CORPORATE governance in the 1970’s was an idea, used initially in the United States, and came to general usage several decades later. It was in the year 2000, seating as an alternate to then Finance Secretary Pardo at the Bangko Sentral ng Pilipinas Monetary Board, that I first became aware of corporate governance when former Finance Secretary Jesus Estanislao introduced it to Philippine institutions.
There are mandated corporate governance and updated trainings for directors, especially for publicly listed companies and banks. This month seems to be the season for the annual corporate governance seminar (ACGS), which requires a four-hour session on updates.
Just recently, LT Group, Inc. held its ACGS attended by directors and senior management of the LT Group of companies, which includes PNB. The speakers were from SGV and experts in their fields: Joseph Ian Canlas, who talked about the overview of corporate governance; Rebecca Sarmenta, about developments in the code of corporate governance; Philip Cassanova, about enterprise risk management; and Shaun Cusi, who discussed business continuity management.
Nickel Asia Corp. (NAC) last week also had its ACGS attended by directors and executives, and on the second day, by middle management. I attended, having just been elected as Lead Independent Director. The session was conducted by Atty. Vincent Edward Festin of the Ateneo Graduate School of Business, where he teaches Business Ethics, Corporate Governance and Business Communications.
He said the efforts of the government and publicly listed companies to integrate corporate governance and ethics in their organization culture over the years have borne fruit. Recognizing the importance of corporate governance and ethics, businesses now focus on how to put these governance and ethics into practice.
Corporate governance has already filtered not only through directors, but also to executives and management. I asked Kat Dionisio, Group Manager of the Corporate Services and Compliance Sector of NAC, and here’s some of her takes from the webinar session:
• The Board, as the company’s leader and guide, is to provide sound governance policies for the company.
• The Board’s governance functions include accountability, oversight, policy making, and strategy formulation.
• The Board also contributes to setting the corporation’s direction by crafting a plan for the short, medium, and long term.
As both member of the Board and the top manager, the chief executive officer serves as link between the Board and the management that is tasked to implement corporate strategies. Senior management leads employees to carry out corporate plans. On the other hand, employees implement and give feedback to management and ultimately, to the Board, about the execution of corporate strategies, and provide information to enable management and the Board to review corporate plans vis-a-vis their execution and refine those plans if necessary.
In the same way that management conducts regular reviews of employee performance, it is also important that the Board review its performance through regular assessments by asking how it is doing as a body and how effective its committees and individual members are performing. In addition to self-assessment activities, it is also important that the Board obtain information and feedback about its effectiveness from other sources, such as management, stakeholders, and including employees.
It is imperative for management to disseminate, enforce and review corporate governance policies regularly. These policies become more meaningful and effective if communicated in a language familiar to the employees, so translating these to easily understandable terms in local languages would be ideal. It is not enough to distribute copies of the policies. These need to be effectively communicated to employees. Obtaining employee feedback on these policies in turn provides valuable information for management and the Board to review the relevance and effectiveness of existing policies.
Just yesterday, Allianz PNB Life’s annual corporate governance lecture series titled “On Embracing Sustainability: The Community, the Environment and the New Norm” was held. It is truly the season for the ACGS.
Corporate governance has come a long way and is still evolving to ensure businesses are going in the right direction. Corporate sustainability is now getting much traction. Businesses need both to stay afloat. What is corporate governance? It is doing the right things right. And that is the road to ensure sustainability.
Flor G. Tarriela was the former chairman of the Philippine National Bank. She is a former Undersecretary of Finance and the first Filipina vice-president of Citibank N.A. She is a trustee of FINEX and an Institute of Corporate Directors fellow. A gardener and an environmentalist, she established Flor’s Garden in Antipolo, an ATI Accredited National Extension Service Provider and a DoT Accredited Agri Tourism Site.