THE SECURITIES and Exchange Commission (SEC) has issued a new code of corporate governance for public companies and registered issuers, in line with its plan of adopting principles observed by the Organization for Economic Co-operation and Development (OECD).
The Philippines’ corporate regulator published over the weekend Memorandum Circular No. 24 Series of 2019, which outlines 16 recommendations for corporate governance.
It said the code is recommendatory in nature and will be followed through a “comply or explain” approach, which means companies will be required to disclose information as identified by the policy, but may choose to simply explain noncompliance with prescriptions.
The recommendations are grouped into five primary classifications, namely: the board’s governance responsibilities, disclosure and transparency provisions, internal control and risk management frameworks, rules on cultivating a synergic relationship with shareholders/members and recommendations on corporations’ duties to stakeholders.
Disclosures required under the new code include any dealings in the company’s shares by directors and officers, as well as the annual corporate governance report (ACGR).
The ACGR should be a comprehensive report containing all pertinent corporate governance information on a company.
It should include all relevant and material information on board directors and key executives, every material fact or event in a company such as acquisitions or disposal of assets, non-audit work and fees of and to the external auditor and other similar information.
Other requirements in the new code include nonfinancial and sustainability reporting. Companies must disclose strategic and operational objectives alongside sustainability initiatives that will support them.
The new code comes into effect 15 days after its publication in a newspaper on Dec. 28.
The SEC said that while it “does not, in any way, prescribe a ‘one-size-fits-all’ framework,” it expects larger companies to follow most of the provisions. — Denise A. Valdez