A new Corporate Governance Code (CGC) took effect at the start of the year to improve the functions of boards, strengthen shareholder protection and promote full disclosure in financial and non-financial reporting.
The Securities and Exchange Commission (SEC) said the new code expands the responsibilities of the board of directors of a publicly listed company (PLC) through a “comply or explain” approach that combines voluntary compliance with mandatory disclosure. This will also harness the competence and commitment of the directors.
Companies do not have to fully comply with provision of the code, but must explain in annual corporate governance reports provisions that were met and identify particular areas of non-compliance, the SEC said.
“The new code is intended to raise the corporate governance standards of Philippine publicly listed corporations to a level on a par with its regional and global counterparts,” said SEC Chairperson Teresita J. Herbosa.
“The adoption of the ‘comply or explain’ approach is also expected to address the perceived overregulation of the SEC,” she added.
The code took effect on January 1, 2017. All publicly listed companies are required to submit a new manual on Corporate Governance to the SEC on or before May 31 this year.
The new code was revised by the SEC and the International Finance Corp. (IFC) – a member of the World Bank Group. It serves as a guide book for publicly listed companies in adopting the best governance practices to improve competitiveness and ability to attract foreign investment.
The revision was part of the IFC and SEC partnership in enhancing the country’s regulatory framework and investment climate.
“Our global experience has shown that corporate governance codes set a benchmark and encourage companies to adopt effective governance practices,” Jane Yuan Xu, IFC Philippines country manager, said.
“Improved corporate governance will make Philippine companies more competitive and enhance their ability to attract foreign capital, leading to the development of a vibrant and sustainable private sector,” she added.
The support given by IFC is a part of efforts to promote effective corporate governance in partnership with the State Secretariat for Economic Affairs of Switzerland.
The new Code of Corporate Governance For Publicly Listed Companies is embodied in SEC’s Memorandum Circular No. 19, series of 2016. Copies may be downloaded from the SEC website at http://www.sec.gov.ph/wpcontent/uploads/2016/12/2016_memo_circular_no.19.pdf