Philippine Stock Exchange, Inc. · PSE:PSE
Philippine Stock Exchange — Securities and Exchange Commission (Philippines) — SEC-PSE Corporate Governance Forum 2014
60 slides from Philippine Stock Exchange's conference presentation, Oct 21, 2014
Slide 1: SEC CG Related Rulings and Memorandums
SEC CG RELATED RULINGS AND MEMORANDUMS
Slide 2: Outline
OUTLINE • Amendments to RCGG re: stakeholders • Government officers/ employees as ID’s • Proposed RCCG amendments • CLSA-ACGA Corporate Governance Report • 2013 SEC Issuances on the ACGR • 2014 SEC Issuances on the ACGR • Findings on PLCs’ ACGRs • SEC Issuances on the accreditation of – • CG Trainin
Slide 3: Amendments to the RCCG MC 14, S. of 2014
AMENDMENTS TO THE RCCG MC 14, S. OF 2014 • Exemption of Closely-held Finance Companies from the 2-ID requirement • Conditions for exemption • FC amends its AI to state the provisions of the CCP for close corporations • CPs shall be issued only to DOSRI not exceeding 19 and institutional lenders • Re
Slide 4: MC 9, S. of 2014
MC 9, S. OF 2014 • The following portions of the RCCG were amended to include therein the word “stakeholders” • Definition of Terms (sh and st) • General Responsibility of the Board (sh and st) • Duties and Functions of the Board (identification of st in the community) • Corp Sec. (work fairly and o
Slide 5: Stakeholders
STAKEHOLDERS • Customers • Employees • Suppliers • Financiers • Government and community where the corp. operates
Slide 6: Government Officers/Employees as IDs
GOVERNMENT OFFICERS/EMPLOYEES AS ID’S • Requirement • Written permission from the head of the department or agency where he is an officer or employee
Slide 7: Proposed RCCG Amendments
PROPOSED RCCG AMENDMENTS • Include the requirement of voting by poll as a good corporate practice in the Code
Slide 8: Proposed RCCG Amendments
PROPOSED RCCG AMENDMENTS • Include detailed functions and qualifications of Compliance Officers
Slide 9: Proposed RCCG Amendments
PROPOSED RCCG AMENDMENTS • Annual performance evaluation report for Independent Directors including a disclosure on how they voted on major issues.
Slide 10: Proposed RCCG Amendments
PROPOSED RCCG AMENDMENTS • Encourage the practice of nominating and electing at least one (1) independent woman director in the board
Slide 11: Proposed RCCG Amendments
PROPOSED RCCG AMENDMENTS • Amendment as to term limits of independent directors: • 5-1-4 rule • Straight 9 year rule For aforementioned rules, the number of years served will be counted from 2012
Slide 12: Proposed RCCG Amendments
PROPOSED RCCG AMENDMENTS • Number of directorships held in publicly-listed companies (PLCs)- An individual shall only be allowed up to five (5) directorships , regular or independent, in PLCs
Slide 13: Proposed RCCG Amendments
PROPOSED RCCG AMENDMENTS • Number of directorships within a conglomerate- An individual shall only be allowed a maximum of 5 directorships (both regular and independent) within a conglomerate
Slide 14: CLSA-ACGA Corporate Governance Report
CLSA-ACGA CORPORATE GOVERNANCE REPORT
Slide 15: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS Rises from 35% in 2012 to To maintain or increase this 40% in 2014 score, an annual review of the ACGR for improvement shall be made The SEC is forcing higher CG Disclosures standards SEC may adopt the and penalizes non- “Comply or Explain” compliance app
Slide 16: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS Like other markets, small Refer to OGA for any cap reporting compares possible directive for small poorly to large caps cap companies Few large caps beat the Look into lowering the 60-day practice deadline for filing the benchmark for audited Annual Repor
Slide 17: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS Non-financial reporting also Re-visit reports, financial varies widely and non-financial, that need to be discontinued. They should match the monitoring process and the information available in their reports. This matter can also be referred to OGA
Slide 18: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS Disclosure of substantial Require the PSE to inform ownerships stakes slow by SEC on date of receipt of regional standards the report. PSI rules tough, but Require PSE to improve enforcement is weak enforcement. Insider Trading Rules Surveillance system a
Slide 19: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS RPTs rules also do not meet Study the feasibility of regional standards having a Rule requiring the PLCs to notify the shareholders and seek approval in advance for major RPTs, which will be incorporated in the CG Blueprint and Amended RCCG. This can also
Slide 20: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS No mandatory voting by Shall be put in the RCCG as poll a voluntary provision No term limit for Consider the number of independent directors years the ID is sitting on the board prior to SEC Memo Cir. No.9, S.2011 in coming up with a new rule on ID term l
Slide 21: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS Poor disclosure of executive Determine regional practice remuneration and if there are any issues relating to security. “Comply or explain” approach Audit Committee member often not genuinely Refer to OGA – AuditComm independent Charter and definition of
Slide 22: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS Pre-emptive rights easily Amend Rule 39 of the SRC if eliminated it is not yet included in the recent proposed amendments Early disclosure of detailed Review best practice in the AGM agendas a bright spot region Regulators need a Devise CG Blueprint that
Slide 23: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS General reporting on CSR required No specific sustainability Come up with a reporting guidelines sustainability guidelines Sustainability reporting mostly on philanthropy Falls from 25% in 2012 to 18% For legislative and executive in 2014 intervention. In
Slide 24: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS SEC needs more funding For legislative and executive intervention. Propose increase in budget for better enforcement Regulatory websites woeful Propose SEC website overhaul c/o ICTD Signs of life in shareholder activism Maintain open communication with Sh
Slide 25: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS Falls from 44% in 2012 to 42% There is joint effort between in 2014 SEC, BSP, IC and PSE to come up with CG initiatives. SEC is planning to come up with an amendment to the CG Code SEC not very independent Review the possibility of SEC being in a similar
Slide 26: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS Philippines still not signed up to IOSCO MMOU PSE’s EDGE company filing Propose SEC website system an improvement, but overhaul c/o ICTD to have a deeper archive would be website comparable to or nice even better than PSE’s EDGE Lack of an independent Ref
Slide 27: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS Falls from 73% in 2012 to 65% in 2014 Accounting standards and Refer to OGA for practices among large caps sustainability or further are fairly good improvement Companies must disclose audit and non-audit fees Rises from 29% to 33% in 2014 Be easily acces
Slide 28: CLSA-ACGA CG Report
CLSA-ACGA CG REPORT FINDINGS SUGGESTED STEPS Annual CG reports driving Regularly assess the ACGR if improved disclosures there are certain areas to be added or removed from the present required disclosures Genuine separation in “Comply or explain” chairman and CEO roles approach unrealistic New shar
Slide 29: Quick Fixes
QUICK FIXES FINDINGS SUGGESTED STEPS Overhaul the SEC website This has already been initiated by ICTD Continue great start with This can be addressed ACGR by increasing through regular substantive disclosure assessment of the ACGR Tighten disclosure of This can be addressed director dealings through
Slide 30: Quick Fixes
QUICK FIXES FINDINGS SUGGESTED STEPS Improve rules on INEDs and This can be addressed board committee through the proposed CG composition amendments and CG Blueprint Improve voting practices at This is being addressed in the annual general meetings proposed amendment to the Corporation Code
Slide 31: Market Rankings & Scores, 2014
MARKET RANKINGS & SCORES, 2014 CG Watch market scores: 2010 to 2014 % 2010 2012 2014 Change 2012 Trend of CG v. 2014 (ppt) reform 1 = Hong Kong 65 66 65 (-1) Weak leadership, tough enforcement 1 = Singapore 67 69 64 (-5) International v. local contrast continues 3 = Japan 57 55 60 (+5) Landmark chan
Slide 32: Market Rankings & Scores, 2014 (continued)
% 201 201 201 Change Trend of CG reform 0 2 4 2012 v. 2014 6 = Taiwan 55 53 56 (+3) Bold policy moves, can they be sustained? 7 = India 48 51 54 (+3) Bouncing back, Delhi more supportive 8 = Korea 45 49 49 - Indifferent leader, more active regulators 9 = China 49 45 45 - Focus on SOE reform, enforce
Slide 33: SEC Issuances re: ACGR
SEC ISSUANCES RE: ACGR
Slide 34: MC 5, March 20, 2013 - Requires Submission of ACGR
MC 5, MARCH 20, 2013- REQUIRES SUBMISSION OF ACGR • 3 copies on May 30 and every 5 years thereafter • 2nd to 4th year- only changes or updates are required to be indicated • Penalty for late filing – P20k plus P2k mo. Penalty • Discontinued – 2 certificates (attendance and extent of compliance with
Slide 35: MC 18 - October 2, 2013
MC 18 – OCTOBER 2, 2013 • Posting of ACGR in PLCs’ websites • Posting is an entry separate from the AR • Basic penalty of P10k, monthly penalty of P1k put monitoring results
Slide 36: 2014 SEC Issuances re: ACGR
2014 SEC ISSUANCES RE: ACGR
Slide 37: MC - May 26, 2014
MC 11 – MAY 26, 2014 • Template for PLCs’ websites • New deadline – Dec. 31, 2014
Slide 38: Notice - June 2, 2014
NOTICE- JUNE 2, 2014 • To post all periodic reports on their due dates. • Minutes of general and special meetings to be posted within 5 days from actual date of meeting
Slide 39: MC 1 - January 10, 2014 Guidelines for Changes/Updates
MC 1- JANUARY 10, 2014 GUIDELINES FOR CHANGES/UPDATES • 17-C if reportable as a current report, otherwise • Advisement letter • Change or update shall likewise be made in the posted ACGR within the same period • Portion of the ACGR on Director’s attendance shall likewise be updated and file an advis
Slide 40: MC 12 - May 26, 2014 Clarifications for Changes/Updates
MC 12 – MAY 26, 2014 – CLARIFICATIONS FOR CHANGES/ UPDATES • No need to amend the notarized page of the ACGR for the updates or changes posted • Updates or changes reportable under Sec. 17 of the SRC – sgd by a duly authorized signatory, otherwise by the Corpsec and Compliance Ofcr • For updates – n
Slide 41: Findings on PLCs' ACGR
FINDINGS ON PLCS’ ACGR
Slide 42: Common Mistakes/Deficiencies in the ACGR
COMMON MISTAKES/DEFICIENCIES IN THE ACGR • Date and place of signing not indicated • No explanation to N.A./”INAPPLICABLE” responses
Slide 43: Common Deficiencies/Mistakes in the ACGR
COMMON DEFICIENCIES/MISTAKES IN THE ACGR • Management’s Remuneration • Not posted in the company’s website • Not signed by the CEO or Independent Director
Slide 44: Common Deficiencies/Mistakes in the ACGR
COMMON DEFICIENCIES/MISTAKES IN THE ACGR • Failure to disclose how often it reviews its Mission and Vision • Check and balance policy not disclosed • ACGR not notarized
Slide 45: Common Mistakes/Deficiencies in the ACGR
COMMON MISTAKES/DEFICIENCIES IN THE ACGR • Made references to other documents (ex. BL, MCG) instead of providing the required information in the ACGR
Slide 46: Annual Corporate Governance Report
ANNUAL CORPORATE GOVERNANCE REPORT Total number of PLCs as of 260 October 2014 Total number of submissions 245 On-time 203 Late 42 Not yet submitted 8 Not yet due 7 Penalized 42
Slide 47: Posting of the ACGR in the Company's Website
POSTING OF THE ACGR IN THE COMPANY’S WEBSITE Total number of PLCs as of 260 October 2014 Total number of PLCs 114 complied with the MC Show cause letters sent 146 Complied 102 Not yet complied 44 Penalized 25
Slide 48: Other SEC Issuances on Other Matters
OTHER SEC (MEMO. CIRCULARS) ISSUANCES ON OTHER MATTERS
Slide 49: MC 20, S. of 2013 Training of BOD Members and Key Officers
MC 20, S. OF 2013 TRAINING OF BOD MEMBERS AND KEY OFFICERS • Directs all BOD members and key officers of PLCs to attend CG Trainings • BOD members – both regular/ordinary and independent • Key officers – officers per By-Laws, Auditcom members, Compliance Officer, Internal Auditor
Slide 50: Training Requirements
Frequency required At least once a year Minimum no. of hours 3 Training Provider SEC-accredited CGTPs Report required Certificate of Attendance (within 10 days from completion) Effectivity Jan. 1, 2014 MC signed on Nov. 29, 2013 Coverage RCCG (minimum)
Slide 51: Training of Directors & Key Officers
TRAINING OF DIRECTORS & KEY OFFICERS • Mandatory topics • Illegal activities of corps, directors, officers • Insider trading • Protection of minority stockholders • Short swing transactions • Liabilities of directors • Confidentiality • Conflict of interest • Related party transactions • Financial r
Slide 52: Course Units on Financial Reporting and Audit
COURSE UNITS ON FINANCIAL REPORTING AND AUDIT (MC 13, S. OF 2014) • Basic Course • Framework for Financial Statements reporting • Principal financial statements and their uses • What decision-makers need to know about principal FS (Statement of Comprehensive Income, BS, Cash Flow Statement, Statemen
Slide 53: Basic Course
BASIC COURSE • What should be included in performance dashboards • Pointers to insure that recording, processing and reporting data do not result in material misstatement of FS • Pointers to avoid material weaknesses in internal controls • Financial policies for fraud prevention that decision-makers
Slide 54: Advance Course
ADVANCE COURSE • Covers, among others, provisions of the PFRS that are relevant to the company’s specific industry
Slide 55: Requirements for Accreditation of CGTPs
REQUIREMENTS FOR ACCREDITATION OF CGTPS (MC 11, S. OF 2012 GUIDELINES FOR ACCREDITATION OF CGTPS) • Adequate track record of successfully conducting training, including preferably CG • Applicant’s AI must specifically include the conduct of training, particularly in CG, as one of its purposes • Soun
Slide 56: Documentary Requirements
DOCUMENTARY REQUIREMENTS • Written application • Certification that it meets all the requirements • Supporting documents • Summary of business experience and plan • Credentials of resource persons • Course program, training materials • Expiry date of the accreditation – 3 years from approval; renewa
Slide 57: Training Programs and Lecturers
TRAINING PROGRAMS AND LECTURERS • Details requires prior clearance at least 1 mo. from the scheduled training program • Includes proposed line-up of trainers. • In case the trainer is unable to lecture on the scheduled date, the Commission shall be advised in writing of the reason and name the repla
Slide 58: Training Programs and Lecturers
TRAINING PROGRAMS AND LECTURERS • Completion Report (Annex “A”) – filed with SEC not later than 15 days after training • Sanction for any violation – withdrawal of accreditation • In-house trainings- • Conducted by the PLC on its own or • In partnership with an accredited CGTP • Each requires prior
Slide 59: Training Programs and Lecturers
TRAINING PROGRAMS AND LECTURERS • Requirements for accreditation • Written request • Certification that it can guarantee a qualified line-up of SEC-accredited trainers • Topics include RCCG, ACGS, ACGR, mandatory topics • Required for foreign and local lecturers
Slide 60: Thank You!
THANK YOU!
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