AE 231 MIDTERM EXAM REVIEWER (MODULE BASED)
Be caring, kind and compassionate, share, be giving and be of service to others
CARING FOR OTHERS
1. INTEGRITY 2. HONESTY 3. TRUSTWORTHINESS AND PROMISE-KEEPING 4. LOYALTY AND CONFIDENTIALITY 5. FAIRNESS AND OPENNESS 6. CARING FOR OTHERS 7. RESPECT FOR OTHERS 8. RESPONSIBLE CITIZENSHIP 9. PURSUIT OF EXCELLENCE 10. ACCOUNTABILITY
CHARACTERISTICS AND VALUES ASSOCIATED WITH ETHICAL BEHAVIOUR
a. Plain graft b. Interlocking directorship c. Insider trading d. Negligence of duty
COMMON UNETHICAL PRACTICES IN BOARD OF DIRECTORS
1. abuse of private and public office for personal gain. 2. includes acts of bribery, embezzlement, nepotism, kickbacks and state capture. It is often associated with illegal practices of rigging, fraud, money laundering, extortion. 3. It is receiving, asking for or giving any gratification to induce a person to do a favor for private gain. 4. It is the misuse of entrusted power for private gain. 5. It is a form of dishonesty or criminal activity undertaken by a a person an organization entrusted with a position of authority, often to acquire illicit benefit. 6. Corruptions spread when there are OPPORTUNITIES, when RISK is MINIMAL in comparison to benefits obtained, or when one is confronted with issues like career advancement, earning of more income, financial problems caused by illness, loss of property, etc.
CORRUPTION
1. Basic justice, fairness 2. Respect for the right of others 3. Concern for the right of others 4. Concern for the well- being on the welfare of others 5. Benevolence, trustworthiness, honesty 6. Compliance with the law
PERSONAL ETHICS
1. in businesses and organizations 2. through legislation 3. Vigilance of Civil Society
PREVENTION OF CORRUPTION
1. Integrity, impartiality, objectivity 2. Professional competence 3. Confidentiality 4. Professional behavior 5. Avoidance of potential or apparent conflict of interest
PROFESSIONAL ETHICS
1. Pursue excellence in all matters, in meeting personal and professional responsibilities 2. Perform all tasks to the best of one's ability, maintain a high degree of competence, be well-informed and well-prepared
PURSUIT OF EXCELLENCE
Succession planning.
Planning for CEO and senior management development and succession in both ordinary and emergency scenarios is one of the board's most important functions.
is widely regarded as one of the most corrupt institutions in the country. Reports on extortion and local rackets are the common engagements of the police force.
Police (the national police force)
- The company should be headed by a competent working board to foster the long-term success of the corporation. Recommendations: 1. BOD with collective working knowledge, experience and expertise. 2. BOD should be headed by Chairperson 3. BOD continuing training 4. Board diversity (gender, age, culture, skills) 5. BOD assisted by a Corporate Secretary 6. BOD assisted by a Compliance Officere
Principle 1: Competent Board
It is the practice of debasing a pure or genuine commodity by imitating or counterfeiting, by adding something to increase its bulk or volume or by substituting an inferior product for a superior one.
Adulteration
the organization's values, and its code of conduct, address the legal and other obligations owed to important stakeholders. Managing, protecting and enhancing reputation has become one of the greatest challenges facing today's board. The reputation of a business is a critical factor in the determination of its value, thus, the values and ethics of the organization need to be explicitly managed.
Corporate Values
companies indicate that irregular bribes and payments in import and export procedures are very common.
Customs administration
It includes but not limited to the practice of placing products in containers of exaggerated sizes or shapes giving false impression of actual contents
Deceptive Packaging
A set of moral principles or values that govern the actions and decisions of an individual or group. Examples of prescribed sets of moral principles or values at the implementation level include laws and regulations, church doctrine, code of business ethics for professional groups.
ETHICS
1. Anti-Graft and Corrupt Practices Act 2. Anti- Red Tape Act 3. Revised Penal Code 4. Anti-Money Laundering Act 5. Act of Establishing a Code of Conduct and Ethical Standards for Public Officials and Employees 6. Government Procurement Reform Act 7. United Nations Convention against Corruption
efforts to curb corruption through legislation
1. Clear Business Processes 2. Policy on gifts and entertainment 3. Declaration of conflict of Interest 4. Convenient corruption reporting system
some measures businesses and organizations can adopt to help prevent corruption in the workplace
1. A good corporate governance practice gives rise to a strict compliance culture. 2. Marvelous corporate governance has instant access to information and excellent communication. 3. Good Corporate Governance can lift up a company's influence and reputation. 4. Increasing cognizance and consensus about the importance of good corporate governance among investors results in more number of investments in companies that have a prosperous track record. 5. In this age of globalization and liberalization, there is a positive correlation between an excellent Corporate Governance and inflow of Foreign Investment. 6. Demonstration of good corporate governance also enables corporate social responsibilities like environmental awareness, health, education, sanitation, and other social aspects. 7. At times, good corporate governance can help ensure that officials of a company do not take unwarranted advantage at the expense of their shareholders. 8. Good corporate governance also provides the elasticity to apply customized practices that fits the companies' requirements and to alter those practices in light of ever-changing conditions, benchmarks, and standards.
BENEFITS OF CORPORATE GOVERNANCE
1. It refers to standards of moral conduct, behavior and judgment in business. It involves making the moral and right decisions while engaging in business activities. 2. An area of corporate responsibility where businesses are legally bound and socially obligated to conduct business in an ethical manner. 3. It is based on the personal values and standards of each person engaged in business. 4. It covers all conduct, behavior and judgment in business
BUSINESS ETHICS
1. Recipients and Payers 2. Extortion 3. Lubricant of Society 4. An Ethical dilemma 5. Poverty alleviation 6. Culture 7. Kindness among friends
CHARACTERISTICS OF CORRUPTION
1. this code is adopted by the Professional Regulation Commission (PRC) and the 42 Professional Regulatory Boards to cover an environment of good governance in which all Filipino professionals shall perform their tasks. 2. While each profession may adopt and enforce its own code of good governance and code of ethics, it is generally recognized that there is a general commonality among the various codes.
CODE OF GOOD GOVERNANCE FOR THE PROFESSION IN THE PHILIPPINES (E.O. No. 220, June 23, 2003)
a. Conflicts of interest b. Dishonesty
COMMON UNETHICAL PRACTICES IN EMPLOYEES
a. Claiming a vacation trip to be a business trip b. having employees do work unrelated to the business c. loose or ineffective controls d. unfair labor practices e. making false claims about losses f. making employees sign documents that they are well and properly compensated but in fact are not g. sexual harassment
COMMON UNETHICAL PRACTICES IN EXECUTIVE OFFICERS and LOWER LEVEL MANAGERS
1. MISREPRESENTATION 2. OVER-PERSUASION
COMMON UNETHICAL PRACTICES OF BUSINESS ESTABLISHMENTS
A. FAIRNESS B. RESPONSIBILITY C. TRANSPARENCY D. ACCOUNTABILITY
CORE PRINCIPLES OF SOUND CORPORATE GOVERNANCE
A very common practice of salesmen, where the seller is not obligated to reveal any defect in the product or service. "Let the buyer beware"
Caveat emptor
1. RULE OF LAW 2. TRANSPARENCY 3. RESPONSIVENESS 4. CONSENSUS-ORIENTED 5. EQUITY AND INCLUSIVENESS 6. EFFECTIVENESS AND EFFICIENCY 7. ACCOUNTABILITY 8. PARTICIPATION
EIGHT (8) MAJOR CHARACTERISTICS OF GOOD GOVERNANCE
Be fair and open-minded, be willing to admit error and, where appropriate change positions and beliefs, demonstrate a commitment to justice, the equal treatment of individuals, and tolerance for acceptance of diversity
FAIRNESS AND OPENNESS
Based on the 2016 report made by the Secretary of Finance, the country is losing P200B from smuggling and P400B from tax evasion. Globally, about P2.7T is lost annually.
FALSE It must be P2.6T is lost annually.
Be faithful and loyal to family, friends, employers, clients and country; do not use of disclose information learned in confidence
LOYALTY AND CONFIDENTIALITY
corruption risks in the land administration are high. Normally the law is not always upheld when it comes to the protection of property rights. Multiple agencies are responsible for land administration, which has led to overlapping procedures for land valuation and title registration making the process costly.
Land administration
1. Obtain the relevant facts. 2. Identify the ethical issues from the facts 3. Determine who is affected by the outcome of the dilemma and how each person or group is affected. 4. Identify the alternative available to the person who must resolve the dilemma. 5. Identify the likely consequences of each alternative 6. Decide the appropriate action.
SIX-STEP APPROACH in resolving ethical dilemmas
1. Service to others 2. Integrity and objectivity 3. Professional competence 4. Solidarity and teamwork 5. Social and civic responsibility 6. Global competitiveness 7. Equality of all professions
Specific Principle of Professional Conduct
It is for a society to function in an orderly manner. Ethics is the glue that holds a society together.
TRUE
1. The person's ethical standards are different from those of society as a whole 2. The person chooses to act selfishly
TWO PRIMARY REASONS WHY PEOPLE ACT UNETHICALLY
tax regulations are among the most problematic factors for conducting business in the Philippines.
Tax administration
obtaining feedback and information to support decision-making.
consultation
CONSENSUS-ORIENTED
consultation to understand the different interests of stakeholders in order to reach a broad consensus of what is in the best interest of the entire stakeholder group and how this can be achieved in a sustainable and prudent manner.
RULE OF LAW
fair legal frameworks that are enforced by an impartial regulatory body, for the full protection of stakeholders
It is a situation a person faces in which a decision must be made about the appropriate behavior.
ETHICAL DILEMMA,
GOVERNANCE
1. way rules, norms and actions are structured, sustained, regulated and held accountable. 2. act or process of governing or overseeing the control and direction of something 3. degree of formality depends on the internal rules of a given organization and, externally, with its business partners. As such, governance may take many forms, driven by many different motivations and with many different results.
Accept responsibility for decisions, for the foreseeable consequences of actions and inactions.
ACCOUNTABILITY
The organization should continually monitor and adapt the risk management framework to address external and internal changes. In doing so, the organization can improve its value.
Adapting
1. a responsibility to serve the public 2. a complex body of knowledge 3. standards of admission to the profession 4. a need for public confidence
All the recognized professions have several common characteristics
1. Audit Committee 2. Nominating/Corporate Governance Committee 3. Compensation Committee
BOARD COMMITTEES
1. Size 2. Composition 3. Characteristics 4. Experience 5. Independence 6. Election 7. Time Commitment
BOARD COMPOSITION
1. Approaches 2. Lead/Presiding Director
BOARD LEADERSHIP
S1: Decision makers and other stakeholders should be aware of the nature and extent of the remaining risk after risk treatment. S2: The remaining risk should be documented and subjected to monitoring, review and, where appropriate, further treatment.
BOTH STATEMENTS ARE TRUE
S1: Monitoring and review should take place in all stages of the process. S2: Monitoring and review include planning, gathering and analyzing information, recording results and providing feedback.
BOTH STATEMENTS ARE TRUE
1. Fair competition 2. Global, as well as domestic justice 3. Social responsibility 4. Concern for the environment
BUSINESS ETHICS
The inputs to risk management are based on historical and current information, as well as on future expectations. Risk management explicitly takes into account any limitations and uncertainties associated with such information and expectations. Information should be timely, clear and available to relevant stakeholders.
Best available information
It can be attributed to regulatory change, reputation, political, regulatory and legal, shareholder relations, credit rating, capital availability, and business interruptions.
Business Risk
It refers to the uncertainty about the rate of return caused by the nature of the business. The most frequently discussed causes of business risk are uncertainty about the firm's sales and operating expenses.
Business Risk
seeks to promote awareness and understanding of risk
Communication
● bring different areas of expertise together for each step of the risk management process; ● ensure that different views are appropriately considered when defining risk criteria and when evaluating risks; ● provide sufficient information to facilitate risk oversight and decision-making; ● build a sense of inclusiveness and ownership among those affected by risk.
Communication and consultation
Risk management is continually improved through learning and experience.
Continual improvement
The organization should continually improve the suitability, adequacy and effectiveness of the risk management framework and the way the risk management process is integrated.
Continually improving
The risk management framework and process are customized and proportionate to the organization's external and internal context related to its objectives.
Customized
Risks can emerge, change or disappear as an organization's external and internal context changes. Risk management anticipates, detects, acknowledges and responds to those changes and events in an appropriate and timely manner.
Dynamic
characterized by actively misrepresenting about products or customers
DIRECT MISREPRESENTATION
Principle 8-11
DISCLOSURE AND TRANSPARENCY
It is related to the probability that some or all of the initial investment will not be returned.
Default Risk
should specify the amount and type of risk that it may or may not take, relative to objectives. It should also define criteria to evaluate the significance of risk and to support decision-making processes.
Defining risk criteria
define the scope of its risk management activities.
Defining the scope
A. Understanding the organization and its context B. Articulating risk management commitment C. Assigning organizational roles, authorities, responsibilities and accountabilities D. Allocating resources E. Establishing communication and consultation
Design
● periodically measure risk management framework performance against its purpose, implementation plans, indicators and expected behaviour; ● determine whether it remains suitable to support achieving the objectives of the organization.
Evaluation
the environment in which the organization seeks to define and achieve its objectives.
External and internal context
Advertising that greatly exaggerates the virtues of a product or talks about the non-existent virtues of a product
False or Misleading Advertising
Include liquidity risk, market risk, credit risk, market liquidity risk, hedged positions risk, portfolio exposure risk, derivative risk, accounting information risk and financial reporting risk.
Financial Related Risks
The firms' capital structure or sources of financing determine financial risk. If the firm is all equity financed, then any variability in operating income is passed directly to net income on an equal percentage basis. If the firm is partially financed by debt that requires fixed interest payments, then these fixed charges introduce financial leverage.
Financial Risk Associated with Investments
It includes interest rates volatility, foreign currency, liquidity, derivative and viability.
Financial Risk Associated with Manufacturing, Trading and Service Concerns
Professionals are required not only to have an ethical commitment, a personal resolve to act ethically, but also to have both ethical awareness, the ability to discern between right and wrong, and ethical competency, the ability to engage in sound moral reasoning and consider carefully the implications of alternative actions.
General Principle of Professional Conduct
1. Be truthful, sincere, forthright, straightforward, frank and candid 2. The adherence to facts; the absence of lying, cheating, theft
HONESTY
Human behaviour and culture significantly influence all aspects of risk management at each level and stage.
Human and cultural factors
Globally Add up to 10% of the total costs of doing business in any part of the world and up to 25% of the cost of procurement programs in developing countries Leads to waste or inefficient use of public resources Corrodes public trust, undermines the rule of law and ultimately, delegitimizes the state Leads to apathy, discontentment and turn people to radical extremists
ILL-EFFECTS OF CORRUPTION
● developing an appropriate plan including time and resources; ● identifying where, when and how different types of decisions are made across the organization, and by whom; ● modifying the applicable decision-making processes where necessary; ● ensuring that the organization's arrangements for managing risk are clearly understood and practiced.
Implementation
A. Adapting B. Continually improving
Improvement
Appropriate and timely involvement of stakeholders enables their knowledge, views and perceptions to be considered. This results in improved awareness and informed risk management.
Inclusive
Risk management is an integral part of all organizational activities.
Integrated
relies on an understanding of organizational structures and context.
Integration
Because money has time value, fluctuations in interest rates will cause the value of an investment to fluctuate also. Although interest rate risk is most commonly associated with bond price movements, risk interest rates cause bond prices to decline and declining interest rates cause bond prices to rise. Movements in interest rates affect almost all investment alternatives.
Interest Rate Risk
procedural fairness and transparency are severely undermined by nepotism, favoritism, and impunity.
Judicial system
broader than solely economic considerations and should take into account all of the organization's obligations, voluntary commitments and stakeholder views.
Justification for risk treatment
1. board of directors 2. Management 3. Shareholders
KEY CORPORATE ACTORS
Top management and oversight bodies, where applicable, should ensure that risk management is integrated into all organizational activities and should demonstrate leadership and commitment by: ● customizing and implementing all components of the framework; ● issuing a statement or policy that establishes a risk management approach, plan or course of action; ● ensuring that the necessary resources are allocated to managing risk; ● assigning authority, responsibility and accountability at appropriate levels within the organization.
Leadership and commitment
It is associated with the uncertainty created by the inability to sell the investment quickly for cash.
Liquidity Risk
what organizations served as the secretariat in the integrity initiative campaign?
Makati Business Club (MBC) and the European Chamber of Commerce of the Philippines (ECCP)
Decisions made by a firm's management and board of directors materially affect the risk faced by investors. Areas affected by these decisions range from product innovation and product methods (business risk) and financing (financial risk) to acquisitions.
Management Risk
Include product risk and competitor risk. Product risk is attributed to complexity, obsolescence, research and development, packaging and delivery of warranties. Competitor risk is attributed to differences in pricing strategy, market share and marketing strategy.
Market Risk
The measuring stick or standard is shorter than the real length
Measurement Understatement or Short Measurement
to assure and improve the quality and effectiveness of process design, implementation and outcomes. Ongoing monitoring and periodic review of the risk management process and its outcomes should be a planned part of the risk management process, with responsibilities clearly defined.
Monitoring and review
If there are no treatment options available or if treatment options do not sufficiently modify the risk, the risk should be recorded and kept under ongoing review.
TRUE
it has allowed mining companies to evade government regulations, which resulted in large-scale deforestation.
Natural resources
Include operational risk, regulatory risk, environment risk, integrity risk and leadership risk.
Non-Financial Related Risk
the process of appealing to the emotions of prospective customer used for the sole benefit of selling a product without considering the interest of the buyer. It may include the following examples: 1. Urging a customer to satisfy a low priority need for a merchandise 2. Playing upon intense emotional agitation to convince a person to buy
OVER-PERSUASION
Risk treatment can also introduce new risks that need to be managed.
TRUE
Be worthy of trust, keep promises, full commitment, abide by the spirit or the letter of agreement
TRUSTWORTHINESS AND PROMISE-KEEPING
It is a risk due to process stoppage, health and safety, after sales service failure, environmental, technological obsolescence and integrity of management and employees.
Operations Risk
1. Integrated 2. Structured and comprehensive 3. Customized 4. Inclusive 5. Dynamic 6. Best available information 7. Human and cultural factors 8. Continual improvement
PRINCIPLES OF RISK MANAGEMENT
1. The company should maintain a comprehensive and cost-efficient communication channel for disseminating relevant information. Recommendation: The company should have a website to ensure transparent and timely dissemination of information.
Principle 11: Comprehensive and Cost-Efficient Access to Relevant Information
diversion of public funds, as well as favoritism in the decisions of public officials.
Public procurement
It is, perhaps, more difficult to recognize than the other types of risk to observe the decline in the price of a stock or bond, but it is often more difficult to recognize that the purchasing power of the return you have earned on an investment has declined (risen) as a result of inflation (deflation).
Purchasing Power Risk
risk management process and its outcomes should be documented and reported through appropriate mechanisms.
Recording and reporting
integral part of the organization's governance and should enhance the quality of dialogue with stakeholders and support top management and oversight bodies in meeting their responsibilities.
Reporting
effect of uncertainty on objectives.
Risk
coordinated activities to direct and control an organization with regard to risk.
Risk Management
to comprehend the nature of risk and its characteristics including, where appropriate, the level of risk.
Risk analysis
1. overall process of risk identification, risk analysis and risk evaluation. 2. should be conducted systematically, iteratively and collaboratively, drawing on the knowledge and views of stakeholders. 3. It should use the best available information, supplemented by further enquiry as necessary.
Risk assessment
1. to support decisions. 2. involves comparing the results of the risk analysis with the established risk criteria to determine where additional action is required.
Risk evaluation
to find, recognize and describe risks that might help or prevent an organization achieving its objectives. Relevant, appropriate and up-to-date information is important in identifying risks.
Risk identification
● formulating and selecting risk treatment options; ● planning and implementing risk treatment; ● assessing the effectiveness of that treatment; ● deciding whether the remaining risk is acceptable; ● if not acceptable, taking further treatment.
Risk treatment
1. Financial Related Risks 2. Non-Financial Related Risk
Risks Associated with Financial Institutions
1. Business Risk 2. Default Risk 3. Financial Risk 4. Interest Rate Risk 5. Liquidity Risk 6. Management Risk 7. Purchasing Power Risk
Risks Associated with Investments
1. Market Risk 2. Operations Risk 3. Financial Risk 4. Business Risk
Risks Associated with Manufacturing, Trading and Service Concerns
to customize the risk management process, enabling effective risk assessment and appropriate risk treatment. Scope, context and criteria involve defining the scope of the process, and understanding the external and internal context.
Scope, context and criteria
involves balancing the potential benefits derived in relation to the achievement of the objectives against costs, effort or disadvantages of implementation.
Selection of risk treatment options
A structured and comprehensive approach to risk management contributes to consistent and comparable results.
Structured and comprehensive
Principle 1 to 7
THE BOARD'S GOVERNANCE RESPONSIBILITIES
the conduct that differs from the way one believes would have been appropriate given the circumstances.
UNETHICAL behavior
CEO evaluation
Under the oversight of an independent committee or the lead director, the board should annually review the performance of the CEO and participate with the CEO in the evaluation of members of senior management
It harmonizes existing ethical standards among businesses operating in the Philippines. It ensures that different market players adhere to the same rules of the game in order to create fair market conditions and promote transparency in doing business. It formally communicates the signatories' commitment to upholding high standards of ethics in all business transactions. It articulates the belief that securing profit at the expense of integrity is unacceptable and unsustainable way of conducting business.
Unified Code of Conduct for Business
The mechanism of the weighing scale is tampered with
Weight Understatement or Short Weighing
RESPONSIVENESS
organizations and their processes are designed to serve the best interest of stakeholders within a reasonable timeframe
1. Leadership and commitment 2. Integration 3. Design 4. Implementation 5. Evaluation 6. Improvement
risk management framework
1. Communication and consultation 2. Scope, context and criteria 3. Risk assessment 4. Risk treatment 5. Monitoring and review 6. Recording and reporting
risk management process
EQUITY AND INCLUSIVENESS
the organization that provides the opportunity for its stakeholders to maintain, enhance or generally improve their well-being provides the most compelling message regarding its reason for existence and value to society.
EFFECTIVENESS AND EFFICIENCY
the processes implemented by the organization to produce favorable results meet the needs of its stakeholders, while making the best use of resources - human, technological, financial, natural and environmental - at its disposal.
Principle 14-16
DUTIES TO STAKEHOLDERS
Principle 12
INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT
ACCOUNTABILITY
1. a key tenet of good governance. 2. Who is accountable for what should be documented in policy statements. 3. In general, an organization is accountable to those who will be affected by its decisions or actions as well as the applicable rules of law.
PARTICIPATION
1. by both men and women, either directly or through legitimate representatives, is a key cornerstone of good governance. 2. it needs to be informed and organized, including freedom of expression and assiduous concern for the best interests of the organization and society in general
TRANSPARENCY
1. information should be provided in easily understandable forms and media 2. information be freely available and directly accessible to those who will be affected by governance policies and practices, as well as the outcomes resulting therefrom 3. any decisions taken and their enforcement are in compliance with established rules and regulations
GOOD GOVERNANCE
1. responsive to the present and future needs of the organization 2. exercises prudence in policy-setting and decision-making 3. best interests of all stakeholders are taken into account 4. ideal which is difficult to achieve in its totality.
CORPORATE GOVERNANCE
1. system of rules, practices and processes by which business corporations are directed and controlled 2. involves balancing the interests of a company's stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community 3. involves a set of relationships between a company's management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. (from the Organization for Economic Cooperation and Development - OECD)
1. Caveat emptor 2. Deliberate withholding of information 3. Passive deception
INDIRECT MISREPRESENTATION
1. The Integrity Initiative Campaign 2. Corporate Values
INITIATIVES TO IMPROVE BUSINESS ETHICS AND REDUCE CORRUPTION
1. Be principled, honorable, upright, courageous and act on convictions 2. The firm and uncompromising adherence to moral and ethical principles 3. The quality of being honest and having strong moral principles; moral uprightness
INTEGRITY
It is the practice of making false statements on the label of a product to a well-known product
Misbranding or Mislabeling
The company should ensure that material and reportable non-financial and sustainability issues are disclosed. Recommendation: Clear and focus policy on the disclosure of non-financial information, with emphasis on the management of economic, environmental, social and governance (EESG)
Principle 10: Focus on Non-Financial and Sustainability Reporting
- The company should have a strong and effective internal control system and enterprise risk management framework. Recommendations: 1. Should have adequate and effective internal control system and an enterprise risk management framework 2. Should have an independent internal audit function
Principle 12: Strengthen Internal Control System and Enterprise Risk Mgmt. Framework
The company should treat all shareholders fairly and equitably. Recommendations: 1. The board should ensure that basic shareholder rights are disclosed in the Manual on Corporate Governance and on the company's website. 2. Encourage active shareholder participation by sending the Notice of Annual and Special Shareholders' Meeting at 21 days before the meeting 3. Results of votes available the next working day and Minutes of the Shareholders' Meeting available on the company website within 5 business days from the end of the meeting. 4. Make available an alternative dispute mechanism to resolve intra-corporate disputes 5. Establish an Investors Relations Office (IRO)
Principle 13: Promoting Shareholder Rights
- The rights of the stakeholders established by law, by contractual relations and through voluntary commitments must be respected. Recommendations: 1. Should identify the company's various stakeholders and promote cooperation between them and the company. Should establish clear policies and programs to provide a mechanism of the fair treatment and protection of shareholders.
Principle 14: Respecting Rights of Stakeholders and Effective Redress for Violation of Stakeholders Rights
- A mechanism for employee participation should be developed to create a symbiotic environment. Recommendations: 1. Establish policies, programs and procedures that encourage employees to actively participate in the realization of a company's goals. 2. Adopt an anti-corruption policy and program. 3. Establish a suitable framework for whistleblowing
Principle 15: Encouraging Employee's Participation
- the company should be socially responsible in all its dealings with the communities where it operates. Recommendation: 1. Recognize and place an importance on the interdependence between business and society, and promote a mutually beneficial relationship that allows the company to grow while contributing to the advancement of the society.
Principle 16: : Encouraging Sustainability and Social Responsibility
- The fiduciary roles, responsibilities and accountabilities of the Board should be clearly made known to all directors, stockholders and other stakeholders. Recommendations: 1. BOD has duty of care and duty of loyalty 2. Approve business objectives and strategies, monitor the implementation 3. Ensure succession planning program 4. Align the remuneration of key officers and board with the long-term interest of the company 5. Have a formal and transparent board nomination and election policy. 6. Has policy and system on related party transactions (RPTs) and unusual/infrequent transactions. 7. Approve the selection and assess performance of management led by the CEO 8. Establish effective performance management framework (performance evaluation) 9. Oversee internal control system 10. Oversee enterprise risk management 11. Have a Board Charter
Principle 2: Clear Roles and Responsibilities
- Board committees should be set up to the extent possible to support the effective performance of the Board's functions. Recommendations: Establish the following: - board committees - audit committees - corporate governance committee - Board Risk Oversight Committee (BROC) - Create Committee Charter
Principle 3: Board Committees
- To show full commitment, the directors should devote the time and attention necessary to properly and effectively perform their duties. Recommendations: 1. Attend and participate in all meetings 2. NEDs should not concurrently serve as directors to not more than 10 public publicly companies 3. Board notifies his/her incumbent board before accepting a directorship in another company
Principle 4: Fostering Commitment
- The Board should endeavor to exercise objective and independent judgment on all corporate affairs. Recommendations: 1. BOD should be composed of a majority of NEDs. 2. At least 2 independent auditors, or such a number as to constitute at least one-third of the members of the board, whichever is higher. 3. Independent directors possess the necessary qualifications. 4. Independent directors should serve for a maximum cumulative term of 9 years. 5. The positions of Chairman of the Board and CEO should be held by separate individuals (balance of power) 6. Appoint a lead auditor among the independent auditor if the Chairman is not independent or the Chairman and CEO are held by one person. 6. Director with material interest in any transaction affecting the corporation should abstain from taking part in the deliberations of the same. 7. NEDs should have separate periodic meetings with the external auditors and head of internal audit
Principle 5: Board Independence
- The best measure of the Board's effectiveness is through an assessment process. Recommendations: 1. Board conduct an annual self assessment of its performance 2. Should have in place a system that provides, at a minimum, criteria and process to determine Board performance
Principle 6: Board Performance
- Members of the Board are duty-bound to apply high ethical standards, taking into account the interests of all stakeholders. Recommendations: 1. Adopt a Code of Business Conduct and Ethics 2. Ensure implementation and monitoring of compliance with the Code of Business Conduct and Ethics
Principle 7: Board Ethics
- The company should establish corporate disclosure policies and procedures. Recommendations: 1. Establish corporate disclosure policies and procedures 2. Require directors and officers to disclose to the company any dealings in the company's shares within three business days 3. Make a Manual of Corporate Governance 4. Disclose all relevant information about corporate governance in the Annual Corporate Governance Report
Principle 8: Disclosure Policies and Procedures
- The company should establish standards for the appropriate selection of an external auditor. Recommendations 1. Adopt a robust process for approving and recommending appointment, reappointment, removal and fees of the auditor. 2. Audit committee assesses the integrity and independence of external auditors 3. Disclose non-audit services performed by external auditors
Principle 9: Auditor's Independence
BOARD STRUCTURE
Public companies employ diverse approaches to board structure and operations within the parameters of applicable legal requirements and stock market rules. Although no one structure is right for every company, Business Roundtable believes that the practices set forth in the following sections provide an effective approach for companies to follow.
normally deals with bribery
Public services
The giving of less than the number asked or paid for
Quantity Understatement or Short Numbering
1. Demonstrate respect for human dignity, privacy 2. Also called esteem.
RESPECT FOR OTHERS
1. Obey just laws, if unjust, openly protest 2. Exercise all democratic rights and privileges responsibly by participation, social consciousness, and public service 3. When in a position of leadership or authority, openly respect and honor democratic processes of decision making.
RESPONSIBLE CITIZENSHIP
a multi-sectoral campaign, launched in 2010, that seeks to institutionalize integrity standards among various sectors of society - business, government, judiciary, academe, youth, civil society, church and media
The Integrity Initiative Campaign
Management development
The board and the independent committee (if any) with primary responsibility for oversight of succession planning also should know what the company is doing to develop talent beyond the senior management ranks.
