SEC sets deadline for submission of corporate governance forms

The Securities and Exchange Commission has directed all listed corporations and other firms with a secondary license from the SEC to submit their corporate governance self-rating forms on or before July 31, 2003.

The self-rating forms will aid the SEC in assessing the level of compliance by corporations with leading practices and principles on good corporate governance.

Apart from listed corporations, other entities covered by the SEC directive include issuers of registered securities, finance companies, investment houses, brokers and dealers of securities, investment companies, pre-need companies, subsidiaries of foreign corporations which operate in the Philippines and are listed in the Philippine Stock Exchange, and stock exchanges.

Companies will rank their compliance with the commitments they made in their corporate governance manuals. The rating shall be from zero to five with the latter being the highest.

Corporations which have yet to comply with their corporate governance manuals are required to explain in writing their reasons for non-compliance.

The SEC said the mere submission by listed corporations of their respective corporate governance manuals does not necessarily mean they already adhere to sound business principles.

The submission of the manual should serve as a reminder to all listed firms to observe the principles of good corporate governance, the SEC said.

Corporate governance manuals are aimed at increasing transparency and accountability in company operations and strengthening minority shareholder rights.

The code is intended to provide guidance to corporate directors so that they can carry out their duties and responsibilities effectively and in accordance with the highest professional standards.

Under the SEC’s model manual, listed firms were required to install a process of selection of competent directors. An annual assessment should be made on the performance of the board’s effectiveness as a whole and those of the individual directors, including the chief executive officer.

Listed firms were also asked to put in place an internal system, including checks and balances, which will apply in the first instance to the board, where power and authority are properly distributed and the process is free and open with sufficient and meaningful participation by independent outside directors.

They were also required to set up an audit committee, composed mainly of independent, outside directors who should be free to hire independent advisers whenever necessary.

The SEC said directors of listed corporations must conduct fair business transactions and ensure that personal interest does not prejudice board decisions. They should not use their position to make profit or acquire advantage for themselves. They must act honestly and in good faith and in the best interests of the company and of its stockholders.