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Mari Antonette C.

Diaz

Block 24

Discussion Paper No. 1

Corporate Governance refers to the way a corporation is governed. A technique by which

companies are directed and managed. It is actually conducted by the board of Directors and the

concerned committees for the companys stakeholders benefit. It is all about balancing individual

and societal goals, economic and social goals. It is also the interaction between various

participants (shareholders, board of directors, and company management) in shaping

corporations performance and the way it is proceeding towards. It has many benefits. Some of

these are, it lowers the capital cost and it ensures organization in managed in a manner that fits

the best interest of all. Some of its goals are the following:

1. Address corporate governance deficiencies that endanger the stability of the global financial

system. 2. Adopt to the structural developments. 3. Help promote growth and development.

Why is Corporate Governance Important?

Good Corporate Governance ensures that the business environment is fair and

transparent and the companies can be held accountable for their actions. Conversely, weak CG

leads to waste, mismanagement, and corruption. Kit is also important to remember that although

Corporate Governance has emerged as a way to manage modern joint stock corporations it is

equally significant in state-owned enterprises, cooperatives, and family businesses. Regardless

of the type of venture, only Good Governance can deliver sustainable Good Business

Performance.

Issues involving corporate governance principles include:

Internal controls and internal auditors


The independence of the entitys external auditors and the quality of their audits

Oversight and management of risk

Oversight of the preparation of the entitys financial statements

Review of the compensation arrangements for the chief executive officer and other senior

executives.

The resources made available to directors in carrying out their duties

The way in which individuals are nominated for positions on the board

Dividend policy

The Principles on which the Code is based are those of Openness:

a. Integrity- both straight forward Dealing and Completeness. What is required of Financial

Reporting is that it should be: Honest and that it should Present a balanced picture of the state of

the companys affairs.

b. Accountability- Board of Directors are accountable to their shareholders and both have to

play their part in making that Accountability Effective Board of Directors need to do so through

the quality of the information which they provide to Shareholders, and shareholders through their

willingness to exercise their responsibilities as owners.

The consequences of Principal-Principal Conflicts in four areas: 1. Managerial talent 2.

Mergers and acquisitions 3. Executive compensation 4. Tunneling/ self-dealing.

Philippines CG has progressed but still needs improvement

- Strengthen enforcement of existing laws (insider trading, disclosure practices, etc.)

- Improve protection of minority shareholder rights

- Strengthen and monitor compliance with IAS/IFRS

- Requiring additional disclosure of internal controls and governance issues


- Encouraging the development of advocacy institutions to promote minority shareholders

rights.

Conclusions

1. Large shareholders that dominate ownership of companies pursue a financing policy

characterized as trading-on-equity, resulting on further dominance by these companies in their

industries.

2. Corporate groups with affiliate banks enjoy advantages in terms of access to financing and

economies of investments and operation in related industries.

3. Most publicly listed Philippine companies are not widely held by public investors.

4. The regulatory framework for corporate governance is inadequate in the context of Philippine

conditions like large shareholder-dominated companies, corporate groups and ownership of

banks by groups of companies.

References:

1. Corporate Governance in the Philippines (Hans B. Sicat)

2. Grant Thornton (Mohamed Hilal)

3. Peng13CHAPTER_Sauerwald_PP.pdf

4. Corporate Governance in the Philippines (Jonathan Juan DC. Moreno)

5. Corporate Governance in Asia: A Comparative Perspective (Cesar G. Saldana, Ph.D.)