CORPORATE GOVERNANCE

Board Committees

BOARD COMMITTEES, FUNCTIONS AND MEMBERS

Corporate Governance Committee

The Board shall organize a Corporate Governance Committee that should be tasked to assist the Board in the performance of its corporate governance responsibilities. It shall be composed of at least three (3) members, two of whom should be independent directors, including the Chairman. The members of the Corporate Governance Committee shall serve for a period of one (1) year or until their successor(s) shall have been duly appointed and qualified.

The Corporate Governance Committee shall act by majority vote of all its members on the following matters:

Oversee the implementation of the corporate governance framework and periodically reviews the said framework to ensure that it remains appropriate in light of material changes to the corporation’s size, complexity and business strategy, as well as its business and regulatory environments;
Oversee the periodic performance evaluation of the Board and its committees as well as executive management, and conducts an annual self-evaluation of its performance;
Ensure that the results of the Board evaluation are shared, discussed, and that concrete action plans are developed and implemented to address the identified areas for improvement;
Recommend continuing relevant education/training programs for directors, assignment of tasks/projects to board committees, succession plan for the board members and senior officers, and remuneration packages for corporate and individual performance;
Adopt corporate governance policies and ensure that these are reviewed and updated regularly, and consistently implemented in form and substance;
Establish a formal and transparent procedure to develop a policy for determining the remuneration of directors and officers that is consistent with the corporation’s culture and strategy as well as the business environment in which it operates.
Determine the nomination and election process for the Corporation’s directors and the general profile of board members that the Corporation may need to ensure that appropriate knowledge, competencies and expertise that complement the existing skills of the Board;
Review, evaluate, pre-screen and shortlist all candidates nominated to become a member of the Board of Directors and other appointments requiring Board approval to ensure that candidates possess all the required qualifications, including whether candidates: (1) possess the knowledge, skills, experience, and particularly in the case of non-executive directors, independence of mind given their responsibilities to the Board and in light of the entity’s business and risk profile; (2) have a record of integrity and good repute; (3) have sufficient time to carry out their responsibilities; and (4) have the ability to promote a smooth interaction between board members;
Ensure that the following nomination and election policy and procedures are conducted:
1. Nomination of independent directors shall be conducted by a committee prior to a stockholders’ meeting. All recommendations shall be signed by nominating stockholders and shall bear the conformity of the nominees.
2. The committee shall pre-screen the nominees and prepare a final list of candidates.
3. The final list of candidates shall contain the business and/or professional experience of the nominees for independent directors, which list shall be made available to the Commission and to all stockholders through the filing and distribution of the Information Statement, in accordance with SRC Rule 20, or in such other reports the Company is required to submit to the Commission. The name of the person or group of persons who recommended the nominees for independent directors shall be identified in such report including any relationship to the nominees.
4. Only nominees whose names appear in the final list of candidates shall be eligible for election as independent directors. No other nominations shall be entertained after the final list of candidates shall have been prepared. No further nominations shall be entertained or allowed on the floor during the actual annual stockholders’ meeting.
5. The conduct of the election of independent directors shall be made in accordance with the standard election procedures of the Company in its By-laws, subject to pertinent laws, rules and regulations of the Commission
6. It shall be the responsibility of the Chairman of the Meeting to inform all stockholders in attendance of the mandatory requirement of electing independent directors. He shall ensure those independent directors are elected during the stockholders’ meeting.
7. In case of failure of election for independent directors, the Chairman of the Meeting shall call a separate election during the same meeting to fill up the vacancy

Board Risk Oversight Committee

The Board Risk Oversight Committee shall be composed of at least three (3) members of the Board, the majority of whom should be independent directors, including the Chairman. The Chairman should not be the Chairman of the Board or of any other committee.

The Board Risk Oversight Committee shall be responsible for the oversight of the Corporation’s Enterprise Risk Management system to ensure its functionality and effectiveness.

The Board Risk Oversight Committee shall act by majority vote of all its members on the following matters:
1. Develop a formal enterprise risk management plan which contains the following elements: (a) common language or register of risks, (b) well-defined risk management goals, objectives and oversight, (c) uniform processes of assessing risks and developing strategies to manage prioritized risks, (d) designing and implementing risk management strategies, and (e) continuing assessments to improve risk strategies, processes and measures;
2. Oversee the implementation of the enterprise risk management plan and conduct regular discussions on the company’s prioritized and residual risk exposures based on regular risk management reports and assess how the concerned units or offices are addressing and managing these risks;
3. Evaluate the risk management plan to ensure its continued relevance, comprehensiveness and effectiveness. It shall revisit defined risk management strategies, look for emerging or changing material exposures, and stay abreast of significant developments that seriously impact the likelihood of harm or loss;
4. Advise the Board on its risk appetite levels and risk tolerance limits;
5. Review the company’s risk appetite levels and risk tolerance limits based on changes and developments in the business, the regulatory framework, the external economic and business environment, and when major events occur that are considered to have major impacts on the company;
6. Assess the probability of each identified risk becoming a reality and estimate its possible significant financial impact and likelihood of occurrence. Priority areas of concern are those risks that are the most likely to occur and to impact the performance and stability of the corporation and its stakeholders;
7. Provide oversight over Management’s activities in managing credit, market, liquidity, operational, legal and other risk exposures of the corporation. This function includes regularly receiving information on risk exposures and risk management activities from Management; and,
8. Reports to the Board as deemed necessary on the company’s material risk exposures, the actions taken to reduce the risks, and recommends further action or plans, as necessary.
Audit Committee

The Audit Committee shall be composed of at least three (3) members of the Board who shall preferably have accounting, auditing, and finance backgrounds, majority of whom shall be independent directors and another with audit experience. The chair of the Audit Committee shall be an Independent Director. The Audit Committee shall have oversight capability over the Corporation’s financial reporting, internal control system, internal and external audit processes, and compliance with applicable laws and regulations.

The Audit Committee should have a process for approving and recommending the appointment, reappointment, removal, and fees of the external auditor. The appointment, reappointment, removal and fees of the external auditor should be recommended by the Audit Committee, approved by the Board and ratified by the shareholders. For removal of the external auditor, the reasons for removal or change should be disclosed to the regulators and the public through the company website and required disclosures.

The Audit Committee Charter should include the Audit Committee’s responsibility on assessing the integrity and independence of external auditors and exercising effective oversight to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant Philippine professional and regulatory requirements. The Charter should also contain the Audit Committee’s responsibility on reviewing and monitoring the external auditor’s suitability and effectiveness on an annual basis.

The Audit Committee shall have the following functions:
1. Assist the Board in the performance of its oversight responsibility for the financial reporting process, system of internal control, audit process, and monitoring of compliance with applicable laws, rules and regulations;
2. Perform oversight functions over the Corporation's internal and external auditors. It should ensure that the internal and external auditors act independently from each other, and that both auditors are given unrestricted access to all records, properties and personnel to enable them to perform their respective audit functions;
3. Review the annual internal audit plan to ensure its conformity with the objectives of the Corporation. The plan shall include the audit scope, resources and budget necessary to implement it;
4. Prior to the commencement of the audit, discuss with the external auditor the nature, scope and expenses of the audit, and ensure proper coordination if more than one audit firm is involved in the activity to secure proper coverage and minimize duplication of efforts;
5. Recommend the approval of the Internal Audit Charter (IA Charter), which formally defines the role of Internal Audit and the audit plan as well as oversee the implementation of the IA Charter;
6. Organize and oversee an internal audit department, and recommend and consider, when necessary and desirable, the appointment and/or grounds for approval of an independent internal audit head or Chief Audit Executive and the terms and conditions of its engagement and removal, as well as for outsourcing internal audit services;
7. Monitor and evaluate the adequacy and effectiveness of the Corporation's internal control system including financial reporting control and information technology security;
8. Review the reports submitted by the internal and external auditors;
9. Review and approve the interim and annual financial statements before their submission to the Board, with particular focus on the following matters:
  1. Any change/s in accounting policies and practices;
  2. Major judgmental areas;
  3. Significant adjustments resulting from the audit;
  4. Going concern assumptions;
  5. Compliance with accounting standards; and
  6. Compliance with tax, legal and regulatory requirements.
10. Coordinate, monitor and facilitate compliance with laws, rules and regulations;
11. Evaluate and determine the non-audit work, if any, of the external auditor, and review periodically the non-audit fee paid to the external auditor in relation to its significance to the total annual income of the external auditor and to the Corporation's overall consultancy expenses. The Committee shall disallow any non-audit work that will conflict with its duties as an external auditor or may pose a threat to its independence. The non-audit work, if allowed, should be disclosed in the Corporation's annual report and Annual Corporate Governance Report;
12. When applicable, establish and identify the reporting line of the Internal Auditor to enable him to properly fulfill his duties and responsibilities. He shall functionally report directly to the Audit Committee;
13. The Audit Committee shall ensure that, in the performance of the work of the Internal Auditor, he shall be free from interference by outside parties; and,
14. Recommends to the Board the appointment, reappointment, removal and fees of the External Auditor, duly accredited by the Commission, who undertakes an independent audit of the Corporation, and provides an objective assurance on the manner by which the financial statements should be prepared and presented to the stockholders.
Related Party Transaction Committee

The Related Party Transaction (RPT) Committee shall be composed of at least three directors, two of whom should be independent, including the Chairman.

The RPT Committee shall be tasked with reviewing all material related party transactions of the company. The RPT Committee shall have the following functions:
1. Evaluate on an ongoing basis existing relations between and among business and counterparties to ensure that all related parties are continuously identified, RPTs are monitored, and subsequent changes in relationships with counterparties (from non-related to related and vice versa) are captured. Related parties, RPTs and changes in relationships should be reflected in the relevant reports to the Board and regulators/supervisors;
2. Evaluate all material RPTs to ensure that these are not undertaken on more favorable economic terms (e.g., price, commissions, interest rates, fees, tenor, collateral requirement) to such related parties than similar transactions with non-related parties under similar circumstances and that no corporate or business resources of the company are misappropriated or misapplied, and to determine any potential reputational risk issues that may arise as a result of or in connection with the transactions. In evaluating RPTs, the Committee takes into account, among others, the following:
  1. The related party’s relationship to the company and interest in the transaction;
  2. The material facts of the proposed RPT, including the proposed aggregate value of such transaction;
  3. The benefits to the corporation of the proposed RPT;
  4. The availability of other sources of comparable products or services; and,
  5. An assessment of whether the proposed RPT is on terms and conditions that are comparable to the terms generally available to an unrelated party under similar circumstances. The company should have an effective price discovery system in place and exercise due diligence in determining a fair price for RPTs;
3. Ensure that appropriate disclosure is made, and/or information is provided to regulating and supervising authorities relating to the company’s RPT exposures, and policies on conflicts of interest or potential conflicts of interest. The disclosure should include information on the approach to managing material conflicts of interest that are inconsistent with such policies, and conflicts that could arise as a result of the company’s affiliation or transactions with other related parties;
4. Report to the Board of Directors as needed the status and aggregate exposures to each related party, as well as the total amount of exposures to all related parties;
5. Ensure that transactions with related parties, including write-off of exposures are subject to a periodic independent review or audit process; and
6. Oversee the implementation of the system for identifying, monitoring, measuring, controlling, and reporting RPTs, including a periodic review of RPT policies and procedures.
Board Committee Members
1. AUDIT COMMITTEE
  1. Enrique M. Soriano III (Independent Director) - Chairman
  2. Jesli A. Lapus (Independent Director)
  3. Andrew L. Tan
2. CORPORATE GOVERNANCE COMMITTEE
  1. Enrique M. Soriano III (Independent Director) - Chairman
  2. Jesli A. Lapus (Independent Director)
  3. Kendrick Andrew L. Tan
3. BOARD RISK OVERSIGHT COMMITTEE
  1. Jesli A. Lapus (Independent Director) - Chairman
  2. Enrique M. Soriano III (Independent Director)
  3. Kendrick Andrew L. Tan
4. RELATED PARTY TRANSACTION COMMITTEE
  1. Enrique M. Soriano III (Independent Director) - Chairman
  2. Jesli A. Lapus (Independent Director)
  3. Andrew L. Tan