INTERNAL AND EXTERNAL

INSTITUTION AND
INFLUENCES OF CORPORATE

LESSON 3 PART 1
 Introduction

• The foundation of good corporate governance is

the intellectual honesty of directors and senior
management. The intellectual honesty is expressed
by acting in the best interest of the incapacitated
company.
• It is the quality of the governance that is important
and not the quantity. Good governance connotes
acting with responsibility, accountability, fairness
and transparency. A company needs the right
people, team and process.
• Long term strategy must follow consideration by the
board of directors on these five aspects: financial,
human, social, environmental and technology.
Corporate Governance in
the Philippines
Corporate governance in the Philippines
• Long before the collapse of Eron & Worldcom, The Philippines has its own
share of corporate scandals like BW Resources Corporation whose share
prices hits record highs and then collapsed in 1999.
• Corporate Governance is needed to make corporate managements more
accountable and their auditors more rigorous.
• The code aims to promote corporate governance reforms that will raise
investor confidence. The code applies to;
• Corporation those who securities are registered or listed.
• Corporations who are grantees of permits/licenses and secondary
franchises from the commission.
• Public companies.
• Branches or Subsidiaries of foreign corporations operating in the
Philippines whose securities are registered.
• The code prescribes that the board of directors shall primarily be
responsible for the governance of the corporation.
• The board shall also constitute committees in aid of good corporate
governance such as;
• The Audit Committee, whose responsibility is to inculcate in the minds
of the board members the importance of a sound system of internal
control and the Board's oversight responsibility.
• The Nomination committee, whose function is to review and evaluate
the qualification of all persons nominated to the board.
• The Compensation or Remuneration committee, whose task is to
established a formal and transparent procedure for developing a policy
on executive remuneration.
• The board is primarily accountable to the shareholder and management is
primarily accountable to the board. The external auditor should be rotated
every five years or earlier or the handling partner should be changed.
• The following stockholders right should be respected
• Voting right
• Pre-emptive right
• Power of inspection
• Right to information
• Right to dividends and appraisal right among others.
• Disclosure is a vital and dominant theme in the code. The more transparent
the internal working of the company and cash flow, the more difficult it will be
for management and controlling shareholders to misappropriate or
mismanage company assets.
• Corporation shall promulgate and adopt their corporate governance rules &
principles in accordance with the code.
 Corporate Governance in PLDT (excerpts)

• PLDT is committed to the highest standard of corporation governance as

articulated in our article of incorporation, by law, manual corporate
governance.
• PLDT is covered by corporate governance rules and regulation of the
Philippine securities and exchange commission (Philippine SEC) and the
Philippine Stock exchange (PSE).
INTERNAL FOUNDATION
OF CORPORATE
GOVERNANCE
• Board of directors
• A board of director is a body of elected or appointment by shareholder who
jointly oversee the activities and the overall managerial and operational
aspects of the corporation.
• Authority and Responsibility and Purpose of the Board
Directors
• To protect the resources entrusted to them by the shareholder’s and make
sure the later receive a decent return on their investment .
• In some European countries , the sentiment is much different; many
directors there feel that their primary responsibility to protect the employee
of the company first, the shareholders second.
• The board of directors is the top governing authority within the
management structure at any publicly listed company.
• Structure and Makeup of the Board of Directors
• The board is made up individual men and women, the “directors” who are
elected by the shareholders.
• Many companies work on a rotating system so that only a fraction of the
directors are up for election each year.
• In most cases , directors either :
• Have a vested interest in the company.
• Work in the upper management of the company.
• Are independent from the company but are known for their
business abilities.
• Committees on the Board of Directors
• The board of director’s responsibilities includes the institution of the audit
and compensation committees.
• The audit committee is responsible in making sure that the company’s
financial statement and reports are reasonably accurate and use fair
estimates in accordance with applicable financial reporting standards.
• The Firm is the entity that actually does the auditing and assurance
services
• Ownership structure and its impact on the board of
directors
• Ownership structure of a corporation has a huge impact on the efficiency and
effectiveness of the board of directors to govern.
• In a company where a shareholders exists, entity or individual investor can
effectively control the corporation.
• In a relatively few number of companies, investment of a person can account as
much as 50% to 67% or even more. (In this case, the controlling shareholder
can be also serve as the CEO and/or chairman of the board, being
supermajority.)
CHIEF • Is usually the singular organizational position
EXECUTIVE that is principally accountable in carrying out
the strategic policies and procedure as
OFFICER (CEO) established by the board of directors.

• The responsibility of the chief executive

officer bring into line the company, internally
and externally, with their long-term vision.
Also, to engage business outside of the
company while directing employees,
manager, etc. Towards a central objective.

• CEO must balance internal and external

initiatives to put together a sustainable
organization.
THE TYPICAL RESPONSIBILITIES OF A CEO ARE:
• Support to the board.
-CEO needs to supports operations and administrative by giving information
and advice to the members boards.
-CEO serves as a crossing point of boards and staff supporting whatever the
board’s evaluation of chief executive and other high ranking people in the
organization.
• Delivery of program, product and service (PPS)
-Administrative design, marketing, promotion, delivery and quality of
programs, products and services.
-CEO expected to be the brand bearer.
• Financial, risk and tax management
-This recommends yearly budget for board’s approval and cautiously manages
organization’s resources with the bounds and budget guidelines.
• Human capital management
-Efficiently manages the human capital of the organization based on sanctioned
personnel policies and procedures that fully conform to current laws, regulations,
and standards both local and international.
• Public relations (PR)
-pledge that the organization and its mission, programs and initiatives, products
and services and consistently presented in strong and physically visible manner
to the community. CEO also build positive image of the company to its relevant
stakeholders.
CHIEF FINANCIAL OFFICER ( CFO)
CHIEF FINANCIAL OFFICER ( CFO)
• The decision to hire a chief financial officer (CFO) is often a difficult desicion. A
chief finance officer (CFO) has a number of responsibilities within the
corporation that are essential in providing a strong financial foundation for a
growing and expanding business. A CFO will be the one responsible for
conveying the important financial controls to a company. A CFO implements
internal control in terms of conveying important financial aspects of the
company. He/she handles and supervise major projects that require significant
quantitative and qualitative analysis to understand and the possible options
Available.
SHAREHOLDERS:
• SHAREHOLDERS RIGHTS AND SSRESPONSIBILITIESS
• Share ownership carries with it important rights and responsibilities.
Share ownership gives the owner with the right to a share of the
income of the company called dividend and a right to a share of net
proceeds on the sale during liquidation of the company. An
important right and responsibility of shareholders is to vote. This
voting right includes the right to information about the company and
the right to express an opinion on the company’s performance. A
shareholder, also referred to as a stockholder, is a person,
company, or institution that owns at least one share of a company’s
stock, which is known as equity. They have the right to sell or
transfer their share without the consent of others.
EXTERNAL ENVIRONMENT OF
CORPORATE GOVERNANCE
 Auditors
• Help to ensure that the firms are run efficiently by keeping public records
accurate, adhering standards of reporting for public purposes and taxes
paid properly and on time.
• Analyze and communicate financial information for various entities such
as companies, potential investors, individual clients, government both
various entities at the local and national level.
• Specialize in forensic accounting investing and interpreting white-collar
crimes such as securities fraud and embezzlement, bankrupts
and contract disputes, and other complex and other complex and possibly
criminal financial transactions, including money laundering by organized
criminals.
• Legal Environment
• Some contend that it is the market that can really press real governance
considering that it is a variable independent from anybody.
• The legal environment is derived partly from the general political climate in a
country.
• Legal Environment has the Three Distinct Dimensions:
• The domestic laws of home country
• The domestic laws of each of foreign markets
• International law in general
• Markets
• Most important institutions of corporate governance.
• Important points of the term markets, these are:
• The firm’s product market
• Capital market
• The managerial labor market.
• If the firm could survive, grow, expand, diversify and lastly, retain a good
stock of human capital to manage the company as it battles the
unforgiving arena of competition.
Other External Factors
• External environment may create major threats or in some cases precursor of the
openings and possibilities for an organization-External environment offers the model, the
thrust and the most essential variable that shapes an organization.
• Political Environment
• Politics of a country or region that an organization is functioning affects the policies
and benefits that an organization derives from a system.
• Also the major pool from which the human resource of an organization is selected
from and hence it is likely to shape an organization both internally and externally.
• Technological Environment
• Any new development may render an organization’s processes and systems obsolete
if it is not quick to adapt to the new changes.
• Social Environment
• Most basic
• Compromises the general behavior of the society and the ethical learnings of the
individuals responsible for the functioning and eventual long term existence of the
organization.
THANK YOU!
Paleracio, Ren
Ompoc, Christine
Garcia, Jp
Declaro, Mary Grace
Pena, Zhyrill Macwen