Reviewer in CORPORATE GOVERNANCE,
This can only
BUSINESS ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL – CABRERA
CHAPTER – 1
GOVERNANCE – refers to a process whereby
elements in society wield power, authority and
influence and enact policies and decisions
concerning public life and social upliftment.
Governance therefor means the process of
decision-making and the process by which
decision are implemented (or not implemented)
through the exercise of power or authority by
leaders of the country and or organization.
CHARACTERISTICS OF GOOD GOVERNANCE
1. Participation – participation by both
men and women is a key cornerstone of
good governance. Participation could be
either direct or through legitimate
institution or representative.
2. Rule of law – Good governance requires
fair legal frameworks that are enforced
impartially. It also requires full
protection of human rights, particularly
those of minorities.
3. Transparency – information is freely
available and directly accessible to
those who will be affected by such
decisions and their enforcement. It also
means that enough information is
provided and that it is provided in easily
understandable forms and media.
4. Responsiveness – Good governance
requires that institutions and processes
try to serve the needs all stakeholders
within a reasonable timeframe.
5. Consensus Oriented – Good
governance requires mediation of the
different interest in society to reach a
broad consensus on what is in the best
interest of the whole community and
how this can be achieved.
result from an understanding of
historical, cultural and social contexts of
a given society or community.
6. Equity and Inclusiveness – ensures that
all its members feel that they have a
stake in it and do not feel excluded
from the mainstream of society.
Requires all group, but particularly the
most vulnerable, have opportunities to
improve or maintain their well-being.
7. Effectiveness and Efficiency – Good
governance means that process and
institutions produce result that meet
the needs of society while making the
best use of resources at their disposal.
8. Accountability – key requirement of a
good governance. In general, an
organization or an institution is
accountable to those who will be
affected by its decisions or actions.
Accountability cannot be enforced
without transparency and the rule of
law.
Corporate Governance – the system of
rules, practices and processes by which
business corporations are directed and
controlled. It basically involves balancing
the interest of a company’s many
stakeholders, such as stakeholders,
management, customers, suppliers,
financiers, government and the community.
- Good governance is all about
controlling one’s business and so is
relevant, and indeed vital, for all
organizations, whatever size or
structure.
PURPOSE OF A CORPORATE GOVERNANCE organization by encouraging full
disclosures of transactions in the
- The fundamentals aim of a corporate
company accounts.
governance is to enhance shareholder’s
value and protect the interest of other
stakeholders’ value and protect the
BASIC PRINCIPLES OF EFFECTIVE
interest of other stakeholders by
CORPORATE GOVERNANCE
improving the corporate performance
and accountability. Also, about what - Effective corporate governance is
the board of directors of a company transparent, protects the rights of
does, how it sets the value of the shareholders and includes both
business firm. strategic and operational risk
management. It is concerned in both
long-term earning potential as well as
OBJECTIVES OF CORPORATE GOVERNANCE actual short-term earnings and holds
directors accountable for their
1. FAIR AND EQUITABLE TREATMENT OF
stewardship of the business.
SHAREHOLDERS – A corporate
- BPECG Threefold
governance structure ensures equitable
1. Transparency and full disclosure – is
and fair treatment of all shareholders of
the board telling us what is going on?
the company. All shareholders deserve
2. Accountability – is the board taking
equitable treatment and this equity is
responsibility?
safeguarded by a good governance
3. Corporate control – is the board doing
structure in any organization.
the right thing?
2. SELF-ASSESSMENT – corporate
governance enables firms to assess CHAPTER 2
their behavior and actions before they
CORPORATE GOVERNANCE RESPONSIBILITIES
are scrutinized by regulatory agencies.
AND ACCOUNTABILITIES
An active and independent board can
successfully point out deficiencies or RELATIONSHIP BETWEEN
loopholes in the company operations SHAREHOLDERS/OWNERS AND OTHER
and help solve issues internally on a STAKEHOLDERS.
time basis.
3. INCREASE SHAREHOLDER’S EQUITY –
another corporate governance’s main
objective is to protect the long-term
interest of the shareholders. This only
reflects the positive perception that
good corporate governance induces
potential investors to decide to invest in
a company.
4. TRANSPARANCY AND FULL
DISCLOSURES – good corporate
governance aims at ensuring a lighter
degree of transparency in an

PARTIES INVOLVED IN CORPORATE
GOVERNANCE. THEIR BROAD ROLE AND
SPECIFIC RESPONSIBILITIES
1. SHAREHOLDERS
Broad role: provide effective oversight trough
election of board members, approval of major
initiative such as buying or selling stock, annual
reports on management compensation, from
the board.
2. BOARD OF DIRECTORS
Broad role: The major representative of
stockholders to ensure that the organization is
run according to the organization’s charter and
that there is proper accountability.
3. NON-EXECUTIVE OR INDEPENDENT
DIRECTORS
Broad role: the same as the board role of the
entire board of directors.
4. MANAGEMENT
Broad role: Operation and accountability.
Management the organization effectively;
provide accurate and timely reports to
shareholders and other stakeholders.
5. AUDIT COMMITTEES OF THE BOARD OF
DIRECTORS
Broad role: Provide oversight of the internal and
external audit function and the process of
preparing the annual financial statements as
well as public reports on internal control
6. REGULATORS
A. BOARD OF ACCOUNTANCY
Broad role: Set accounting and auditing
standards dictating underlying financial
reporting and auditing concepts; set the
expectations of audit quality and accounting
quality.
B. SECURITIES AND EXCHANGE
COMMISSION
Broad role: ensure the accuracy, timeliness and
fairness of public reporting of financial and
other information for public companies.
7. EXTERNAL AUDITORS
Broad role: perform audits of company financial
statements to ensure that the statements are
free of material misstatements including
misstatements that may be due to fraud.
8. INTERNAL AUDITORS
Broad role: Performs audits of companies for
compliance with company policies and laws,
audits to evaluate the efficiency of operations,
and periodic evaluation and tests of controls.
CHAPTER 3
BOARD OF DIRECTORS
- The governing body elected by the
stockholders that the corporate powers
of a corporation, conducts all its
business controls its properties.
MANAGEMENT
- A group of executives given the
authority by the Board of Directors to
implement the policies it has laid down
in the conduct of the business of the
corporation
INDEPENDENT DIRECTOR
- A person who is independent of
management and controlling
shareholder, and is free from any
business or other relationship which
could, or could reasonably be perceived
to, materially interfere with his exercise
of independent judgement in carrying
out his responsibilities as a director.
EXECUTIVE DIRECTOR
- A director who has executive
responsibility of day-to-day operations
of a part or the whole of the
organization.
NON-EXECUTIVE DIRECTOR
- A director who has no executive
responsibility and does not perform any
work related to the operations of the
corporation
CONGLOMERATE
- A group of corporations that has
diversified business activities in varied
industries, whereby the operations of
such business are controlled and
managed by a parent corporate entity.
INTERNAL CONTROL
- A process designed and effected by the
board of directors, senior management,
and all levels of personnel to provide
reasonable assurance on the
achievement of objectives through
efficient and effective operations;
reliable, complete and timely financial
and management information; and
compliance with applicable laws,
regulations, and the organization’s
policies and procedures.
ENTERPRISE RISK MANAGEMENT
- A process, effected by an entity’s board
of directors, management and other
personnel, applied in strategy setting
and across the enterprise that is
designed to identify potential events
that may affect the entity, manage risks
to be within its risk appetite, and
provide reasonable assurance regarding
the achievement of entity objectives.
RELATED PARTY
- Shall cover the company’s subsidiaries,
as well as affiliates and any party
(including their subsidiaries, affiliates
and special purpose entities), that the
company exerts direct or indirect
control over or that exerts direct or
indirect control over the company
RELATED PARTY TRANSACTION
- A transfer or resources, services or
obligations between a reporting entity
and a related party, regardless of
whether a price is charge. It should be
interpreted broadly to include not only
transactions that are entered into with
related parties, but also outstanding
transaction that are entered into with
an unrelated party that subsequently
becomes a related party.
STAKEHOLDERS
- Any individuals, organization or society
at large who can either affect and or be
affected by the company’s strategies,
policies, business decisions and
operations, in general, this includes,
among others, customers, creditors,
employees, suppliers, investors, as well
as the government and community in
which it operates.
 CHAPTER 7

COMMON UNETHICAL PRACTICES OF BUSINESS

ESTABLISHEMENTS

Misrepresentation – may classified into 2 types

1. DIRECT MISREPRESENTATION
2. INDIRECT MISREPRESENTATION

DIRECT MISREPRESENTATION – is characterized

by actively misrepresenting about the product
or customers.

1. Deceptive packaging – takes many

forms and is of many types. One type is
the practice of placing the product in
containers of exaggerated sizes and
misleading shapes to give a false
impression of its actual contents.
2. Misbranding or mislabeling –
misbranding is the practice of making
false statements on the label of a
product or making its container similar
to well-known product for the purpose
of deceiving the customer as to the
quality and or quantity of a product
being sold.
3. False or Misleading Advertising -