I

TH

The Role of

Stakeholders In

Corporate Governance
March 8, 2022 GROUP 4
TH Today's agenda
A. The rights of stakeholders that are established by law or through mutual agreements are to be

THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE

respected

B. Where stakeholder interests are protected by law, stakeholders should have the opportunity to

obtain effective redress for violation of their rights

C. Mechanisms for employee participation should be permitted to develop

D. Where stakeholders participate in the corporate governance process, they should have access to

relevant, sufficient and reliable information on a timely and regular basis

E. Stakeholders, including individual employees and their representative bodies, should be able to

freely communicate their concerns about illegal or unethical practices to the board and to the

competent public authorities and their rights should not be compromised for doing this.

F. The corporate governance framework should be complemented by an effective, efficient

insolvency framework and by effective enforcement of creditor rights

I

INTRODUCTION
TH

The corporate governance framework should recognise the rights of

stakeholders established by law or through mutual agreements and encourage a
healthy collaboration between the firm and its stakeholders in the creation of
wealth, jobs, and the long-term viability of financially sound enterprises

Corporations should recognise that the teamwork and contributions of

stakeholders and from a range of different resource providers, constitute a
valuable resource for building competitive and profitable companies. The
governance framework should recognise the interests of stakeholders and their
contribution to the long-term success of the corporation.
 A For those not established by law, many firms make additional
commitments to stakeholders. This is because the
effectiveness and credibility of the entire corporate
The rights of governance framework depend to a large extent on

stakeholders that institutional investors’ willingness and ability to make informed

use of the shareholder rights and effectively exercise their
are established by ownership function.

law or through For instance, companies shall follow the provisions of Act No.
mutual 1459, "The Corporation Law", in its operations; and shall
formulate its Memorandum and Articles of Association, as well
agreements are to as internal policies, with the stakeholders in mind. And when it

be respected comes to a company’s additional commitments, it shall ensure

that its Memorandum and Articles of Association, as well as
internal policies, include the controls and the basis for
protecting stakeholders’ and shareholders’ rights.
THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE
A The main objectives are as follows:
B

THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE Protect the rights of its shareholders including minority
shareholders as well as the Company’s various stakeholders

Provide timely and accurate information regarding the Company

including the Company’s financial position and major
shareholders

Encourage the effective participation of shareholders at General

Assembly meetings and provide them their rights in line with the
Company’s Articles and By-Laws and the prevailing laws
 Where stakeholder interests are protected by law, stakeholders
B
B should have the opportunity to obtain effective redress for
THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE
violation of their rights
The corporate governance framework should should protect and facilitate the
exercise of shareholders’ rights and ensure the equitable treatment of all
shareholders. It should not impede the ability of stakeholders to communicate and
to obtain redress for the violation of rights.

It is crucial for the company to maintain open and easy communication with its
stakeholders. Stakeholder engagement is important to ensure that most vulnerable
groups are aware of the various remedy options available. “Effective remedy
requires directly seeking the perspective of stakeholders who have been harmed.”
It is comprised of the following five elements:
1. Restitution
4. Satisfaction
2. Compensation
5. Guarantee of non-repetition
3. Rehabilitation
B Five elements of effective remedy in violation of rights:
B 1. Restitution
- which is intended to restore, to the extent possible, whatever has been lost to the victim
THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE
preceding the harm.

2. Compensation
- which is appropriate in cases where damage/ harm to the victim can be economically
assessed.

3. Rehabilitation
- which covers medical or psychological care, and social or legal services needed to restore
the victim.

4. Satisfaction
- which includes measures as a cessation of the violations.

5. Guarantee of non-repetition
- which includes actions and measures to prevent further abuses or similar future violations.
 In the context of corporate governance, mechanisms for
C
participation may benefit companies directly as well as indirectly
through the readiness by employees to invest in firm specific skills.

Mechanisms for
Examples for mechanisms for employee participation include:
1. Employee representation on boards
employee
2. Governance processes such as work councils

participation

3. International conventions and national norms

4. Employee stock ownership plans
should be
5. Pension commitments

permitted to
The degree to which employees participate in corporate

develop
THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE
governance depends on national laws and practices, and may vary
from company to company as well. Nevertheless, their participation
and involvement in decision making will be an effective adoption of
methodologies and show a fairly utilized practice in the workplace
that will be reliably favorable and relevant.
 C Mechanisms for employee participation include:
1. Employee representation on boards
- where it shows their rights to vote for representatives for the BOD.

2. Governance processes such as work councils

- providing work councils that consider employee viewpoints in certain key decisions for their
THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE

views and interests to be ensured by granting them the formal authority.

3. International conventions and national norms

- recognizes the rights of employees to information, consultation and negotiation.

4. Employee stock ownership plans

- Many countries have acknowledged employee stock ownership plans or other profit-sharing
mechanisms which can actually give employees a chance to hold ownership interest in the company.

5. Pension commitments
- Often an element of the relationship between the company and its past and present
employees. Where such commitments involve establishing an independent fund, its trustees should be
independent of the company’s management and manage the fund for all beneficiaries.
 D
D
Where stakeholders participate in the corporate
governance process, they should have access to
relevant, sufficient and reliable information on a
timely and regular basis.

Where laws and practice of corporate governance frameworks

provide for participation by stakeholders, it is important that
stakeholders have access to information necessary to fulfill their
responsibilities.

THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE

 D
D

The board should establish corporate disclosure policies and procedures to ensure
a comprehensive, accurate, reliable, and timely report to other stakeholders that
gives a fair and complete picture of a company’s financial condition, results and
business operations. Setting up clear policies and procedures on corporate
disclosure that comply with the disclosure requirement as provided in Rule 68 of the
Securities Regulation Code (SRC), Philippine Stock Exchange Listing and Disclosure
Rules, and other regulations such as those required by the Bangko Sentral ng
Pilipinas, is essential for comprehensive reporting.

THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE

 EE
Stakeholders,
including individual
employees and their
representative bodies,
should be able to
freely communicate
their concerns about
illegal or unethical
practices to the board
and to the competent
public authorities and
their rights should not
be compromised for
doing this
THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE
With the risk of unethical and illegal practices in an
organization, it is essential for the company to
establish procedures for complaints by employees
and outsiders. Wherein, these individuals can report
through representative bodies or personal means
to:
a. Audit or Ethics Committee
b. Ombudsman
c. Confidential phone and e-mail facilities
d. Competent authorities
It should be provided that these individuals are
protected from any retaliatory acts as a result of
their actions.
 EE
Representative bodies and employees should have direct access to:

a. Audit or Ethics Committee

A committee that is responsible for overseeing the conduct of employees and management,
whether they are in line with lawful and ethical guidelines.

b. Ombudsman
An appointed company officer with the responsibility to investigate and resolve complaints.

c. Confidential phone and e-mail facilities

Facilities where individuals can report their concerns while keeping the entire conversation private

d. Competent authorities
With the hundreds of complaints in a company, the audit or ethics committee, ombudsman, or
reporting facilities may not be able to concerns in a timely manner. With this, it is also appropriate
to report to competent authoties.

THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE

 EE
Companies should ensure the protection of whistleblowers:

Whistleblowers
Are individuals that report the illegal and unethical practices of a company. By doing
this, they become prone to retaliatory acts. They might be harrassed, deprived of
opportunities, or even dismissed from work.

Many have acknlowedged that whistleblowers do not deserve discrimination.

Whistleblower Laws
Countries such as the United States passed Whistleblower Protection Laws. However, the
Philippines is yet to do the same. Senator Richard J. Gordon filed a Senate Bill in regard to
that entitled “An Act Providing for Whistleblower Bill of Rights” in 2009. Companies in the
Philippines have also taken the initiative to establish their own Whistleblowing Policies.

THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE

 F The corporate governance framework should be
F complemented by an effective, efficient insolvency framework
and by effective enforcement of creditor rights

What is meant by insolvency framework?

Insolvency is a state of financial distress in which a person or business is unable to

pay their debts. Now, the insolvency framework serves as rules or as a way to
determine how to resolve distressed assets, allowing the corporation to continue
and the said assets to be redeployed to more productive uses.

Creditors are key stakeholders that play a role in corporate governance. The terms,
volume and type of credit extended to firms will depend importantly on their rights and
on their enforceability.

THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE

 F
F As observed from financially sound enterprises, those with good corporate
governance are often able to borrow large sums of money with more favorable
terms in comparison to those that operate in less transparent markets.

Insolvency procedures usually require efficient mechanisms for reconciling the

interests of different classes of creditors. This is because creditor rights also vary,
ranging from secured bond holders to unsecured creditors. In many jurisdictions, a
provision is made for special rights such as through “debtor in possession”.

The insolvency framework varies across countries. In some countries, when

companies are nearing insolvency, the legislative framework imposes a duty on
directors to act with the interests of creditors in mind. Other countries have
mechanisms which encourage the debtor to reveal timely information about the
company’s difficulties to create a consensual solution between the debtor and its
creditors.

THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE

 X

References
OECD (2015). G20/OECD Principles of Corporate Governance. OECD Publishing, Paris. Retrieved from

http://dx.doi.org/10.1787/9789264236882-en

SEC (2019). Revised Securities Regulation Code (SRC) Rule 68. Manila Bulletin, Philippines. Retrieved

from https://www.sec.gov.ph/wp-content/uploads/2019/12/2019Rule_RSRCRule68.pdf

ICJ (2018). The Right to a Remedy and Reparation for Gross Human Rights Violations. Geneva,

Switzerland. Retrieved from https://www.icj.org/wp-content/uploads/2018/11/Universal-Right-to-a-

Remedy-Publications-Reports-Practitioners-Guides-2018-ENG.pdf
Kusbiantoro, R. (2019). Human Rights, Access to Remedy, and Stakeholder Engagement. Retrieved from

https://www.bsr.org/en/our-insights/blog-view/human-rights-access-to-remedy-and-stakeholder-

engagement
XIII
Roles:
Introduction - Kate Ashley Carmelotes
Section A - Daniece Nicole Lipon
Section B - Jullanah Jhay Memoracion
Section C - Rianne Marie Tangcay

TH
Section D - Fregelyn Jamon
Section E - Goddess Mary Barcenas
Thank you!
Section F - Mary Joyce Mondejar
Let's make this our best quarter yet.
Powerpoint - Rianne Marie Tangcay
- Jullanah Jhay Memoracion
Finalizing Content - Mary Joyce Mondejar
- Goddess Mary Barcenas