Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues

1
Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
2

INTRODUCTION

Corporate governance is a concept that was introduced in the 1970s and the succeeding years
leading to the present. It has become a topic of debate around the world by both academics and
practitioners. Corporate governance structures were put in pace to protect the various stakeholders of
corporations and prevent corporate scandals and / or failures from happening. But corporate failures
continue to occur despite existing regulations. History has shown that new and stricter rules ensure after
every sandal, but it still did not guarantee good corporate behaviour Even the most stringent rules are
only as effective as the people who must abide by them. It makes you think why exemplary companies
awarded with regional and international corporate governance awards, like Enron and many others fall
into this quagmire of questionable governance.

A corporation is an entity created by laws. Company law dictates how it is created or

incorporated laws are considered conduct approved and enforced by a government of a particular
country. Society cannot function effectively if there is no basis or a mechanism that regulates the
interaction between its citizenry. The law is also a mechanism that protects people’s fundamental rights,
establishes order, resolves disputes, and sets standards. Business law (or commercial law) is a body of
law that deals with corporate contracts, manufacture or sale of goods and services, employment, labor
relations, and many others. Knowledge of the law is essential in running organizations that are socially
responsible and governed well.

This Module is divided into two lessons namely;

Lesson 1 Corporate Governance
Lesson 2 Legal, Regulatory and Political Issues

MODULE LEARNING OUTCOME

In this module, you should be able to:
1. understand good governance locally;
2. explain why should good governance be a central issue in managing organizations;
3. illustrate and explain the need to regulate business activities; and
4. discuss if big business influence affect public policy.
Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
3

Lesson 1:
Philippine Corporate Governance

SPECIFIC LEARNING OUTCOMES

In this lesson, you are expected to:
1. explain good governance in the Philippines;
2. explain the difference between governance and management;
3. enumerate and explain the key players in corporate governance; and
4. identify and expound on the approaches to corporate governance and important of committees.

PRE-ASSESSMENT
Instruction: Write letter T if the statement is correct and O if the statement is False on the space
provided before the number.
_______1. Corporate governance in the Philippines shares similar qualities with its East Asian
counterparts, most observed of the family-ownership structure.
_______2. Governance is defined as how an organization is operated by its human and material
resources to achieve organizational success.
_______3. The Chairman of the Board is the person responsible for leading and managing the
entire organization in achieving its organizational goals.
_______4. Resource Dependency Theory is based on organizational theories that look at corporate
governance from a strategic management view.
_______5. Board size is determined by the current board and should comply with the terms
established in the bylaws of the corporation.
_______6. Remuneration committee has become a non-negotiable aspect of good governance.
The main objective of the audit committee is to oversee accounting and financial
reporting processes and results.
_______7. Communications skills is needed for board members to perform their functions properly.
_______8. Ethical stewardship are unique in the sense that there is an emotional component to it.
_______9. Networking is a trait of a director providing resource connection for possible alliances in
business development.
_______10. One of the importance of committees is to assure an effective working board, the
directors on board must be independent thinkers, including its executive directors.
Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
4

LESSON MAP

Philippine
Corporate
Governance

Ethical Governance
Stewardship and
Management

Corporate
Governance
Family
Governance Approaches
to Corporate
Governance

Toward an
Members of
Effective
the Board
Working
and Politics
Board

Figure 1 describes Corporate Governance

CORE CONTENTS

ENGAGE: Quotation Analysis

Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
5

1. What is your interpretation with the quote?

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

EXPLORE: Reading Concepts

CORPORATE GOVERNANCE IN THE PHILIPPINES

Long before the collapse of Enron and WorldCom, the Philippines had its own share of corporate
scandals like BW Resources Corporation, whose share prices hit record highs and then collapsed in
1999. These scandals brought down the stock market’s image and weakened private investor
confidence. The scandals have their roots in management’s desire to project a false picture of
performance, with the aim of driving up the value of the corporation in a competitive global market.
• Corporate governance is needed to make corporate managements more accountable, and their
auditors more rigorous. But good governance requires fair legal frameworks that should enforce
impartially.
• The Philippine securities and Exchange Commission (SEC), a principal player in matters of
corporate governance, issued Memorandum Circular No. 2, Series of 2002, otherwise known as
the Code of Corporate Governance, under SEC Resolution No. 135, date Apr. 4, 2002. The code
is now effective and must be followed under pain of penalty.
• The code aims to promote corporate governance reforms that will raise investor confidence,
develop the capital market and help achieve high sustained growth for the corporate sector and
the economy.
• The code applies to:
o corporations whose securities are registered or listed
o corporations who are grantees of permits/licenses and secondary franchises from the
Commission,
o public companies
o branches or subsidiaries of foreign corporations operating in the Philippines whose securities
are registered or listed.
• Some of the code's salient features are as follows:
o The code prescribes that the Board of Directors shall primarily be responsible the governance
of the corporation.
o The Board should establish the corporation's vision and mission, strategic objectives, policies
and procedures that guide and direct activities of the company, and the mechanism for
monitoring management performance.
Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
6

GOVERNANCE AND MANAGEMENT

Governance and management are two different areas. Management focuses on the day-to-day
operations of an organization. Executives and managers in management ensure that the company is
run well and, ideally, brings profit for its shareholders. On the other hand, the governance function is
carried out by a body or group of persons (board of directors / trustees) who governs the organization,
making sure that the company or entity is efficiently and effectively run by management.

Management is defined as how an organization is operated by its human and material resources
to achieve organizational success. Such success may be measured by profits generated through its
operati8ons and the continued growth of its resource to produce more revenues. Management is widely
viewed as hierarchical organization as depicted illustrated below:

Board of Directors

Management

The board does not readily manifest itself in the organization structure because of its explicit
definition.
• A board supervises the management and provides oversight, ensuring that the company is
steered in the right direction for the satisfaction of its various stakeholders without direct
interference in the day-to-day operations of the company.
• They may be viewed as an overlapping entity that provides oversight for the organization and that
some executives (e.g. CEO, president, or vice president) are members of the board.
Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
7

KEY PLAYERS IN CORPORATE GOVERNANCE

There are five key players in corporate governance, namely:
• the CEO,
• the chairman of the board,
• the board of directors;
• the shareholders; and
• the stakeholders.
Chief Executive Officer (CEO)
• The person responsible for leading and managing the entire organization in achieving
its organizational goals.
• It is the duty of the CEO to collaborate with the board for the overall direction of the
company.
Chairman of the Board
• The chairman of the board of directors should not only provide leadership of the
board, but play an important role in the governance practices of the company.
Board of Directors
• This is the best entity for steering the company’s strategic direction and evaluating its
performance.
• As a director, questions must be asked during board meetings to make sure decisions
made by the company will be for the best interest of the company in the long term.
Shareholders
• Considered owners of the company through their ownership / holdings of stock
shares, this group actively seeks to maximize stock price increase over a period of
time.
Stakeholders
• Any group of people who are affected by how a corporation operates in (i.e.
employees, suppliers, government, and society among others).

OTHER FORMS OF ORGANIZATIONS

• Not all organizations are for profit.
• Many types of nonprofit organizations that can be formed to achieve goals and maximize
organizational performance, such as:
➢ village associations,
➢ charitable institutions
➢ many others
The main objective of good governance is the proper governance of its valuable resources for its
stakeholders. While these may not be under the scrutiny of regulating bodies, it is just as important to
ensure good governance through its board of directors (or trustees).
Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
8

THEORETICAL PERSPECTIVES
There are many lenses with which to study and loo at corporate governance. We take a look at
the most widely used and researched perspectives.

Agency Theory –
• This perspective assumes that the two principal characters, the agent (manager) and the
principal (owner), are at odds with their objectives.
• This theory posits that managers cannot be trusted and act on their interests and not for
the benefit of the owners of the company.
• Such a view brought about the agency theory (Fama & Jensen, 1983) and the majority
of corporate governance research has used this perspective mainly because of its
practical business approach.
• Measuring performance through the agents and rewarding them help assuage the
intrinsic nature of agents.
• However, the mechanics put in pace from this perspective has not been guaranteed.

Stewardship Theory –
• The agent acts in the principal’s best interest and therefore acts as a responsible steward
of the company.
• David Schoorman, ad Donaldson (1997), believed that agents are naturally inclined to
provide paper oversight and works for the best interest of the owners.
• This alternative view of the agent-principal relationship has been widely debated because
the tenets of agency theory should have provided control mechanisms for the agent to
behave, but did not do so given the numerous corporate collapses that are still happening
to this day.
• The argument continues an scholars/practitioners have yet to find a sound and generally
accepted theoretical perspective on corporate governance.

Resource Dependency Theory –

• Based on organizational theories, this theory looks at corporate governance from a
strategic management view.
• It examines how the external resources of the organizations affect how organizations
behave for their maximum utility (Pfeffer & Salancik, 1978).
• The long-term survival of an organization is dependent on the efficient and effective use of
its resources, such as raw materials, labor, executive management, and strategic
networks to name a few.
• This theory suggests that board members should actively develop their resources to build
a competitive advantage.
Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
9

Stakeholder Theory –
• Given the growing social activism seen in the last century, Freeman (1974) developed this
societal perspective and viewed organizations as entities that are responsible for their
actions that affect anyone involved or affected by their existence.
• This approach to corporate governance encourages boards to consider their
stakeholders’ concerns, not only shareholders, as the metric for a successful organization
is the satisfaction of all its stakeholders.

CULTURE AND CORPORATE GOVERNANCE

• The influence of culture influences board practice and acceptance (Humphries & Whelan,
2017) and contributes t the development of best practices.
• The context by which corporate governance is understood and practiced is an important
dimension to consider when studying the relationship between an organization’s culture
and governance processes.
• Corporate governance is generally seen as mechanisms that promote good governance,
but it is a culture that gives it the impetus.
• For instance, there are nuances in corporate governance practices between the East and
the West.
• A prime example of this would be the oft-discusses Chinese social value of “saving face”
for a particular person/entity/organization.
• Most Asian cultures, including the Philippines, have this particular emotional idiosyncrasy.
• In the West, where emotions are given lesser importance, this is not seen so much of an
issue as Western culture is deemed is more open and straightforward.

APPROACHES TO CORPORATE GOVERNANCE

A rules-based approach to corporate governance relies on regulation and the law to
ensure compliance. It is in a principles-based approach where companies are required to explain
why certain violations of the code have been made. This is sometimes referred to as a “comply
and explain approach. Both approaches adopt a unitary board (against the European two-tier
board) wherein there are two boards, one made up of executive directors and another board
made up of non-executive directors (shareholders and employees).

Functions of the Board

There are four main functions of a board: (Tricker 2019)
• Accountability
• Strategy formulation
• Monitoring and supervising, and
• Policy-making
 Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
10

External perspective Provide accountability Formulate strategy

Internal perspective Monitor and supervise the Set policy
management
Time reference Past and Current Future

Accountability –
• Why be accountable?
• Simply because the success or failure of an organizations rests on the board and the
board should be accountable not only to their shareholders but also to all the other
stakeholders affected by their actions/behavior.
Monitoring and supervision –
• Another function of the board is to oversee the performance of its management.
• There are various financial and nonfinancial metrics available but most companies prefer
to use financial met
• Another common tool used is the budgetary control system that compares the budget
against actual numbers from operations.
Setting policy –
• For strategies to work a set of policies procedures, and plans must be prepared for
management to abide by.
• This is also used to supervise management activities.
• These may either be set by the board or by approving the recommendations by
management which is often the case.
Strategy formulation -
• Can a company survive without a strategy? Hardly.
• This is the most important function of the board as this will steer the company to achieve
its vision and mission.
• A large part of board work is spent on the formulation and calibration of organizational
strategies.
• Board members require strategic planning with varying backgrounds and expertise.
• The most common tool used in strategy planning is the SWOT (strength, weakness,
opportunity, and threat) framework.
Providing accountability and formulating strategy are outward-looking perspectives,
whereas monitoring and supervising and policymaking are inward-looking. The reference for
accountability and monitoring and supervision refers to both historical (what happened in the
past) and current period, whereas strategy formulation and policy-making are future-focused
activities.

MEMBERSHIP OF THE BOARD

• Board size is determined by the current board and should comply with the terms
established in the bylaws of the corporation.
 Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
11

• A corporation is composed of one director (for OPCs) up to a maximum of 15 directors

with each director owning at least one share of stock, as per the guidelines indicated in
the Philippine Corporate Code (2019).
• The term for each director is set at one year among holders of stocks of the company
(three years in the case of trustees, chosen from among the members of the corporation).
• Directors are normatively nominated by the shareholders, controlled by the board in the
director selection process as best practices indicate.
• But in cases where a founder or majority group is in control of a corporation, the
nomination usually comes from these entities through the nomination committee, much
more so when the organization is in its start-up stage.
• Director classification comes in many forms but there are three main director types:
independent, non-executive, and executive directors.
Independent directors -
• are individuals who have no connection with the company and is free from any
relationship which may be considered a conflict of interest.
Non-executive directors –
• are individuals who are not part of management but are related to a certain aspect of the
company, such as being supplier, family representative, friend, adviser, or shareholder.
Executive directors –
• Hold a particular position inside the organization, such as the CEO or other senior
executive positions such as the vice president.
Aside from the fundamental requirements of a director having integrity, intellect, and
independence, a director must have the following core competencies: good
communication skills, ability to read and understand financial statement, strategic
planning, critical thinking and networking.
Politics in the Board –
• An aspect of organizational life is the existence of politics.
• Politics can be destructive if used the wrong way but can also be used positively to
further a worthwhile agenda or cause that will benefit the company.
• Corporate politics may be described as processes and interactions, involving power and
authority that influence decisions made for the benefit of an individual, group, or
organizations.
• In the study of corporate governance, it is important to understand a company’s
governance structure, or where the power lies.
• Tricker (2019) noted that human behavior is based on relationships, and by the
processes of power. How people behave in an organization is dictated by their
association of power.
 Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
12

IMPORTANCE OF COMMITTEES
Committees are formed because board work can be done more effectively. By focusing
and discussing particular issues separately from general board meetings, the time management
of directors is optimized. It is advisable and recommended that the chairman of these
committees be independent directors so that they truly perform their oversight roles according to
the requirements of the regulating bodies. In publicly listed companies, the following committees
are required by regulating bodies:
1. Audit committee – As a result of corporate meltdowns, this committee has become a
nonnegotiable aspect of good governance. The main objective of the audit committee
is to oversee accounting and financial reporting processes and results. They make
sure that internal and external audits are carried out with integrity.
2. Remuneration committee – This committee is responsible for identifying
compensation and benefit plans for directors and senior executives through
performance appraisals. Excessive compensation packages during economic
downturns or financial crises warrant a closer investigation of the rationale behind said
compensation.
3. Nomination committee – To assure an effective working board, the directors on
board must be independent thinkers, including its executive directors. The nomination
committee should nominate the right mix of board members to ensure objectivity,
independence, and expertise. However, there is usually a preponderance of the
“old boy’s club” in many companies. Having a majority independent director board
does not necessarily equate to better governance is the CEO and the chairman are in
control of the board.
Other committees can be formed by the board as part of good governance but this will
depend on the need and circumstance of a company.

TOWARD AN EFFECTIVE WORKING BOARD

An effective working board would require the sound leadership of a board. Apart from this
fundamental quality; it would be ideal for directors to have the following traits.
1. Commitment – in terms of time spent and in the achievement of strategic objectives;
2. Expertise – possess strong technical knowledge of the industry or business;
3. Unity – ability to work and get along with fellow board members; collaborating effectively in
getting the group to agree on resolutions;
4. Independence – challenging the status quo and critically questioning perspectives; and
5. Networking – providing resource connections for possible alliances in business
development.
As with any professional endeavor, training and development are they key to building skills that
will enhance performance. This also builds participant confidence in carrying out their respective roles in
the ordination. Professional director associations such as the Institute of Corporate Directors (ICD) and
Good Governance Advocates and Practitioners of the Philippines (GGAPP) are two leading outfits that
provide such training.
 Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
13

Information symmetry is needed for board members to perform their functions properly.
Documents for review must be given on time with complete formation. While each director may have
different needs depending on his knowledge of the company’s operations, it is the director’s right and
duty to get information.
Lastly, good communication skills provide a smooth flow of information to the parties involved in
corporate governance. Miscommunication usually leads to misunderstanding. Communications with all
stakeholders involved, primarily the shareholders, are the key in ensuring governance structures and
processes (e.g., financial reporting, annual general meetings, disclosures, and others) are understood
therefore must be undertaken clearly and cohesively.

Board Evaluation
• One of the purposes of evaluating boards is to continuously improve best practices and see if
they are functioning effectively.
• The board is tasked to do evaluations internally and/or through a third party to ensure compliance
within the legal and regulatory framework.
• Of course, best practice would dictate such processes to go beyond conformance and
compliance.
• Every country would have different evaluation parameters but most rating systems follow the
OECD Principles Organization for Economic Cooperation and Development). In Asia including
the Philippines, the ASEAN corporate governance scorecard (ACGS( is used.
• Evaluating the board would include a review of the company’s governance and board structure,
board members, and processes.
• Concerning board evaluation, individual directors are also assessed.
• The Chairman of the Board normally assesses directors.
• Who now assesse the chairman?
• In some companies, it is the independent director who does this assessment.
• Again, each company may have its method of evaluation, as indicated in its governance codes or
the company bylaws.

Family Governance
• Family corporations are unique in the sense that there is an emotional component to it.
• Schmid, Rouvinez, and Poza (2014) argued that the objective of good family business
governance is the sustainable development of the economic value and emotional value (well-
being) of the enterprise.
• Higher economic value is manifested through its revenues, while emotional value refers to
the emotions that create an attachment to the company.
• In other words, emotions must be managed before good corporate governance can even
progress.
 Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
14

• The creation of a family constitution (with the assistance of a lawyer and/or consultant) should
help in the process of good family governance as this is a document that describes their
strategy and structures.
• All family members must be included in the construction of this constitution.
• There are challenges to the governance of family-owned enterprises even if it has been
transformed into a publicly listed company.
• Issues such as nepotism, lack of professional managers, family infighting, third-generation
entitlement, and the absence of succession planning can lead to disruptions. Some family
businesses have been in existence for generations and the continuity of these enterprises
may become fragile over time if family governance is weak.

Ethical Stewardship
• One of the board of directors’ responsibilities is to ensure the proper governance of their
organizations’ sources, and address the needs of its various stakeholders.
• Apart from formulating business strategies and policies, a director is also held accountable
for actions taken by the company and monitoring management.
• A director’s position in the board carries a lot of weight in the downstream activities of an
organization’s various functions.
• We may have all the necessary tools and processes in implementing good corporate
governance but this is not enough, as manifested in quite a name of corporate scandals over
the last 30 years around the globe.
• What is needed, beyond compliance on form and structure by which corporation are
regulated and assessed, is awareness and affirmation of ethical values in corporations-
values such as integrity, which Estanislao (2017) stated as the very core of governance
character.
• This has to be imperatively paired with the sound leadership of the CEO and the board of
directors.
• Corporate participants in all levels must continuously be trained in good governance so that
that they may be able to demonstrate moral behavior for followers and peers to emulate.
• Such, training must reiterate and reinforce the values by which we live decent lives.
• Ethical stewardship (Caldwell, Hayes, Karrie, & Bernal, 2008) is good for business and
involves demonstrating respect for values that include honesty, fairness, equality, dignity,
diversity, and individual rights.
• If only institutions are always in with ethical behavior then people in organizations would not
find themselves and their companies involved with these debilitating circumstances.

Unfortunately, it is not as simple as it sounds. It takes time for individual and collective efforts to
build and form lasting values in organizations. Executive training and development is a cornerstone of
organizational growth and development.
 Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
15

As part of organizational values formation, it is important to remind big companies of the true
objective of forming corporation. Apart from providing fair returns to the company and its investors, it is
the responsibility of corporations to contribute to the task of nation-building through economic
development. Further, and because of the concept and hegemony of shareholder supremacy, this
responsibility is more often than not marginalized.
Controlling shareholders also need to be reminded that corporations are not exclusively “owned”
by them and that corporations belong to all shareholders regardless of the number or percentage of their
shareholdings. Gone were the days when corporation were considered “private.” Not only are they
accountable to their shareholders, but we are also now living in an era where corporations are
accountable to the various publics, rightfully demanding ethical behavior from these giants. The
corporation’s various stakeholders must be protected, and that firm profitability is certainly achievable
without sacrificing good corporate governance.

EXPLAIN: Discussing Concepts

INSTRUCTIONS: Answer the following questions below.

1. Discuss the difference between governance and management .

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
2. Describe the different theoretical perspectives in corporate governance.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
3. Describe the four main functions of the board.
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________

4. Explain the importance of the different cmmittees.

________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________
 Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
16

EXTEND: TAKING OPINIONS

1. Enumerate and explain the key players in corporate governance.
Functions Duties and Responsibilities
Chief Executive Officer (CEO)
Chairman of the Board
Board of Directors
Shareholders
Stakeholders

2. What is Family governance?

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

EVALUATE: GOING DEEPER

1. Enumerate and explain the ideal traits of the board of directors.

2. Discuss the meaning of ethical stewardship.

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

TOPIC SUMMARY
In this lesson, you have learned that …
• Corporate governance in the Philippines shares similar qualities with its East Asian counterparts,
most observed of the family-ownership structure.
• The two key features of corporate ownership among East Asian countries: concentration and
composition. The concentration dilemma happens in two forms – low concentration (high
dispersion and high concentration (low dispersion). The former occurs when the majority of the
 Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
17

ownership is held by several majority and minority shareholders, and the latter, when the majority
of the ownership is held by a small number of major stockholders. In low concentration, conflict
arises between shareholders and managers, while in high concentration, between majority and
minority shareholders.
• The Philippines’ own Code of Corporate Governance is stated in SEC Memorandum Circular No.
2, Series of 2002, complementing the Corporation Code of the Philippines.
• The revised Corporation Code of the Philippines (2019), however, stated that the board should be
comprised of at least 20 percent independent directors from the total number of directors; board
committees are formed to aid in complying with good corporate governance, and that
management is accountable to the board, and the board is accountable to the stockholders.
Saldaǹa (1999) maintained that both the Corporation Code of the Philippines and the
requirements of SEC were based or inspired by counterparts in the US.
• The family-ownership structure is unique to East Asia, including the Philippines, and other
countries such as Japan and Germany. This issue should be addressed in the country’s
corporate governance code, for it is not which model that is superior that should be regarded, but
which one works for the circumstance.
• Governance and management are two different areas. Management focuses on the day-to-day
operators of organizations while governance function is carried out by a body or group of persons
(board of directors/trustees) who governs the organization, making sure that the company or
entity is efficiently and effectively run by management.
• There are five key players in corporate governance, namely the CEO, the chairman of the board,
the board of directors, the shareholders, and the stakeholders.
• There are many lenses with which to study and look at corporate governance. We take a look at
he most widely used and research perspectives such as Agency Theory, Stewardship Theory,
Resource Dependency Theory, and Stakeholder Theory.

POST-ASSESSMENT
IDENTIFICATION.
____________1. Defined as how an organization is operated by its human and material resources to
achieve organizational success. (Reframing Organiz ation)

____________2. The person responsible for leading and managing the entire organization in achieving
its organizational goals. Douglas McGregor

____________3. Considered owners of the company through their ownership / holdings of stock
shares, this group actively seeks to maximize stock price increase over a period of
time.Elt

____________4. This theory looks at corporate governance from a strategic management view. Supermajority

____________5. A function of the board to oversee the performance of its management. Anti-Takeover tactics

____________6. This committee is responsible for identifying compensation and benefit plans for
directors and senior executives through performance appraisals. Social environment
 Module 2 – Corporate Governance; and its Legal, Regulatory, and Political Issues
18

____________7. One of the ideal traits of a board of directors an ability to work and get along with
fellow board members; collaborating effectively in getting the group to agree on
resolutions. External Environment

____________8. What is needed for a board members to perform their function properly.
____________9. This committee has become a nonnegotiable aspect of good governance whose main
objective is to oversee accounting and financial reporting processes and results.
____________10. Any group of people who are affected by how a corporation operates in like
employees, suppliers, government, and society among others.
____________11. This perspective assumes that the two principal characters, the agency –manager
and the principal-owner.
____________12. A trait of a director that possess strong technical knowledge of the industry or
business.
____________13. Challenging the status quo and critically questioning perspectives trait of the board of
director.
____________14. An strategic work of the director, setting a policies, procedures, and plans must be
prepared for management to abide by.
____________15. A corporation is composed of _________director owning at least one share of stock,
as per the guidelines indicated in the Philippine Corporate Code f 2019.

REFERENCES
• Aune, b. (2014). Kant’s theory of morals. New Jersey, USA: Princeton University Press.
• Ballade, Win, et all. Good Governance & Social Responsibility. DomDane Publishers. 2015.
• Bowen, H.R. (1953). Social Responsibilities of the Businessman. USA: Japer & Brothers.
• Caldwell, C., Hayes, L.A., Karrie, R., & Bernal, P. (2008). Ethical stewardship – Implications for
leadership and trust. Journal of Business Ethics, 78, 153-164, doi: 10.1007/s10551-006-9320-1
• Carroll, A.B. (1991). The pyramid of orporat3 social responsibility: Toward the management of
organizational stakeholders, Business Horizons, 39-48.
• Delos Santos, D.L. & Ng, L.T. Good Governance and Social Responsibility. First Edition. Rex
Book Store. Philippine Copyright, 2021