SUMMARY IN UNIT 3: THE DIRECTORS AND CORPORATE OFFICERS

OF THE COMPANY (GBERMIC)

 A DIRECTOR IS ANY APPOINTED OR ELECTED MEMBER OF THE BOARD OF

DIRECTORS OF A COMPANY THAT HAS THE RESPONSIBILITY IN
DETERMINING AND IMPLEMENTING THE COMPANY’S POLICY.
 THE BOARD SHOULD COMPRISE OF DIRECTORS WHO HAS COLLECTIVE
WORKING KNOWLEDGE, EXPERIENCE AND EXPERTISE THAT IS RELEVANT
TO THE COMPANY’S INDUSTRY, AS WELL AS ENSURING THAT IT HAS AN
APPROPRIATE MIX OF COMPETENCE AND EXPERTISE AND THAT MEMBERS
REMAIN QUALIFIED FOR THEIR POSITIONS ENABLING IT TO FULFILL ITS
ROLES AND RESPONSIBILITY IN RESPONDING THE NEEDS OF THE
ORGANIZATION.
 TO BECOME A DIRECTOR ONE MUST HAVE AND OWN AT LEAST ONE (1)
VOTING SHARE OF STOCK BEFORE AND DURING HIS TERMS AS DIRECTOR.
 THE TWO (2) TYPES OF GROUNDSA FOR DISQUALIFICATION ARE;
PERPETUAL GROUNDS WHICH FOCUS MORE ON CRIMINAL BEHAVIOR OR
THE INCAPABILITY OF BEING RELIABLE TO BE ENTRUSTED WITH THE
FUTURE SUCCESS OF THE COMPANY (I.E., FRAUD), 2ND IS; TEMPORARY
GROUNDS WHICH FOCUS MORE OF UNDESIRABLE BEHAVIORS UNRELATED
TO CRIMES OR THE INCAPABILITY OF PERFORMING HIS DUTIES AS
DIRECTORS WHICH A PERSON IS TEMPORARILY DISQUALIFIED UNTIL
PROVEN QUALIFIED.
 A DIRECTOR SHOULD SHOW FULL COMMITMENT TO THE COMPANY, THE
DIRECTORS SHOULD DEVOTE THE TIME AND ATTENTION NECESSARY TO
PERFORM THEIR DUTIES AND RESPONSIBILITIES PROPERLY AND
EFFECTIVELY, INCLUDING SUFFICIENT TIME TO BE FAMILIAR WITH THE
CORPORATION’S BUSINESS. MOREOVER, IN BOARD AND COMMITTEE
MEETINGS, THE DIRECTOR SHOULD REVIEW MEETING MATERIALS AND IF
CALLED FOR, ASK THE NECESSARY QUESTIONS OR SEEK CLARIFICATIONS
AND EXPLANATIONS.
 TYPES OF DIRECTORS;
o INDEPENDENT DIRECTORS; ONE WHO IS INDEPENDENT OF
MANAGEMENT, FREE FROM ANY BUSINESS OR OTHER RELATIONSHIP
AS WELL AS SOMEONE WHO EXERCISE INDEPENDENT JUDGEMENT
IN CARRYING OUT HIS RESPONSIBILITY.
o EXECUTIVE DIRECTOR; ONE WHO HAS EXECUTIVE RESPONSIBILITY
OF DAY-TO-DATE OPERATIONS
o NON-EXECUTIVE DIRECTOR; ONE WHO HAS NO EXECUTIVE
RESPONSIBILITY AND DOES NOT PERFORM ANY WORK RELATED TO
THE COMPANY’S DAILY OPERATIONS.
 LIMITATIONS OF DIRECTORS;
o NO DIRECTOR SHOULD PARTICIPATE IN DISCUSSIONS OR
DELIBERATIONS INVOLVING HIS OWN REMUNERATION. A RULE THAT
WILL PREVENT DIRECTORS FROM USING THEIR INFLUENCE TO
CONVINCE THE BOARD TO GIVE HIM PAY BEYOND WHAT HE
DESERVES.
o THE BOARD SHOULD ALIGN THE REMUNERATION OF KEY OFFICERS
AND BOARD MEMBERS WITH THE LONG-TERM INTERESTS OF THE
COMPANY. IN DOING SO, IT SHOULD FORMULATE AND ADOPT A
POLICY SPECIFYING THE RELATIONSHIP BETWEEN REMUNERATION
AND PERFORMANCE.
o THE GROUNDS FOR PERMANENT AND TEMPORARY
DISQUALIFICATION.
o DIRECTORS MAY BE ALLOWED TO PARTICIPATE IN BOARD MEETINGS
THROUGH TELE/VIDEO CONFERENCING PROVIDED THAT THE
DIRECTOR ADOPTING THIS MODE MUST ESTABLISH THE EXISTENCE
OF JUSTIFIABLE CAUSES.
o A DIRECTOR SHOULD NOTIFY THE BOARD WHERE HE/SHE IS AN
INCUMBENT DIRECTOR BEFORE ACCEPTING DIRECTORSHIP IN
ANOTHER COMPANY.
o THE NON-EXECUTIVE DIRECTORS OF THE BOARD SHOULD
CONCURRENTLY SERVE AS DIRECTORS TO A MAXIMUM OF FIVE
PUBLICLY LISTED COMPANIES TO ENSURE THAT THEY HAVE
SUFFICIENT TIME TO FULLY PREPARE FOR MEETINGS, CHALLENGE
MANAGEMENT’S PROPOSALS/VIEWS, AND OVERSEE THE LONG-
TERM STRATEGY OF THE COMPANY.
o THE BOARD’S INDEPENDENT DIRECTORS SHOULD SERVE FOR A
MAXIMUM CUMULATIVE TERM OF NINE YEARS. AFTER WHICH, THE
INDEPENDENT DIRECTOR SHOULD BE PERPETUALLY BARRED FROM
REELECTION AS SUCH IN THE SAME COMPANY BUT MAY CONTINUE
TO QUALIFY NOMINATION AND ELECTION AS A NON-INDEPENDENT
DIRECTOR. IN THE INSTANCE THAT A COMPANY WANTS TO RETAIN
AN INDEPENDENT DIRECTOR WHO HAS SERVED FOR NINE YEARS,
THE BOARD SHOULD PROVIDE MERITORIOUS JUSTIFICATION/S AND
SEEK SHAREHOLDERS’ APPROVAL DURING THE ANNUAL
SHAREHOLDERS’ MEETING.
o THE POSITIONS OF CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER SHOULD BE HELD BY SEPARATE INDIVIDUALS,
AND EACH SHOULD HAVE CLEARLY DEFINED RESPONSIBILITIES.
o A DIRECTOR WITH A MATERIAL INTEREST IN ANY TRANSACTION
AFFECTING THE CORPORATION SHOULD ABSTAIN FROM TAKING
PART IN THE DELIBERATIONS FOR THE SAME.
o MEMBERS OF THE BOARD ARE DUTY BOUND TO APPLY HIGH
ETHICAL STANDARDS, CONSIDERING THE INTERESTS OF ALL
STAKEHOLDERS.
o IT IS CRUCIAL FOR COMPANIES TO HAVE A POLICY REQUIRING
DIRECTORS TO TIMELY DISCLOSE TO THE COMPANY ANY DEALINGS
 WITH COMPANY SHARES SINCE THEY HAVE ACCESS TO THE
MATERIAL INFO IN THE COMPANY TO REDUCE THE RISK THAT THE
DIRECTORS MIGHT TAKE ADVANTAGE OF THIS INFORMATION.
 SEC. 25. CORPORATE OFFICERS, QUORUM. - IMMEDIATELY AFTER THEIR
ELECTION, THE DIRECTORS OF A CORPORATION MUST FORMALLY
ORGANIZE BY THE ELECTION OF A PRESIDENT, WHO SHALL BE A
DIRECTOR, A TREASURER WHO MAY OR MAY NOT BE A DIRECTOR, A
SECRETARY WHO SHALL BE A RESIDENT AND CITIZEN OF THE PHILIPPINES,
AND SUCH OTHER OFFICERS AS MAY BE PROVIDED FOR IN THE BY-LAWS.
ANY TWO (2) OR MORE POSITIONS MAY BE HELD CONCURRENTLY BY THE
SAME PERSON, EXCEPT THAT NO ONE SHALL ACT AS PRESIDENT AND
SECRETARY OR AS PRESIDENT AND TREASURER AT THE SAME TIME. THE
DIRECTORS OR TRUSTEES AND OFFICERS TO BE ELECTED SHALL PERFORM
THE DUTIES ENJOINED IN THEM BY LAW AND THE BY-LAWS OF THE
CORPORATION. UNLESS THE ARTICLES OF INCORPORATION OR THE BY-
LAWS PROVIDE FOR A GREATER MAJORITY, A MAJORITY OF THE NUMBER
OF DIRECTORS OR TRUSTEES AS FIXED IN THE ARTICLES OF
INCORPORATION SHALL CONSTITUTE A QUORUM FOR THE TRANSACTION
OF CORPORATE BUSINESS, AND EVERY DECISION OF AT LEAST A MAJORITY
OF THE DIRECTORS OR TRUSTEES PRESENT AT A MEETING AT WHICH
THERE IS A QUORUM SHALL BE VALID AS A CORPORATE ACT, EXCEPT FOR
THE ELECTION OF OFFICERS WHICH SHALL REQUIRE THE VOTE OF A
MAJORITY OF ALL THE MEMBERS OF THE BOARD.
 OFFICERS OF THE CORPORATION;
o CORPORATE SECRETARY; IS ENTRUSTED WITH ASSISTING THE
BOARD IN ITS DUTIES AND ONE MUST NOT BE A MEMBER OF THE
BOARD OF DIRECTORS AND SHOULD ANNUALLY ATTEND A
TRAINING ON CORPORATE GOVERNANCE.
o COMPLIANCE OFFICER; A MEMBER OF THE COMPANY’S
MANAGEMENT TEA IN CHARGE WITH COMPLIANCE FUNCTIONS,
THEY ARE PRIMARILY LIABLE TO THE CORPORATION AND ITS
SHAREHOLDER.
o CHIEF EXECUTIVE OFFICER; THE HIGHEST-RANKING EXECUTIVE IN
THE COMPANY AND IS RESPONSIBLE FOR MANAGING THE OVERALL
OPERATIONS AND RESOURCES OF THE CORPORATION, AS WELL AS
SERVING AS THE MAIN COMMUNICATION BETWEEN THE BOARD OF
DIRECTORS AND THE MANAGEMENT.
o CHIEF RISK OFFICER; THE ULTIMATE CHAMPION OF ENTERPRISE
RISK MANAGEMENT AND HAS ADEQUATE AUTHORITY, STATURE,
RESOURCES AND SUPPORT TO FULFILL HIS RESPONSIBILITY.