Upholding the standard for corporate governance in PHL

On Sept. 19, the Institute of Corporate Directors (ICD) hosted the annual Golden Arrow Awards along with the first Global Governance Summit at the Manila Ballroom, Marriott Hotel Manila, in Pasay City.

The summit celebrated the 25^th anniversary of the ICD, established by visionary business leaders, including Dr. Jesus P. Estanislao, in response to the financial crises that have historically plagued economies.

Themed “Global Governance Summit: Leading the Future, Strengthening Unity,” the summit brought together distinguished speakers, industry leaders, policy makers, and experts to discuss the vital integration of good governance in public service and business practices.

Following the summit, ICD honored top-performing Philippine publicly listed companies (PLCs) and insurance companies (IC) for their excellence in corporate governance through the 2024 Golden Arrow Awards.

The event recognized organizations that demonstrated outstanding performance in the 2023 ASEAN Corporate Governance Scorecard (ACGS) and Corporate Governance Scorecard (CGS) Assessment based on key governance principles, including equitable treatment of shareholders, transparency, accountability, and strategic board oversight.

The Golden Arrow Award is presented to companies that score at least 80 points in the ACGS assessment. Each arrow represents a level of achievement: one arrow for 80 to 89 points, two arrows for 90 to 99 points, three arrows for 100 to 109 points, four arrows for 110 to 119 points, and five arrows for 120 to 130 points.

This year, 136 companies received the coveted Golden Arrow, reflecting the continued efforts of Philippine organizations to improve corporate governance practices.

The five-arrow award, the highest level of excellence in corporate governance, was awarded to BDO Unibank, Inc., China Banking Corp. (Chinabank), Globe Telecom, Inc., SM Investments Corp. (SMIC), and SM Prime Holdings, Inc.

“This recognition reflects the commitment and hard work of our entire organization,” said SMIC Chairman Amando M. Tetangco, Jr. “From the board, management, our leaders, and teammates — everyone consistently works to ensure we continue to adopt and uphold the highest standards in good corporate governance.”

SMIC’s governance approach prioritizes long-term growth and sustainability by maintaining transparency and accountability in all stakeholder interactions. This philosophy ensures that SM companies remain both profitable and socially responsible, according to SMIC Executive Vice-President and Chief Risk and Compliance Officer Elizabeth Anne “Lizanne” C. Uychaco.

“We recognize the rising global attention on corporate governance and sustainability as part of companies’ business strategies. Beyond compliance, SM’s operations are anchored on fairness, integrity, accountability, transparency, and stakeholder engagement,” she added.

The PLCs that garnered four-arrow distinction include Aboitiz Equity Ventures, Inc., Ayala Corp. (AC), Manila Electric Company (Meralco), Metropolitan Bank & Trust Company (Metrobank), and Philippine National Bank (PNB), among others.

Notably, Meralco, which earned three-arrow award in 2021 and 2022, stepped up its efforts and secured the four-arrow award this year. This marks Meralco’s second time receiving the four-arrow ranking.

The three-arrow recognition includes Aboitiz Power Corp., AREIT, Inc., Bank of the Philippine Islands, Cebu Air, Inc., and Monde Nissin Corp., among others.

Furthermore, the two-arrow award recognized firms such as A Brown Company, Inc., Alliance Select Foods International, Inc., First Gen Corp., and Wilcon Depot, Inc.; while those in the one-arrow award category included Megawide Construction Corp. and Philippine Business Bank (PBB), among others.

Meanwhile, the Golden Arrow Awards recognize top-performing ICs under the CGS assessment. Insular Life Assurance Company, Ltd., and Pru Life Insurance Corp. of the U.K. earned the four-arrow distinction.

Firms like AIA Philippines Life and General Insurance Company, Inc., BPI-AIA Life Assurance Corp., and Kasagana-Ka Mutual Benefit Association, Inc., received three-arrow recognition.

According to ICD, companies that meet these high standards attract investors as they continuously demonstrate their commitment to ethical business practices and long-term sustainability.

Fostering long-term growth and sustainability

The Golden Arrow Awards not only recognize the accomplishments of individual companies but also symbolize collaborative efforts to raise corporate governance standards in the Philippines.

The recognition of 136 companies stems from their performance under the ASEAN Corporate Governance Scorecard (ACGS), a system that assesses and benchmarks corporate governance practices according to the globally accepted principles of the Organization for Economic Cooperation and Development (OECD).

The OECD Principles of Corporate Governance, which form the foundation of the ACGS, enjoy widespread acceptance among policy makers, investors, and stakeholders. These principles establish standards for effective corporate governance and encompass five critical areas: the rights of shareholders, equitable treatment of shareholders, the role of stakeholders, disclosure and transparency, and board responsibilities.

With an increasing emphasis on sustainability, Environmental, Social, and Governance (ESG) issues, and ethical business practices, the ACGS promotes higher standards of accountability within the industry.

Many of the ACGS criteria go beyond the minimum requirements of national legislation, encouraging companies to adopt international best practices.

Thus, the awardees have embraced these principles, achieving high scores in the evaluation process and demonstrating their dedication to ethical leadership, transparency, and accountability.

With the 2024 rating process currently under way, optimism surrounds the prospect of even better performance in future assessments.

“We look forward to much better ratings this year as companies moved from mere compliance to firm commitment to good corporate governance practices. We look forward to the day when good corporate governance and ratings of 100 points will be the norm rather than the exception,” said Atty. Pedro H. Maniego, Jr., chairman of ICD.

The 2023 corporate governance assessment

Since its creation, the corporate governance scorecard has enabled publicly listed companies and insurance firms to adopt best practices in corporate governance, helping them meet the evolving demands of investors, regulators, and the public.

The 2023 ASEAN Corporate Governance Scorecard (ACGS) assessment evaluated 276 publicly listed companies in the Philippines. The average score for all PLCs was 75.71 points, slightly lower than the 76.64 points recorded in 2022. The assessment, however, also revealed positive trends, particularly in PLCs resilience during the post-pandemic recovery.

A total of 111 companies scored 80 points or higher, indicating steady progress toward corporate governance excellence, up from 109 in 2022.

Additionally, the top 100 PLCs by market capitalization maintained an average score of 90.64 points, unchanged from 90.68 points in 2022.

Despite minor declines in overall scores, the findings suggest that PLCs in the Philippines have sustained a high level of corporate governance and continue to adapt to new industry challenges.

The results also indicate that PLCs’ boards of directors actively drive improvements in corporate governance. Their focus on sustainability and corporate responsibility helps companies address emerging trends and challenges, ensuring adherence to best practices.

In the insurance sector, corporate governance has significantly improved over the past seven years, with companies consistently striving to enhance their practices.

However, the 2023 Corporate Governance Scorecard (CGS) assessment indicates a slight setback for the industry. The total average score for insurance companies was 54.90 points, down from the 2022 average of 55.13.

Despite this dip, progress in specific areas of the scorecard, such as Part C (Role of Stakeholders in Corporate Governance), Part E (Responsibilities of the Board), and the Bonus and Penalty sections, shows improvement.

A significant portion of insurance companies scored below 50 points, with many scoring between 30 and 40 points. This figure indicates a broad disparity in corporate governance practices across the sector, highlighting the need for companies to elevate their performance. Only 25 insurance companies achieved a score of 80 points or higher. — Mhicole A. Moral