July-September 2012

Volume 9 Number 3 ISSN 1727-2254 Journal on corporate governance in asia

Marching towards economic sustainability

0 8

9 771727 225007 contents Letter from the pubLisher

Editorial: he administration of President Benigno Aquino III has put good governance, In pursuit of best corporate T transparency and accountability at the centre of its policy and this is being hailed as governance practices ...... 4 the key behind the government’s major achievements since he assumed office two Capital markets: years ago. Good governance promotes the influx of more investors into the country, Philippine domestic capital markets who are looking for a level playing field, which in turn results to more jobs and thrive amid global volatility ...... 6 sustained economic opportunity. The business community has taken as well the cudgels to enhance good Public governance: governance among its ranks, working closely with the regulators and market International Conference on Public Administration and Governance ...... 13 advocates to adapt to best international practices. It is well aware that the investors put a premium on good corporate governance practices and the corporates Governance: themselves are fully cognizant of the impact of such practices when they access the Everyone’s every day call ...... 15 internationa l capital markets. Since adherence to good corporate governance is a long-term CG Philippines: Advancing corporate governance commitment, it entails cost particularly in its initial stages of implementation, reforms in Philippine state-owned but the business community should realize that its long-term impact will enterprises ...... 20 definitely outweigh such cost. We must commend the Philippine Stock Exchange, the Securities and Exchange Capital markets: Commission, and the Bangko Sentral and Pilipinas for being at the forefront in lifting Taking the next steps at a time the standards of corporate governance in the country. Their initiatives should put the of change ...... 30 Philippines in good stead and climb up the corporate governance ladder from where Sustainability: it was a few year ago when the Corporate Governance Watch 2010 report ranked The Philippines: Sustaining the the country as the bottom of the list and lagging behind its neighbours. economic momentum ...... 34 We must also applaud the efforts of several market advocates whose commitments to good corporate governance are pushing the corporates to align Good governace: their practices to best international standards and to protect the interests of all the The Gawad Kalinga Paradigm ...... 39 stakeholders. The likes of the Institute of Corporate Directors is attending to the Advocates: professional needs of corporate directors to raise the standards for the professional Advancing good governance in the practice of corporate directorship, while the newly-organized Shareholders’ Philippines ...... 44 Association of the Philippines has a mission to champion the rights of the minority shareholders. Minority shareholder: Of course, there is still a lot of work that needs to be done and we at Corporate SharePHIL: Educating the new Governance Asia will always be at your side, cheering for you along the way. Filipino investor ...... 46

Private sector: Aldrin Monsod First ever Private Equity Fund for Publisher Philippine Infrastructure Investment .... 48

Aldrin Monsod Malou Paez Corporate Governance Asia is published Quarterly by new initiative media ltd. Publisher and Head of Special Projects No reproduction is permitted in whole or in part without proper written consent of the publisher. Please address all Managing Director and Administration correspondence to: New Initiative Media, Rm 2301, 23th Floor, World Wide, 19 Des Voeux Road, Central, Hong Kong Professor Simon Ho W Mak Tel: (852) 3118 2902 • www.corporategovernanceasia.info • [email protected] Editor at large Special Events and Projects Frank Santiago new initiative media ltd Professor Gregg Li E Dos Passos Rm 2301, 23th Floor, World Wide House, 19 Des Voeux Road, Central, Hong Kong Editorial Consultant Special Events Ted Arellano Louis Maniquiz Editorial: Rm 7D, 7th Floor, Shing Hing Comml Bldg, 21-27 Wing Kut St, Central, Hong Kong Rhandell Santos Creative Director Tel: (852) 2231 9612 Fax: (852) 2169 6300 • Email: [email protected] Research and Editorial Dante Peralta www.corporategovernanceasia.info Ann Lau H Jeremiah Printer: T’s Project, Rm 902, Manley Commercial Building, 367 Queen’s Road Central, Hong Kong Marketing Services Photographers

CorporateGovernanCeasia 1 July-september 2012

Journal on asian Government and Public service

Recognition11stst PhiliPPinesPhiliPPines Awards internationalinternational Class of 2011 CorPorateCorPorate GovernanCeGovernanCe ForumForum 20122012 THE BEST OF ASIA MarchingMarching Corporate governance asia is once again giving our Annual Recognition Awards 2911. Recent initia- tives across Asia illustrates that corporate governance remains an important undertaking in the region. Amid the unravelling oftowards fraudtowards issues that hurt the investors, efforts economiceconomic are continuing to improve the corporate landscape and make Asia a better place to conduct business. Regulators continue to strive for fair, transparent and orderly market environment through swift enforcement actions, while professional firms and industry bodies continue to promote responsible conduct and sustainabilitypractices.sustainability The significance of corporate governance for the stability and equity of society is captured in the broader definition ofAugustAugust the concept 15, 15, offered 2012 2012 by• • SirMarriott Marriott Adrian Cadbury Hotel, Hotel, (2002): Resorts Resorts “Corporate World World governance Manila, Manila, is concernedPasay Pasay City, City,with holding Philippines Philippines the bal- ance between economic and social goals and8.008.00 between am am individual- -3.00 3.00 pm andpm communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society.”

Corporate governance is a continuing process which majority of public companies in Asia continues to adopt based on standards, in Asia and across the global financial markets. For the past eight years, corporate governance asia has put emphasis on recognizing companiesO inO rAsia r g g awho a n n icontinue i z z e e r r to lead the way in initiating best practices which provide an open, ethical, Asian values, fair spirit and continuing dialogue with all stakeholders. As the only journal currently specializing in corporate governance in this region, corporate governance asia is in a unique position to see and observe those who have contributed significantly to the overall development of corporate governance during the past year.

In recognition of such contributions, corporate governance asia is giving out the “7th Corporate Governance Asia Recognition Awards 2011” to selected companies, based on the following criteria: • The awardee must have must a previous publicly-acclaimed track record for corporate governance (This can be in the form of other CG-related awards); • The awardee must HhaveH o o sbeen s t t involved in a specific publicly-knownCC o o -activity/activities - h h o o s s t t s s (legislation, surveys, studies, etc) directly related to improving or enhancing the standards of corporate governance during the past 12 months; • The awardee must have implemented significant and specific CG-related reforms during the past 12 months • Rights of shareholders SS p p o o n n s s o o r r s s • Disclosure and transparency • Board and management discipline • Audit and Remuneration committee President, • INEDS and Investor Relations Practices Republic of the Philippines • CorporateAugustAugust Governance15, 15, 2012 2012 •as • Marriott aMarriott business propositionHotel, Hotel, Resorts Resorts World World Manila, Manila, Philippines Philippines • Corporate Social Responsibility and Environmental Practices

www.corporategovernanceasia.infowww.corporategovernanceasia.info www.corporategovernancephilippines.comwww.corporategovernancephilippines.com

AsianGovernanceCGA-Phil Report 2012.indd Ad.indd 1 2 20/08/20126/1/10 10:52:54 12:23 PM AM CGA-APRIL-JUNE2011.indd 57 13/06/2011 1:08 PM EDITORIAL EDITORIAL

in dealing with the stakeholders. ate and progressive rules, standards and practices on good “Good corporate governance is the underpinning of safe governance. In pursuit of best and sound banking operations. Hence, it is important that GGAPP also advocates to provide a forum/venue to the tone of good governance emanates from the top. The share and exchange ideas on good governance for profes- board shall embody and nurture the principles of governance sional development and cooperation; and provides training, corporate governance practices in carrying out their duties and responsibilities,” the BSP said. knowledge and resources on good governance to promote The BSP will be holding the basic course on the subject, its advocacy and practice. but it will tap a third party to conduct the good corporate The latest to join the good corporate governance advo- governance training for the bank directors. cacy are members of the Management Association of the W hen the Asian Corporate mote good corporate governance Over at the PSE, there was a bit of a setback on its Philippines, which organized a group called the Shareholders’ Governance Association and CLSA Asia- “The board shall accordingly such as the “Principles for Enhancing corporate governance initiatives when it decided last year Association of the Philippines (SharePhil) to champion the Pacific Markets unveiled their CG Watch Corporate Governance” issued by to defer the launch of its Maharlika board, a separate rights of the minority shareholders. define the bank’s level of 2010 report, the Philippines found the Basel Committee on Banking board for companies embracing superior corporate gover- As the name implies, SharePhil is a group primarily itself ranked last in the list of 11 Asian risk tolerance in respect of Supervision. nance practices, in order to further review and fine-tune intended to protect the shareholders’ rights. Its vision is to countries. The report faulted a number its business activities such as The guidelines placed a sig- its framework. be the leading institution and catalyst in the protection and of local corporates for various infractions investments, loans and liability nificant emphasis on the role of the The Maharlika board seeks to distinguish publicly-listed promotion of a shareholder’s rights, duties and responsibili- such as depriving minority shareholders board of the directors, who should companies that will voluntarily abide by certain corporate ties. Its mission is to be major player in promoting the devel- management” of pre-emptive rights through changes in have the ability to exercise objective governance practices beyond those already required by law. opment of the domestic capital markets through advocacy, corporate by-laws, insufficient disclo- judgments and ensure that there is One of the rules governing the proposed board is that it education and enlightenment of the shareholders. sures and poor reporting practices. The a strong system for checks and bal- grants the minority shareholders the right to nominate the One of SharePhil trustees Francis Lim, former president report also found that the process of appointing indepen- ances in the financial institutions. They say a sufficient num- candidates for independent directors. Another important and CEO of PSE, describes the launch of the organization as dent directors who are supposed to look out for the small ber of qualified non-executive members shall be elected to feature is its adherence to the ‘one share, one vote’ principle the birth of shareholder activism or engagement in the Phil- shareholders left much to be desired. promote the independence of the board from the views to ensure that all shareholders are given equal rights in terms ippines. He says it is a powerful weapon against corporate This dubious distinction served as a wake-up for the of the senior management. At least 20% but not less than of voting for members of the board and for all corporate ac- abuses and a key instrument in instilling a culture of good Philippine regulators and market advocates to raise the stan- two members of the board shall be independent directors. tions requiring the approval of the shareholders. corporate governance in a company. dards of corporate governance in the country. Since then, The board shall accordingly define the bank’s level of There are several advocates dedicated to enhance SharePhil president Evelyn Singson notes that minor- several initiatives have been undertaken in order to make risk tolerance in respect of its business activities such as the standards of corporate governance in the Philippines, ity shareholders of both public and private firms as well as the Philippines a more attractive market both for local and investments, loans and liability management, and a mecha- including the Institute of Corporate Directors (ICD). It is a small stockmarket investors usually do not know what their foreign investors. nism to ensure compliance with the said policies shall be professional organization comprising of corporate directors rights are. Through the active partnership of key regulators such as provided. and other reputable agents for corporate governance. Its Thus, SharePhil intends to help educate investors about the Philippine Stock Exchange (PSE), Securities and Exchange Since reputation is a very valuable asset, the BSP says mission is to attend to the professional needs of corpo- their rights since sharing information about fairness, trans- Commission (SEC), the Bangko Sentral ng Pilipinas (BSP), it is in the institution’s best interest that in dealings with rate directors directly related to their serving in a board of parency and good governance are key to attracting more and the Insurance Commission (IC) with governance ad- the public, it should observe a high standard of integrity. directors, raising the standards for the professional practice investors in local companies. vocacy groups as well as the leading academic institutions, “The board shall lead in establishing the tone of good of corporate directorship, and to work with partners in a “Increased transparency in governance along with better corporate directors and senior executives were mandated governance from the top and in setting corporate values, joint pursuit of systemic corporate governance reforms in informed minority shareholders will encourage better under- to take corporate governance orientation programmes to codes of conduct and other standards of appropriate the Philippines and the East Asian region; and to accredit standing and cooperation among shareholders, minimizing enhance their awareness on this matter. Legislations were behaviour for itself, the senior management and other corporate directors committed to enhancing the long-term corporate disputes and increasing trust and cooperation passed and various regulations were issued to help create employees,” it adds. value of the corporations that they serve through the obser- between management and shareholders,” SharePhil said. a legal and regulatory environment that is conducive and The guidelines prohibit the chief executive officer, chief vance of corporate governance principles, ethics and social In distinguishing itself from other organizations such as supportive of corporate governance practices that are in line financial officer and/or treasurer from being part of the responsibility. the ICD, which focuses on corporate governance at the com- with international best practices. audit committee in order to prevent personnel holding A group of professionals involved in the corporate gover- pany level, Lim says SharePhil will focus on the investor side. In January this year, the Monetary Board, the policy- the said positions from exercising undue influence on the nance and compliance offices of their respective companies It follows the philosophy that an enlightened and informed making body of the BSP, approved the revised guidelines decision of the said committee. The institutions shall also also banded themselves together and formed the Good investing public is essential for investor protection. He points strengthening the central bank’s governance standards for appoint a chief risk officer or any equivalent position, who Governance Advocates and Practitioners of the Philippines out empowering shareholders promotes good corporate supervised financial institutions as part of its continuing shall be independent from executive functions, business line (GGAPP). Its vision is to create a national culture anchored governance as it provides balance of power between the efforts to implement corporate governance reforms in the responsibilities and revenue-generating functions. on good governance and social responsibility in accordance insiders of the company and its shareholders at large. financial industry. In issuing the guidelines, the BSP says it In another memorandum issued in June, the BSP with the global best practices and high ethical standards. Its The founding trustees of SharePhil envision the group to is its thrust to continuously strengthen corporate gover- requires all bank directors to undergo training on the mission is to consistently promotes and advocates integrity, be largely similar with the Securities Investors Association for nance in its supervised financial institutions cognizant that principles of good corporate governance. It reminded the fairness, accountability, transparency, excellence, and social Singapore (SIAS), a non-profit organization founded in 1999 this is central in sustaining the resiliency and stability of the banks of their responsibility to continually strengthen their and environmental responsibility; proactively engages with to promote investor protection. Today, according to Lim, SIAS financial system. In this light, the BSP is aligning its existing governance systems by, among others, having their board regulatory agencies and other governance organizations is the largest organized investor group in Asia with almost regulations with the international best practices that pro- of directors undergo the basic course on prudent practices to contribute to the continuous development of appropri- 70,000 retail investors as members. n

CorporateGovernanCeasia 4 July-september 2012 CorporateGovernanCeasia 5 July-september 2012 capital markets • By Frank santiago capital markets

paying coupons of 5.652 percent and 6 are innovative transactions that further percent, respectively. Proceeds from the enhance the development of the local This was the first ever transaction will be used to finance the currency bond market. One of the coun- Philippine domestic company’s 37-billion peso capital expen- seven-year LTNCD to be try’s leading conglomerates, Ayala Cor- diture (capex) programme as it plans to offered in the Philippines poration, again exhibited its tradition for launch 24,800 residential units in 2012, as most of the previous innovation by launching in April the lon- up 20 percent from last year. gest tenor and largest bond issue in the capital markets thrive amid issuances by banks have Filinvest Land is issuing a total of domestic capital markets. The company 11 billion pesos this year with the first maturities of a little over raised 10 billion pesos through a 15-year global volatility tranche launched in June amounting to five years offering, which was priced to yield 6.875 7 billion pesos for seven years paying an percent a year. interest rate of 6.2731 percent. The sec- Unlike in the previous deals, Ayala ond tranche amounting to 4 billion pe- and help beef up the bank’s capital in did not put any liquidity enhancement sos will be issued in the third quarter of preparation for implementation in the into the structure and instead launched Proceeds from the sale the year. The bond proceeds will be used Philippines by 2014 of higher capital and a plain vanilla 15-year non-call 10 of- to partially finance Filinvest’s capex for liquidity requirements under Basel III. In fering. In terms of target investors, the will be used to finance the 2012, which as set at 15 billion pesos. 2008, DBP issued 6.5 billion pesos worth company has gone for institutional in- 10-year bonds that DBP The country’s financial institutions of tier 2 notes, with a call option on the vestors, which are the natural investors will redeem in 2013 and are tapping the local currency bond mar- fifth year. for this kind of tenor. At the same time, help beef up the bank’s ket to raise capital in preparation for the In February, Philippine Savings Bank it also targeted the retail investors and implementation of Basel III. In January (PS Bank), the thrift bank subsidiary of enticed them to invest in longer-term pa- capital in preparation for this year, the state-owned Land Bank of one of the country’s largest banks Me- per for yield pick-up. implementation in the the Philippines (LANDBANK) successfully trobank, raised 3 billion pesos in unse- Another Ayala Corporation subsid- Philippines by 2014 of completed a 10.5-billion peso issue that cured subordinated notes that qualified iary, Globe Telecom, raised in June 10 bil- higher capital and liquidity qualified as tier 2 capital – marking the as tier 2 capital. The bank closed the lion pesos in five-year and 10-year notes largest ever public peso bank issuance offer one week ahead of schedule in to help fund the company’s ongoing requirements under Basel III in the country. The offering was upsized the wake of strong demand, with the network modernization and IT transfor- from the initial target of 6.5 billion pesos order book being more than 2x oversub- mation programme, as well as finance after it attracted total orders of over 12.5 scribed. This enabled PS Bank to price other capex requirements in 2012. billion pesos. the 10-year notes at 5.75 percent per The five-year notes amounting to he local currency bond market has The robust demand enabled the annum, or inside the initial price guid- 4.5 billion pesos pay a coupon of 5.75 proven to be a dependable source bank to price the issue at the tight end of ance of 5.875 percent. percent, while the seven-year notes of Tof funding for Philippine borrow- the indicative range, setting the coupon Also in February, Security Bank raised 5.5 billion pesos pay 6 percent. Earlier ers and issuers. While the offshore capi- at 5.875 percent per annum after initial- 5 billion pesos in fresh funds for its ex- this year, Globe settled its rated 5 billion tal markets exhibited extreme volatil- ly announcing a guidance of 6 percent pansion plans through the issuance of pesos fixed-rate bonds – comprising of ity in the wake of the global financial area. The bonds have a tenor of 10 years long-term negotiable certificates of de- 1.974 billion pesos three-year bonds due crunch in 2008 and the continuing and three months with a call option after posit (LTNCD) with an interest rate of 5.5 in 2012 and 3.026 billion pesos five-year eurozone debt crisis, the domestic debt the fifth year. There was no step-up in percent a year for seven years. This was bonds due in 2014. Such was financed market thrives, providing the funding the interest rate should LANDBANK de- the first ever seven-year LTNCD to be of- by a combination of internally-generat- requirements for both government and cide not to exercise the call option. fered in the Philippines as most of the ed funds and the issuance of long-term the private sector. Another government-owned finan- previous issuances by banks have ma- loans. The bond market continues to see cial institution Development Bank of the turities of a little over five years. The SM Group is another regular is- a procession of real estate developer Philippines (DBP) followed suit in March LTNCD are time deposits but have suer in the local currency bond market. issuers as the sector remains buoyant and raised 5.65 billion pesos worth of longer maturity and pay higher yields. Mall operator SM Prime Holdings raised amid a robust demand for residential unsecured subordinated debt qualifying While they cannot be pre-terminated 5 billion pesos in January from the issu- and commercial properties. In April, Ay- as tier 2 capital, slightly bigger than its unlike the regular time deposits, they ance of fixed rate notes to partly finance ala Land priced a 15 billion peso deal, original target of 5 billion pesos. are negotiable so they can be sold in the its capex in 2012. The offering was di- representing its largest debt sale so far. The notes due in 2022, with a call secondary market to other investors. The vided into three tranches of five years, The offering comprised of 10 billion option on the fifth year, carry a 5.75 LTNCD structure enables the banks to of- seven years and 10 years. pesos, with an oversubscription of up percent coupon rate. Proceeds from the fer better yields to clients because they In June, SM Investments Corporation to 5 billion pesos. It was issued in two sale will be used to finance the 10-year are tax-free due to its long tenor. (SMIC) launched a 10-billion peso retail tranches of seven years and 10 years, PSE: Among the top 30 bond issuers in 2011, 27 companies are listed on the Philippine Stock Exchange bonds that DBP will redeem in 2013 Amid the steady stream of issues bond offering to partially finance its ca-

CorporateGovernanCeasia 6 July-september 2012 CorporateGovernanCeasia 7 July-september 2012 capital markets capital markets pex requirements for the next five years this year is geothermal power produc- on-year increase of 5.9 percent as both power generation businesses under and for general corporate purposes. Amid the steady stream er Energy Development Corporation, the government and corporate issuers In a low interest rate Global Business Power Corporation. GT The offer has an option to issue an ad- of issues are innovative which raised in April 7 billion pesos took advantage of the massive liquidity Capital also own stakes in Toyota Mo- ditional amount of up to 5 billion pesos. worth of fixed rate notes with a tenor in the financial system and low interest environment, the banks tor Philippines Corporation and insurer transactions that further The fixed rate bonds will be issued in of 10 years. Proceeds from the offering rates to issue long-term bonds. Fixed have been tapping the AXA Philippines. enhance the development two tranches of seven years with a cou- was used to refinance its existing cor- rate treasury notes accounted for 2.96 bond market to protect In another IPO, mid-sized lender of the local currency pon of 6 percent and 10 years with a porate notes, which have an average trillion pesos, while corporate bonds their existing lending East West Banking Corporation raised coupon of 6.9442 percent. bond market remaining life of about two years, and amounted to 436 billion pesos. Treasury about 4.5 billion pesos in April – the Also tapping the local bond market for general corporate purposes. bills, meanwhile, shrank to 295 billion franchises, expand first for any local bank since 2004. The In another significant transaction, pesos. operations and ensure bank sold 245.3 million shares at 18.50 San Miguel Brewery raised 20 billion pe- Banking and financial services insti- liquidity pesos each, or at the low end of the sos of long-term retail bonds in March, tutions remained the dominant issuers marketing range of between 18.50 pe- marking its second foray in the local in the fourth quarter of 2011, account- sos and 23.50 pesos. The share price bond market following its landmark of- ing for 36 percent of the total market as per in February, Carmen Copper also surged as much as 12 percent at its fering of 38.3 billion pesos three years the banks enhanced their capital struc- for US$300 million for five years in market debut on May 7, bucking the ago. The latest issuance was divided ture and boost deposit bases through March, the International Container Ter- general weakness in the broader mar- into three tranches of 10 billion pesos LTNCD. In a low interest rate environ- minal Services Inc in a US$150 million ket. Owned by one of the Philippines’ for seven years with a coupon of 5.93 ment, the banks have been tapping the re-opening in January and Rizal Com- largest family-owned conglomerates, percent, 7 billion pesos for 10 years bond market to protect their existing mercial Banking Corporation for a total Filinvest Development Corporation, the paying 6.6 percent and 3 billion pesos lending franchises, expand operations of US$275 million (including a tap for bank intends to use the proceeds to for five years paying 6.05 percent. and ensure liquidity. US$75 million in March). expand its branch network nationwide A 13.6-billion peso tranche of the Among the top 30 bond issuers in While the local currency bond mar- and to implement IT infrastructure pro- 2009 deal matured in April which San 2011, 27 companies are listed on the ket manifests a steady flow of deals, gramme. Miguel sought to refinance, while the Philippine Stock Exchange (PSE). Only the equity capital market exhibited re- Farm supplier Calata Corpora- remainder will be used to help prepay a Manila North Tollways Corporation, surgence this year, which underpinned tion also successfully debuted on the US$300 million term facility. Tanduay Distillers and Philippine Phos- the local stock exchange to post record PSE on May 23, listing 360.11 million In a rare fund raising so far this year, phate Fertilizer Corporation are private- highs. Foremost among them are the common shares at 7.50 pesos apiece First Gen Corporation, raised in May ly-owned companies. initial public offerings (IPOs) and share on the bourse’s second board. The net 10 billion pesos from the issuance of According to the latest issue of Asia sales that mostly generated strong in- proceeds from the 270-million peso IPO perpetual preferred shares – hybrid in- Bond Monitor released by the Asian De- vestor demand. are earmarked for the expansion of re- struments which pay a coupon but are velopment Bank in April this year, the GT Capital Holdings, the flagship tail outlets nationwide. treated like equity because they do not Philippines, along with Indonesia, reg- of banking tycoon George Ty, raised But what stood out so far this year have maturity date. The company has istered the most dramatic increase in 21.6 billion pesos through an IPO in in terms of size is the 43.5 billion pesos different options to use the proceeds of corporate bond issuance in the fourth April after selling 47.4 million primary rights offering by BDO in June, which the offering, including the acquisition quarter of 2011as it rose 294 percent. It and secondary shares, including an represented the biggest equity deal in of a 40 percent stake in the British Gas, says the large increase in the Philippine over-allotment option of around six mil- the local capital markets. The bank is- redemption of convertible bonds, to corporate issuance reflects the fact that lion shares. This was the country’s first sued 895.22 million rights shares at make a partial payment of the debt of firms have run up against their borrow- IPO this year and the second biggest 48.60 pesos each, bringing its issued its affiliate Red Vulcan and for general ing limits with domestic banks as they ever after the US$600 million equiva- and outstanding shares to over 3.58 corporate purposes. come under pressure to improve their lent IPO by low-cost carrier Cebu Pacific billion shares. Meanwhile, the government con- capital adequacy in preparation for the in October 2010. The offer price was based on the tinues to tap the local currency bond Philippines’ adoption of Basel III capital The domestic IPO tranche was 15-day volume weighted average price market for its budgetary requirements adequacy standards. In addition, the more than 2x oversubscribed while the of BDO common shares listed on the and the Bureau of Treasury sold a re- Philippine banks are issuing tier 2 sub- international portion was more than PSE at a discount of 24.9 percent. The cord 179.8 billion pesos of 15-year and ordinated debts to bolster their capital 5x covered. The stock closed higher bank says the one-for-three rights of- 20-year retail treasury bonds in the last adequacy ratios. at 485.20 pesos on its first trading fering strengthened its common equity week of February, paying coupons of The attraction of the local curren- day on April 20, up 6.6 percent from tier 1 capital and is expected to provide 5.375 percent and 5.875 percent, re- cy bond market as a funding avenue, its offer price of 455 pesos. The com- a comfortable buffer to the Basel III cap- spectively. however, has not prevented the Philip- pany plans to use the IPO proceeds to ital requirement by the central bank. It As of end December 2011, the out- pine issuers from tapping the offshore fund the expansion of its various units raised its tier 1 or core capital from 10 Real estate: REITs are tradable securities whose underlying assets are property portfolios that earn standing local currency bonds stood at G3 bond market, with BDO Unibank such as hotel and residential projects percent to 15 percent and the overall from either real estate sales or rents. 3.4 trillion pesos, representing a year- raising US$300 million in five-year pa- of its real estate arm Federal Land and capital adequacy ratio from 15 percent

CorporateGovernanCeasia 8 July-september 2012 CorporateGovernanCeasia 9 July-september 2012 Corporate Profile Corporate Profile

partment specifically tasked to nurture the culture of good gov- Investing in CG ernance already flourishing within the group. The department, Traditionally, corporate governance is seen as a way to protect Sustainability through headed by Mr. Gil L. Gonzales, VP for Corporate Governance investors. SM recognizes that good corporate governance also and Risk Management, is responsible for compliance with all has a positive effect on firm valuation and has since tasked Ms. regulatory requirements as well as best practices on corporate Corazon P. Guidote, SVP for Investor Relations of SMIC, to good corporate governance: THE SM WAY governance, and in leading the company’s corporate governance bridge the gap between the company and its existing and po- strategy, policies and programs. SM also has an Adviser to the tential investors and shareholders. Her department ensures the Board on Corporate Governance in Mr. Roberto G. Manabat, timely disclosure of information on the company and its opera- M Investments Corporation is the pub- tors, creditors, customers, regulators and other the Chairman of Manabat Sanagustin & Co., a member firm of tions; strengthening relationships built on trust and confidence Slicly listed holding company of the SM stakeholders. – Mr. Jose T. Sio, EVP & CFO, KPMG International. already established among SM’s various stakeholders. Group of Companies. The company has SMIC. steadily grown from its humble beginnings SMIC’s commitment to the principles of as a modest shoe store to become one of the good corporate governance emanate from its Philippines’ largest, most diverse conglomer- Board of Directors. In line with this commit- ates, consisting of core businesses in retail ment is the Board’s primary responsibility to merchandising, mall operations, banking, foster the long term success of the company property development and tourism. and secure its sustained competitiveness consis- Among the key factors to the sustainabil- tent with its fiduciary responsibility in a man- ity of SM’s businesses is the practice of good ner that ensures the best interests of SMIC, its corporate governance throughout the organi- shareholders and its stakeholders. zation. Even before the adoption of corpo- The SMIC Board of Directors is composed rate governance policies in the country, SM of eight (8) directors, three (3) of whom are chose to conduct business in a manner that independent directors. SM’s independent fostered growth and sustainability through directors are highly-qualified individuals who Jose Sio, Executive Vice Gil Gonzales, Vice President, Joseph Higdon, Independent Corazon Guidote, Senior Vice President and CFO Corporate Governance and Risk Director President, Investor Relations highly principled and disciplined operations. Teresita Sy-Coson, Chairperson, BDO have proven themselves in their respective Management Much of that is rooted on effective control Unibank, Inc. Vice Chairperson, SM fields and provide real value to the respective systems to preserve naturally thin margins Investments Corporation Boards that they serve through independent Since the establishment of the CG department, SM Good governance will continue to grow. Much can still be in retail and the interest rate volatility that decision-making and effective monitoring. All has formally adopted a Code of Ethics, which stresses the done in terms of effectively enforcing regulations and monitor- investors had to face under a rather unpredictable political envi- SM Board members have undergone accredited training and importance of integrity in the relationships and dealings ing compliance to bring about a significant change in corporate ronment. This commitment however did not stop with retail. orientation programs on corporate governance and understand with business partners and explains the company’s duties governance in the country. Nowadays, companies that practice SM continued to develop good corporate governance and adopt that the most effective way to spread the principles of good regarding employee welfare, the rights of shareholders, good corporate governance are rewarded by a market that is hun- best practices into all facets of its diverse businesses. governance throughout the organization is to be examples of the protection of company information assets and the gry for transparency and fairness. Investors are becoming tired of “We’ve tried to instill in our organization the virtues of integrity and ethics. importance of corporate social responsibility. SM has putting their money into companies that leave them in the dark. integrity and fairness in dealing with our business partners, Fundamentally, there is a level of confidence that is associ- also adopted several supplemental policies pertaining to SM has always been open about its business operations and plans and of accountability and transparency to our customers and ated with a company that is known to have good corporate relationships with business partners, insider trading, and and is among the better market performers as a result. – Ms. investors. This has been our practice since the beginning of the governance. The presence of an active group of independent anti-money laundering to name a few. These policies and Corazon P. Guidote, SVP for Investor Relations, SMIC. company in 1958. The practice of integrity, prudence, leader- directors on the board contributes a great deal towards ensuring programs are regularly disseminated to directors, officers ship and hard work – these are very basic values that everyone in confidence in the market. – Mr. Joseph R. Higdon, Indepen- and employees through orientations and seminars con- Moving Forward SM understands, long before they became mandatory corpo- dent Director, SMIC. ducted by the CG department, in coordination with SM’s Through its long held values and ethical standards, SM has rate governance requirements.” – Ms. Teresita Sy-Coson, Vice human resources department. earned the loyalty of its millions of customers and the confi- Chairperson, SMIC. CG in Motion I think that good corporate governance dence of its investors and creditors. The In SM, corporate governance is viewed as a business impera- is innate in the way that SM does business. company enjoys good working relation- CG through Leadership tive of growth, sustainability and corporate social responsibility. Every transaction, every deal, whether it be ships with its business partners and credits The corporate governance culture emanates from the Board The SM Group recognizes that it makes good business sense on the grand scale or something as simple this to the premium it places on fairness, and management – which set a high standard for excellence to practice high ethical standards and that by keeping the com- as the purchase of a pencil, is done in an accountability and transparency in its and integrity across the organization. By putting a premium pany well governed, they protect the interests of their various organized, disciplined manner that ensures business dealings. SM remains commit- on accountability and transparency in all business transactions, stakeholders, which include their business partners, minority that all parties are satisfied. When it comes ted to the idea that there is an equilibrium the company has fostered good working relationships with all shareholders, investing public, among others. to integrity and ethics – SM walks the talk. between good governance and the bottom- of its business partners. Through this, I believe we have made To fortify its commitment to keeping pace with emerging – Mr. Gil L. Gonzales, VP for Corporate line – good governance equals good busi- a difference in deepening the trust and confidence of our inves- trends and regulations, SM created a corporate governance de- Governance & Risk Management, SMIC. ness – the SM way. n

CorporateGovernanCeasia 10 July-september 2012 CorporateGovernanCeasia 11 July-september 2012 capital markets PUBLIC GOVERNANCE • By His Excellency Benigno S. Aquino III, President of the Philippines to 20 percent. (ICA). The ETFs would be required to be incorporated in accordance to the ICA In another deal, the Philippine ca- The rules also provide sino operator Bloomberry Resorts raised and to register its shares under the Se- in May 8.84 billion pesos from its first for in-kind issuance and curities and Regulation Code. follow-on share issue since it was listed redemption of ETF shares According to the SEC, the pro- through a reverse takeover late in 2011. as well as issuance of ETF posed rules provide for pertinent re- quirements on the different aspects The company sold 1.179 billion shares shares in exchange for cash at 7.50 pesos each, or just above the of operation of ETF such as ensuring mid-point of the price guidance of be- in exceptional cases liquidity of ETF shares by requiring the tween 6.55 pesos and 8.25 pesos. It appointment of a market maker and holds one of the four licenses to build listing of ETF shares in an exchange. integrated tourism resorts in Entertain- through an unhedgeable convertible “There shall be transparency in the ment City that were awarded in 2009 bond – its second CB after a debut is- identities and weighting of the securi- and has commenced construction on its sue in 2007. The offering has a five- ties comprising the index, ETF’s port- Solaire Manila project in July 2011. year maturity with a three-year put and folio holdings as well as its net asset Another company which went pub- was offered with a coupon of between value by posting these information lic in 2011 through a backdoor listing, 0.625 percent and 1.625 percent, and daily on ETF’s website,” it adds. Century Properties Group, completed a yield-to-put of between 1.875 per- The rules also provide for in-kind its inaugural share sale in February that cent and 2.875 percent. It was mar- issuance and redemption of ETF shares raised 2.33 billion pesos. In what was keted with a conversion premium of as well as issuance of ETF shares in ex- regarded as a re-IPO, the company sold between 20 percent and 30 percent change for cash in exceptional cases. about 1.33 billion shares at 1.75 pesos over the February 2 volume weighted There is also a growing clamour President Aquino: We need to invest in our countrymen so that they can truly feel that they have a stake in our country. each, or at the bottom of the market- average price of 651.205 pesos. to launch the moribund real estate in- ing range of between 1.75 pesos and The improved market sentiments vestment trust (REIT) with the PSE re- 2.35 pesos. have helped the PSE index to post re- starting the discussion with industry International Conference on JG Summit completed a transac- cord highs, closing at 5,369.98 points and investment stakeholders to address tion in early February that boosted its on July 5. The market last peaked on the issues confronting this product. investor base as it sold a US$125 mil- July 3, when the index rallied by 65.46 The REIT law was passed in 2009 and Public Administration lion equivalent stake – up from the ini- points to close at 5,365.70, piercing its implementing rules and regulations tial size of US$75 million – following a the 5,360-point mark on the back of were issued by the SEC and the Bureau strong demand that saw the book cov- forward-looking expectations of mon- of Internal Revenue in 2011. REITs are tradable securities whose and Governance ered in just 30 minutes. Affiliates of JG etary policy easing abroad, along with Summit sold 215 million shares at 25 the likelihood of robust economic data underlying assets are property portfo- pesos each, or 3 percent of JG Summit’s at home. lios that earn from either real estate t is heartening to see a good number nance. I have always been a firm believer we have heard about in the West. outstanding stock. What should also help spur the lo- sales or rents. They are popular in Sin- of people gathered to talk about public that the mission of government is to take What we are seeing here is the social The company initially planned to cal capital markets is the introduction gapore and Malaysia, but the interest Iadministration and governance, and I actions to create fairer outcomes for so- contract that holds these societies together sell 129 million shares, or 1.9 percent of new products for investors. In early in this product in the Philippines has am certainly glad to be here. I must con- ciety. And among the jobs of a President fraying at the edges. Those at the fringes of the company, for US$75 million, but July, the Securities and Exchange Com- been dampened by the stringent rules fess this is I think my first interaction with is the efficient allocation of resources, so are beginning to question whether this so- raised the size of the transaction after mission (SEC) en banc has received related to the minimum public own- NCPAG – besides, of course, the 2010 that the government can achieve those cial contract does indeed ensure everyone the demand reached close to US$225 the proposed rules and regulations on ership, as well as the imposition of elections where a former member of your outcomes. This is the underlying philoso- a fair share of responsibilities and benefits; million. More than 40 investors partici- exchange traded funds (ETF). The SEC value-added tax and the requirement faculty, or present member of your faculty, phy that informs all of our decisions. and this has affected the social cohesion – pated in the transaction. invited market participants to submit of escrow. was one of my severest critics. [Laughter] Which leads one to ask: Why is this the togetherness – of some countries. JG Summit’s transaction followed a comments on the proposal. The PSE has organized a public fo- Of course, he forgot to tell us that he was important? Why have we chosen to focus This is precisely why our administra- similar placement in oil refiner Petron ETFs are funds that track an index, rum to discuss the various issues on the a consultant of one of my competitors. on anti-corruption and anti-poverty as a tion focuses on inclusive growth and anti- Corporation, which raised 7.65 billion a commodity, or a basket of assets but REIT and as PSE president Hans Sicat [Laughter] means to achieve these fairer outcomes? corruption, in particular. If we ensure that pesos. The block trade by the com- trade like a stock on a stock exchange. points out, there was a huge interest It is in conventions like this where we If we take a moment to look at what is growth is inclusive, from those in the cen- pany’s pension fund comprised 695.3 Under the proposed rules, the ETF is in investing in REITs in the Philippines. get the opportunity not just to share our going on in the world, we see that the dis- ter to those in the margins of society, then million shares at 11 pesos each, repre- classified as a “new investment product He says that if they get the REIT list- ideas with our colleagues from all over the parity between the rich and the poor, be- all of us will feel that we have a stake in senting a discount of 17.3 percent to its which is similar to mutual fund but has ing up and running, it is estimated the world, but also to listen and learn from tween the powerful and the powerless, keeping society moving forward, and will January 19 closing price of 13.30 pesos. distinct characteristics”. Philippines could attract at least US$2.4 one another. has widened over the last few decades. do our fair share to make sure that this In the equity-linked space, SMIC in The proposed rules are issued pur- billion in new investments from the pri- So perhaps you will allow me to begin This has led to turmoil in the Middle East, happens. early February raised US$250 million suant to the Investment Company Act vate sector. n by sharing some of my views on gover- and to some extent, to the political discord So, how exactly have we done this?

CorporateGovernanCeasia 12 July-september 2012 CorporateGovernanCeasia 13 July-september 2012

PUBLIC GOVERNANCE governance • By Jesus P. estanislao, Ph.D., chairman, Institute for Solidarity in asia / chairman, Institute of corporate Directors

How have we put flesh to the idea? Now, what were formerly breaking today: many of you, in one way or another, For one, we are equipping more than points of our society are becoming the du- represent the backbone of our bureaucracy three million poor households with the re- rable joints of a formidable whole. We are – people of excellence who work tirelessly Governance: Everyone’s sources to cope with the challenges that learning from the mistakes that have led with dedication and professionalism, so come their way through our conditional cash to crises in other places, and the world has that we can truly change this country for transfer program; and we haven’t stopped embraced our efforts. the better. As your President, I know that Every Day Call adding to this list. In two years, we have The global community has recognized if our administration succeeds in instituting nearly quadrupled the program’s budget, the seriousness of our goal to close the gap widespread reform in this country, it will from ten billion pesos in 2010 to P39.4 bil- between rich and poor, and to eradicate have been because of people like you; and lion this year – and may I add, we did this corruption. Transparency International, for I want to thank you all for your service. without raising our taxes. This program example, cited an improvement in govern- Filipinos have already begun to move will need to be observed and lived; for val- will have families sending their children to ment service and the cutting of red tape towards a larger realm of possibility. Only “In charting a personal ues remain abstract at the ideal, concep- school; it will have their infants and their as the reasons behind our steadily improv- a few years ago, we had been hopelessly tual level unless they take flesh and blood strategy map, every individual mothers going to medical professionals for ing rankings in their Corruption Percep- caught in a spiral of apathy and paralysis. – are incarnated – in the life and work, in check-ups. tions Index. In 2008, we were ranked at We had become used to scandals of graft has to be fully conscious of the the decisions and actions of individual per- These are the poorest of the poor, and 141st; and we have progressed to 134th and corruption that faded away with no need for balance between all sons. It is only when persons habitually live we are empowering them to pull themselves in 2010, and to 129th in 2011. Of course one held to account. Today, we continue facets of life” and work by them that values become vir- out of their plight. I have always believed in we should not stop until we go below 100 to dream – and dream bigger at that. More tues. They become real. They are brought the capacity of the Filipino to rise above their and further than that. This, without doubt, than becoming self-sufficient in rice, we down to the practical level: and it is at this circumstances, and we need to give them is in large part due to some of the excellent have taken the steps so that in all prob- level where good governance actually de- the opportunity to do just that. people in your field. We have also been in- ability we can begin to export rice to our Introduction livers transformational results. We are also getting more and more of vited to, and are a founding member of neighbors in the next few years. More than “Good Governance” is the imperative of our countrymen covered by health insur- the open governance partnership. jobs for our people, we can start thinking our time and of our country. It demands Personal Governance ance. We have raised the number of Filipinos Our efforts have likewise redounded about higher and higher qualities of work a long-term strategy, which aims at radi- At the base of all good governance, there- registered in PhilHealth, from 74 percent in to similar praise for our economy. Re- and the best way to equip our people with cal change and transformation. It also asks fore, is personal governance. All the essen- 2010, to 82 percent today. And this is with nowned publications and institutions have the necessary skills for that work. And that all our day-to-day operations should tial requirements of a governance system the goal of having every Filipino registered by referred to us as probably the “16th larg- more than protecting the rights of our be linked with the demands of such a that delivers performance need to be met, the time I step down in 2016. est world economy by 2050,” and as “the OFWs, we are laying the foundations so long-term strategy. eventually, at the personal level. Thus, a We need to invest in our countrymen so best place to do business in Asia/Oceania, they can think about coming home. Institutions and organizations today, governance charter, strategy map, and that they can truly feel that they have a stake in both manufacturing and service.” Through our shared efforts, we are with a good governance program, typi- performance scorecards also have to be in our country. This is how we are strength- Clearly, our reforms have won us mo- beginning to realize the dreams we share cally have a governance charter (with core Dr Jesus P. Estanislao: “Due to our replicated at the individual, personal level: ening the glue that holds society together. mentum. And it is up to us, to all of us – with the Filipino people. We have, in fact, values, mission, and vision); a strategy map personal relationship with God, every every person working in an institution or This is also why we have been focusing whether in the private or public sector – to been steadily and noticeably upgrading the (with a set of priorities covering all key one of us are called upon to pursue and organization with a good governance on improving areas that have, for so long, maintain this momentum. There remain Filipino dream. With your help: imagine facets of operations); and performance practice good governance, 24/7, everyday program also has to formulate a person- been neglected by officials who only looked serious challenges ahead. The problem of the impossibilities we can make possible, scorecards (with measures, targets, and and in the discharge of our day-to-day, al charter, map, and scorecard – ideally after themselves. For example, we have syn- poverty is one that must be solved. There and achieve. a portfolio of strategic initiatives). For the ordinary duties” aligned and fully consistent with the char- chronized the ARMM elections with national are still corrupt officials who will be prose- And before I end, may I ask you, per- program to work, there need to be coher- ter, map, and scorecard of the component elections – to foster genuine political com- cuted and jailed. The changes we envision haps, in your free time, or perhaps in a very ence and alignment between the charter, has to be brought down to them, i.e. to unit where they work, and of the institu- petition, authentic choices for voters, and to are massive, and these changes cannot be conscientious and directed manner, per- the map, and the scorecards. the individual, personal level, so that ev- tion or organization to which they belong. eliminate the idea of the ARMM as a vote enacted by a single office. We have to do haps you can help me answer one ques- Institutions and organizations, howev- eryone in carrying out their everyday tasks In charting a personal strategy map, bank for those who want to buy and sell it together. tion: How do we transform not just our er, are made up of departments, divisions would seek to contribute towards the gov- every individual has to be fully conscious votes wholesale to affect the outcomes of Many of you here know this. After all, officials but also our populace – to looking and other operating units. They also have ernance program of change and transfor- of the need for balance between all facets the polls. This is why we have released 8.59 through the years, the National College at their officials not just as the provider for core constituencies and key stakeholders. mation. It is at this individual, personal level of life. These facets are dictated by the fol- billion pesos worth of projects in that region, of Public Administration and Governance solutions but rather as the enabler of solu- A good governance program calls for the where the good governance “rubber actu- lowing relationships and duties: so that the people there can finally feel what has done more than its share of producing tions. Partnerships like this will undoubt- cascading of the charter, the map, and ally hits the “road”. It is at this level where a) The duties to oneself: physical well- it is like to have a government that actually graduates who contribute to nation-build- edly bring us to our dreams closer and the scorecards down to all the units and success of the change and transformation ness, cultural development, and profes- works for them. ing, and who help nurture institutions in faster. n stakeholders, with a view to getting their program ultimately hangs. Thus, it is es- sional advancement; Likewise, this explains why we have government and in civil society. This is the involvement, participation, and commit- sential for a governance program of any b) The duties to others: those aris- been consistent in holding peace talks with institution we turn to, if we want to find Speech of His Excellency Benigno S. Aquino III, ment to contribute towards change and institution or organization to be brought ing from our social relationships (fam- rebel groups, because, as we have learned some of the greatest, unheralded heroes President of the Philippines Aat the International transformation. down to the individual, personal level. ily, friends, other colleagues, and fellow Conference on Public Administration and from what is going on in the world, progress of our bureaucracy. All component units have individuals It is also at the personal level where citizens); Governance. [Delivered at EDSA Shangri-La Hotel is impossible if a nation stands divided. This is why I made it a point to be here on June 27, 2012] working in them. The cascading eventually values as the guideposts to governance c) The duties to the world outside:

CorporateGovernanCeasia 14 July-september 2012 CorporateGovernanCeasia 15 July-september 2012 governance governance financial and economic requirements as respective communities and of the coun- social institutions within any community or community or society, the typical macro participate and be meaningfully engaged results. They are: well as environmental care and sustain- try as well. If as individuals, we seek to society demands due observance of certain units are the following: in the pursuit of strategic priorities, includ- a) Acceptance of God as Father, and ability; be well and properly governed persons, core values as guideposts. These values a) The government: this is the public ing one’s own priorities, provided these are therefore, of our being children of God. d) The duties to God: the spiritual, then we put in the solid building blocks need to be translated into virtues, by their authority, an instrumentality of the State. also congruent with the priorities of the This enables us to put our trust in God ethical and moral core of personal life. for a properly governed institution or or- habitual observance in all the key decisions It can be either a national government higher institutional, organizational, corpo- and throw our cares, concerns, and ambi- Thus, in any personal strategy map, ganization, and for a properly governed and actions of everyday. These values are: agency or a local government unit. Its rate, or social units. tions with regard to the attainment of our the priorities considered and included community and country. a) Commitment: this highlights the main task is, among others, to coordinate d) Solidarity: this underscores the im- strategic priorities at all levels to His provi- fall under at least seven facets: physical; winning of hearts so that all individuals and facilitate, set the strategic direction for perative of teamwork and the forging of dence, even as we put in all the earnest ef- cultural; professional; social; economic; Institutional Governance commit to the same strategic priorities be- the community, and provide the proper partnerships so as to more effectively con- forts to attain them. This foundation pro- environmental; and spiritual. It follows Immediately beyond the individual level, ing pursued at higher levels of the institu- environment for everyone to contribute to tribute to the broader common good. vides answers to the most basic questions: that the performance scorecards of any within any institution or organization, tion or organization as well as of the com- the general welfare. These values, which are fundamental who are we, where do we come from, and individual personal, under personal gov- there are operating units as well as func- munity and society. b) The business corporation: this is for good social governance, also need to ultimately where are we going? ernance, should have measures, targets, tional divisions and departments. Within b) Competence: this highlights the the form of business organization, upon guide the governance at the level of the b) Acknowledgment that we live and and strategic priorities in all of these seven any community or within society (coun- winning of minds, which need to widen which a separate, independent personality two perfect societies within any commu- work in God’s presence. This enables us to facets; not a single one of these facets can try) as a whole, there are key, institutional and deepen their hold of culture, knowl- is vested, by law, to enable it to carry out nity: these are the State and the Church. have an outlook that transcends the purely be ignored or neglected if balance is to be drivers of change, It is essential for all of edge, expertise, skills and technical capa- its economic and social purposes, with ap- While they are separate and independent natural and material. We are never alone. struck and kept in a properly-governed us to be fully conscious of these key driv- bilities required to live a full life and do a propriate responsibility and accountability. of each other, nonetheless, both State We can actually count on God’s help, only personal life. ers: they too need to have their charter, great job. c) Civil society: this encompasses not- and Church are at the service of the same if we turn to Him; and then decide, act, In the pursuit of all the strategic pri- map, and scorecards, to which we have to c) Professionalism: this highlights a sin- for-profit, non-governmental organiza- community or society. They are thus called live, and work under His oversight and orities – with corresponding measures and align ours at the personal, individual level; cere, genuine spirit of service, which opens tions set up to pursue specific social causes upon to work closely with each other, in guidance, and with His protection. This targets – in one’s performance scorecards, and which in turn need to be fully aligned us up to the needs and requirements of all and promote advocacies for the welfare of close harmony and in effective collabora- foundation helps answer the most basic we need to observe and seek to incarnate with the charter, map, and scorecards of others, but particularly those that we are specific groups or for the general welfare. tion, for the good of everyone. Recogniz- questions: what do I know, and what am I in our life and work, in all our decisions the entire institution or organization, let duty-bound to serve. For good social governance, the ing their distinctive spheres for which they capable of? and actions four core personal values. alone those of the community and society d) Patriotism: this highlights the love guidepost values that would need to be have responsibility – the material and the c) Acting always to do God’s will. This Upon and around them, the acquisition of as a whole. with which we carry out our daily tasks converted into actual virtues through their spiritual – they respect the separation of enables us to take the circumstances given all other personal virtues hinges. They are: Within any institution or organization, and duties, always bearing in mind that we habitual observance and pursuit on the powers while being in service of the same to us, and to build on those realities so as a) Integrity: it highlights the call to the organizational chart readily makes have the duty to contribute to the com- part of all these macro units in society are community or society, of the same people to begin to make a positive difference. We keep ourselves whole such that our ide- clear which operating units and functional mon good of our people and the progress the following: or nation. start with the cards we have been given to als are fully consistent with our deeds; our divisions and departments we work in of our country. a) Personal dignity: this underscores play, and with the opportunities we have principles with our decisions; and our con- and belong to. But within any community It is clear that these four guideposts for the value of every individual person, who Foundations for a Sustainable been provided: it is there in our daily ordi- victions with our actions. or society, it is important for all of us to good institutional governance are far from by nature is endowed with such high dig- Governance Culture nary duties, in the exercise of our day-to- b) Fairness: it highlights our duty to be fully aware of the key social drivers of comprehensive; but they do point to all the nity as to demand respect. Every person, In promoting consciousness of the guide- day responsibilities that we do God’s will others; and in particular, our obligation change and transformation. They are: other values that we need to observe in by the fact of being a person, has certain post values, which are critical for personal, by simply trying to do them extraordinarily to give to them and pay back what we a) The family: this is the most basic our daily life and work, if we are to make entitlements, which provide the founda- institutional, and social governance, we well. This foundation answers the most owe them. social unit; its strength and unity de- our respective institutions and organiza- tion for personal rights that cannot be should never forget that at the end of the basic questions: what should I do, and c) Courage: it highlights our obliga- termine the strength and unity of the tions as well as our communities and our abridged or violated. day values need to be lived and observed. how should I act? tion to face up to all difficulties coming broader community and of the country, country properly governed. b) Common good: this underscores Only thus can they become virtues, and it It is on these spiritual foundations from outside with patience, strength, per- which draws new life from the bosom of the corresponding duty of every person is only virtues that enable any governance upon which we can build a proper gover- severance, and always holding on to our the family. Social Governance and of all intermediate micro units as well system to deliver performance and break- nance culture that is constantly refreshed principles and continuing to pursue our b) The school: this is a critical social in- On top of these intermediate, more micro as of all macro units in the community or through, transformational results. and renewed. The fact is: governance priorities. stitution that helps ensure the passing on units – operating units, functional divisions society to contribute to the general wel- For virtues to remain habitual, they demands a long term horizon; it needs to d) Orderliness: it highlights our need to the younger generations the culture of and departments within institutions or or- fare and to the improvement of the broad need to be sustained. They need to be be sustained; and there is no other per- for self-restraint, self-control and personal the community or society; moreover, it is ganizations; families, schools, and socio- environment that should be conducive to given ever-fresh impetus. This impetus manent source of impetus to persevere in discipline as we face up to all difficulties the source of new ideas. economic enterprises in the community or the development of everyone in the insti- can come only from the spiritual facet, pursuit of what is good, of what is better, arising from deep within us. c) The socio-economic enterprise: this society – are the more macro units. Again, tution or organization and in the commu- which indeed is the core facet, from and of what is best other than the source Our fight to observe these values is a source of newer, broader, productive for good governance, there is need for nity or society as well. which all good flows and all good is sus- of goodness, God, with whom we have to and convert them into personal virtues relationships that should work for the close alignment between the micro and c) Subsidiarity: this underscores the tained. Under the spiritual facet, three remain personally related and connected. through our habitual observance of welfare and progress of the entire com- macro units, particularly with regard to imperative of bringing decision-making foundations need to be laid down. These Due to our personal relationship with God, them in our life and work would enable munity and society. charters, maps, and scorecards. down to the lowest possible level and of are the foundational convictions or be- every one of us are called upon to pursue us to provide a strong and stable base for The proper governance of these in- In the case of institutions or organiza- providing wide opportunities for every- liefs that in the end underlie any and all and practice good governance, 24/7, ev- the good governance of our respective termediate units within any institution or tions, the macro unit is the institution or one – starting at the individual level and governance culture that continues to de- eryday and in the discharge of our day-to- institutions or organizations and of our organization and of these intermediate organization itself. But in the case of the including at all intermediate levels – to liver performance and transformational day, ordinary duties. n

CorporateGovernanCeasia 16 July-september 2012 CorporateGovernanCeasia 17 July-september 2012 Corporate Profile Corporate Profile

ers. Appropriate venues of communication are positioned to Corporate Governance (CG) Asia for two years in a row, reach out to its stakeholders (please visit our website at www. 2011 and 2012, as Best in Asia on Corporate Governance meralco.com.ph for more details). and Best in Investor Relations. Meralco complies with the regulatory reports and disclo- In 2012 Meralco also received distinction from CG Asia sure requirements of the Securities and Exchange Commis- as Asia’s Best Chief Finance Officer. The Institute of Corpo- sion (SEC), the Philippine Stock Exchange (PSE) and Energy rate Directors (ICD) conferred the Company with a Silver Regulatory Commission (ERC). The reports are anchored Award for its Corporate Governance Scorecard for Philippine on compliance to the Manual of Corporate Governance, ac- Publicly Listed Companies. The Company also garnered countability and audit of financial statements, and disclosure awards from the Anvil and Quill Awards for its efforts in of material transactions and events involving the Company. public relations and corporate communications. The Company holds corporate governance symposia for The Company commits to adapt best corporate gov- its Board and Management so that they are kept abreast of ernance practices and exhibit ethical corporate conduct. recent industry developments and global corporate gover- Meralco is one with organizations espousing these ideals, nance best practices. The Meralco Board, Board Committees such as the Good Governance Advocates and Practitioners in and Management assess their performance annually in order the Philippines (GGAPP) and the Massachusetts-based Eth- to make significant improvements for the ensuing year. ics and Compliance Officer Association (ECOA). The Company develops policies and implementing rules in line with its Manual of Corporate Governance and stra- Governance through Social Responsibility tegic directions from the Board and Management. These are Meralco is taking strategic steps towards Nation building and the Code of Ethics, Policy on Blackout Period/Restriction on supporting the next generation of Filipinos through its One Meralco: Building a Trading of Shares, Policy on Solicitation and Acceptance of Meralco Foundation (OMF). OMF is committed to make a Gifts, Conflict of Interest, Be Right Communication Policy, difference in the lives of the Company’s stakeholders through Ereport Mo (Whistleblowing), Esuggest Mo (Suggestion four focus areas: community electrification, grassroots Culture of Governance Program), and Suppliers Business Conduct. partnerships, youth and sports advocacy, and emergency preparedness and disaster response. Governance Innovation CG Asia recognized Meralco as Best in Corporate Social An online system facilitates employee education and compli- Responsibility. The Company also garnered Anvil and eralco is the largest electric distribution utility in the coming from Metro Manila alone. Electrification level in the ance. Employees access corporate governance policies, signify Philippine Quill Awards for its initiatives on One Meralco MPhilippines and consistently ranks in the list of the franchise is 99%. their commitment to corporate governance and code of Foundation launch, Sibol schools, bio-intensive gardening, country’s top five corporations. Celebrating its 109th year ethics, as well as submit reports and disclosures in an online community electrification, solar bottle bulbs (Isang Litrong of service in 2012, Meralco serves over 5 million residential, Service with integrity platform. This electronic facility expedites monitoring of Liwanag Program), and bags manufactured from dried water- commercial and industrial customers. “Service with Integrity” is the cornerstone upon which employee compliance and discipline, which serves as a gauge lily (Waterlily for Life Program). The franchise area covers 9,337 sq. kms., covering 31 cit- Meralco fulfills its mandate to serve customers, the com- on succeeding and imperative courses of action. Through OMF programs and initiatives, the Company ies and 80 municipalities including Metro Manila, the entire munity and the country, empowered by seven corporate contributes in uplifting the lives of every customer, commu- provinces of Bulacan, Rizal and Cavite; parts of the provinces values: Customer Service, Performance, Accountability/Em- Governance Track Record nity and the country. of Laguna, Quezon, Batangas and Pampanga. More than powerment, Integrity/Transparency, Teamwork/Collegiality, Meralco relentlessly pursues its vision to be a world-class half or 55% of the total electricity usage in the Philippines, Malasakit and Makabayan. company and the service provider of Governance vis-à-vis Performance or almost three-fourths of all electricity used in Luzon, is The Company’s directors, officers and employees ensure choice as it advocates corporate gover- Meralco recognizes that governance is vi- consumed in the Meralco area. that service steps beyond mere compliance by making good nance principles. It is consistently in the tal in its financial performance and long- The franchise is strategically located to serve the country’s governance as a way of life, with a conscious choice to list of the Philippines’ top five corpora- term sustainability. Good governance center of commerce and industry and its hub of government uphold fairness, accountability, integrity and transparency at tions and has distinguished as among brings about sustained breakthrough services and infrastructures. It serves about 30 manufacturing all times. Asia’s finest. results, evident in the financial and oper- economic zones which also compete in the global market. The Company is recognized both ating results ensuring that the interests The company also caters to providers of outsourced business Governance Advocacies locally and internationally for corporate of stakeholders are protected. processes, both domestic and international. Through all its financial operations and business decisions, governance, corporate social responsibility For the Company, Corporate Gover- Almost half of the country’s Gross Domestic Product Meralco protects the welfare of all its stakeholders: customers, and investor relations, among other dis- nance is more than just performance. It (GDP) is produced within the franchise area, with one-third suppliers, creditors, employees, government and sharehold- tinctions. It has received recognition from is the Meralco way of life. n

CorporateGovernanCeasia 18 July-september 2012 CorporateGovernanCeasia 19 July-september 2012 CG PhiliPPines CG PhiliPPines • By Jonathan Juan DC. Moreno, FiCD and Maria Teresa P. Garcia

which contributed to the depletion of many years, instead of being audited the water supply6. The houses belonged “The Members of the Board by COA as it does all other SOEs and to many of the Trustees and executives. met 47 times in a year much branches of government. Advancing corporate to the chagrin of the Senators • In the case of the Local Water Utili- The Unbridled Corruption in Philip- ties Administration (LWUA), the Board who pointed out that there pine GOCCs decided to allocate P80 Million to buy governance reforms in Philippine Immediately after the President of the are only 52 weeks in a year” Express Savings Bank without the ap- Philippines brought to light the excesses proval of the Office of the President and of MWSS, the Senate Committee on Fi- the Central Bank. The Senate public state-owned enterprises nance and the Committee on Govern- bers of the Board are able to retire hearings revealed that in 2008, LWUA ment Corporations and Public Enterprises after 2 years of service and are en- stopped remitting dividends to the Na- initiated an investigation on governance titled to MECO’s retirement package, tional Government despite RA 7656 activities of various SOEs. Spearheaded Php600,000 for each year served. because of its Board resolution to sus- bonus, another for Family Week, another the mammoth metropolis to its respon- by Senator Franklin M. Drilon as the pend payments. To add, the National “The situation became on Charter Day, and even a Government sibilities of sourcing the water and build- Chairman of the Senate Committee on n SOEs failed to remit dividends to Government subsidized LWUA in 2008 even more aggravated Employees’ Week. It gradually added up ing dams. Instead, the MWSS works with Finance, a series of inquiries were held the National Government. and 2009 amounting to Php2.69 Billion when the MWSS reported to 20 bonuses, almost every letter of the two concessionaires to distribute: the calling on Chairmen, Executives and Ad- • Under Republic Act 7656, SOEs are that there was a shortage alphabet was used for their acronyms Maynilad Water Services and the Manila ministrators and even Cabinet Secretaries required to remit at least 50% of their The Role of SOEs in the Philippines reaching the equivalent of more than Water Company. Through its concession- from the Department of Finance and the net earnings to the National Govern- SOEs play a crucial role in the social and of water from its dams, 25 months of salaries2. A multipurpose aires, MWSS was able to earn a nett in- Department of Budget and Management ment. According to the Commission on economic development of the Philip- an incredulous claim since loan is also available to everyone in the come of P277 Million last 2009 but still to answer queries regarding the nature Audit (COA) in its 2010 Report, SOEs pines. They are the institutions that usu- all of these inquiries MWSS. A driver, for example, can use it failed to pay the National Government and operations of SOEs. still have to remit Php49.611 Billion to ally provide essential infrastructure and happened in the middle of to buy a car. P258M in dividends4. This was, again, an- According to the transcripts of these the National Government7. However, basic services that are critical to national the rainy season” The Capitalist’s Dream of the MWSS other indiscretion to add to its excesses. public hearings and inquiries, it was re- there are SOEs who are unable to re- economic development. The question did not end there. It was the govern- It was only until newly-elected Presi- vealed that the different SOEs committed mit dividends simply because of their now being asked is how come these ment’s obligation to keep the MWSS dent Mr. Benigno Simeon Aquino III men- the following atrocities: losses. The Philippine Export-Import SOEs are able to commit these atrocities MWSS’ fountain of wealth afloat with the people’s taxes since it was tioned the MWSS in his first State of the n Excessively obscene bonuses de- Credit Agency (PhilEXIM), also known and still get away with it? To better an- Journalists called it the Capitalist’s a State-owned enterprise. It was the per- Nation Address (SONA), citing it as an spite poor financial conditions and as the Trade and Investment Develop- swer this, it is important to understand Dream1. Members appointed to the fect setup, a fountain of wealth without example of the excesses and abuses of staggering losses. ment Corporation of the Philippines what SOEs are, why they exist in the first Board of the Metropolitan Waterworks any sign of drying up. The unfortunate the previous administration that his entire • The MWSS was guilty of giving away (TIDCORP),could not remit for years place, and what sort of environment that and Sewerage System (MWSS) suited truth was this: there was nothing in Phil- election campaign was aiming to correct. 25 months worth of salaries in addition 2008 and 2009 due to its negative re- they work in. up, attended meetings, and collected ippine law that said they were not to be- It was only then that the country began to the annual salaries of its employ- tained earnings for the past 11 years8. While State intervention is usually thousands of pesos in per diem fees. On have this way3. to find out about the extravagance in ees. The Members of the Board met controversial in market economies, the those days, the agenda was a long list of According to its mandate, the MWSS State-owned Enterprises (SOEs). 47 times in a year much to the cha- n GOCCs are also guilty of blatantly existence of SOEs rely on several politi- company concerns and requests of man- is tasked to ensure that water will be Then the proverbial dam broke. As grin of the Senators who pointed out disregarding the law and govern- cal and economic theories that address agement policies waiting for Board ap- readily available to all the constituents the Senate Committee on Finance and that there are only 52 weeks in a year. mental processes. gaps in the delivery and access of services proval. When the agenda was too long in Metro Manila. However, MWSS could the Committee on Government Corpo- Many Board meetings were held twice • SOEs are all entities by extension of and goods. Their existence is based on the Board would split it into two meet- no longer reconcile the overwhelming rations and Public Enterprises found out in a day which entailed per diems to be the State. However, some of their ac- the fact that market failures do exist and ings: one in the morning and one in the task of distributing water in all parts of through its inquiries, the MWSS was given twice for those days of double tions, institutionalized by Board resolu- the State has to intervene in order to pro- afternoon. Both meetings meant double remiss in its efforts to provide pension meetings. Even a budgeted 5% for tions, demonstrate a blatant disregard tect the public interest. Thus the State’s per diems. 1 Soriano, James and Roman, Carlo. “The GOCC Salaries Issue: The for its retirees, a 15-year-old disservice Gender Development by the National of law and governmental processes. As role in free markets: (1) macroeconomic Capitalist’s Dream as the Citizens’ Nightmare”. Bantay Presidente: It eventually became a collusion of the First 100 Days in Power. http://bantaypresidente100.wordpress. among more than a thousand retired Government was not spared. Instead an example, MECO has been audited management through regulatory and Management and the Board as the sys- com/2010/09/12/the-gocc-salaries-issue-the-capitalist%E2%80%99s- employees5. of using it to fund Gender Develop- by a foreign auditing firm in Taiwan for promotional functions to make markets dream-as-the-citizens%E2%80%99-nightmare/ tem of checks and balances eroded. The 2 Esguerra, Christian. “Only at MWSS: Even Drivers can get Car The situation became even more ag- ment programs within the MWSS, more effective, help direct investments to Loans”. The Philippine Daily Inquirer. Sept 1, 2010. requests of top management to give bo- gravated when the MWSS reported that the Board decided to give it away as 7 ensure that resources are deployed effi- 3 “Obscene”. Editorial. The Philippine Daily Inquirer. August 27, 2010 Miel, Likha Cuevas, “GOCCs owe national gov’t P50B in dividends –COA”. Interaksyon.com: The online news portal of TV5. TV5. nuses to all employees of the MWSS also 4 there was a shortage of water from its a “Gender Bonus”. All these bonuses ciently, to create an environment condu- Sy, Marvin. “MWSS still owes Gov’t 258M in Dividends”. The 29 December 2011 < http://www.interaksyon.com/article/20707/ benefited the Board. On Christmas, there Philippine Star. September 1, 2010. http://new.philstar.com/head- dams, an incredulous claim since all of were given when the MWSS suffered goccs-owe-national-govt-p50b-in-dividends---coa > Accessed on cive for private investments and political lines/608016/mwss-still-owes-government-p258-million-in-dividends April 24, 2012. were three different bonuses: the Tradi- 5 these inquiries happened in the middle of a Php3.5 Billion loss in 2009 and even stability, (2) investments in human capital “Excessive Perks”. Editorial. Philippine Daily Inquirer. July 31. 2010. 8 Republic of the Philippines. Senate. “PSR NO. 66: Resolution Di- tional Corporate Christmas Package, the http://opinion.inquirer.net/inquireropinion/editorial/view/20100731- the rainy season. It was only upon further failed to deliver its commitment to recting the Committees on Finance and Government Corporations and physical infrastructure (e.g. increased 284107/Excessive-perks Traditional Christmas Bonus, and the Ad- investigation that the Senate found out MWSS pension holders. and Public Enterprises to Conduct an Inquiry, in Aid of Legislation, market access), and of course, the (3) 6 Fernandez, Lira Dalangin. “MWSS housing project built without QC into the Alleged Excessive and Unwarranted Salaries, Allowances, ditional Christmas Bonus. It didn’t stop approval”. Philippine Daily Inquirer. July 30, 2010. http://newsinfo. why. The MWSS built a residential subdi- • In the case of the Manila Economic Bonuses, other Emoluments and Perks of Top Officials and Board protection of the marginalized such as inquirer.net/breakingnews/metro/view/20100730-284029/MWSS- Members of Government Owned and Controlled Corporations as there; there were also the Family Day housing-project-built-without-QC-approval vision in one of its important watersheds and Cultural Office or MECO, Mem- well as Government Financial Institutions”. September 8, 2010. the poor and the vulnerable. The usual

CorporateGovernanCeasia 20 July-september 2012 CorporateGovernanCeasia 21 July-september 2012 CG PhiliPPines CG PhiliPPines

economic-driven reasons for the creation 2006, the ICD concluded that the follow- benevolence will never let these SOEs go privatization of the SOE or the transfer of of SOEs are: “The free-riding problem ing factors created the environment of bankrupt, there is no cause to shape up “We will be putting in regulatory functions to other agencies. • Natural Monopoly. This is the in- corruption among SOEs: and improve. While the National Gov- With the GOCC Governance Act, SOE prevents private firms from board members who are stance wherein the economies of scale • Although there is a clear mandate for ernment have continuously asked for Boards are now empowered to discipline entering the market so or costs of providing a service are ex- GOCCs in their task to provide public their audit reports and for Trustees to at- more functional… We have its officers accordingly as well as pass the tremely high and only one large pro- SOEs are the logical choice services, there are some GOCCs that tend corporate governance orientations, recommended to the Palace Fit and Proper test of the GCG. vider can exist to make a reasonable to provide public goods have opposing responsibilities and mere compliance is not even demon- the appointment of strong Last June 2012, the GCG enrolled it- profit. The SOE intervenes and is tasked essential to the economy” conflicts of interests. PAGCOR, for strated. This is the reason why SOEs are finance people, lawyers and self in a Corporate Board Retreat under with the mandate to provide the initial example, was acting as a gaming cor- left behind by their private counterparts experts in the field of water the auspices of ICD with the purpose of infrastructure and service. In economic poration that operated casinos and yet who are constantly monitored by the creating a GCG Roadmap. resources” parlance, a firm with a natural monop- ICD as Senate’s resource it is also tasked to give out licenses to rigid laws of the Securities and Exchange oly on services can demand high prices On September 13, 2010, the Senate other private casinos. Commission (SEC) and the Central Bank. Revisiting the MWSS in return but from a policy viewpoint, a Committee on Finance, together with the • There is a weak ownership by the of the GOCCs. ICD obliged by suggest- The MWSS has undergone through SOE, being an extension of the State, Committee on Government Corporations State or the National Government, The Governance Commission: ing models of other countries that had an many changes in governance since it can regulate its prices to provide the and Public Enterprises called on the ex- thus a dire need for a coordinating Empowering the State’s Ownership SOE super body that were documented was cited in President Aquino’s SONA. service not only to those who can af- pertise of the ICD through its Chairman, supervisory entity with effective, and In 2011, the Philippine government was by the OECD. While E.O. 24 directly ad- In October of 2010, the MWSS, for the ford it but to the majority of the popu- Dr. Estanislao to shed light on the greed even punitive, powers over the GOCC once again buried in controversy. The dressed the problem of remuneration of first time in fifteen years, finally gave its lation. In developing economies like and the state of the SOEs. Coincidentally and Government Financial Institutions media shifted its focus from the obscene Directors in their Boards, it did not in- retirees their pension. The new manage- the Philippines, SOEs extend various enough, the ICD has already conducted a (GFI) sector. abuses of the GOCCs to the corruption clude the blatant abuses of the GOCCs’ ment of MWSS led by its Administrator, services to the poor especially in terms benchmarking tool on the corporate gov- • The corporate governance culture in the Armed Forces. The transfer of me- top executives. Furthermore, to create a Mr. Gerry Esquivel, has embarked on its of health care, energy, and basic needs. ernance of SOEs in the country in 2006, among SOEs needs to be improved dia attention gave respite to the Senate Republic Act that should only focus on many needed reforms. • Externalities. Since private firms a second scorecard project next to the drastically and urgently. There is a lack Committees, who further consulted ICD remuneration becomes a futile exercise The composition of the Board of are geared towards earning a profit companies listed in the Philippine Stock of transparency and accountability in drafting a law to address the ill-prac- when more is required from the SOEs to Directors was entirely changed. MWSS through their provision of goods and Exchange. In the same year, the Institute in the Board level that led to missed tices of the GOCC sector. Senate Bill No. be at par with world standards. Chair Ramon Alikpala was quoted say- services, none of them will be interest- participated in an Asian Roundtable un- opportunities and thoughtless resolu- 2640 was finally sponsored into the floor On June 6, 2011, President Aquino ing, “We will be putting in board mem- ed in providing goods and services that der the auspices of the Organization for tions. Ultimately they contributed to for interpellations. House Bill No. 4067 finally signed into law the Republic Act bers who are more functional… We have will create external benefits to other Economic Co-operation and Develop- significant losses along with the arro- was also in process in the Lower House. 10149, “The GOCC Governance Act of recommended to the Palace the appoint- firms. Public goods often entail posi- ment (OECD) on the topic of governance gance to disregard the law. In truth, there were already attempts 2011” which fully empowers the Nation- ment of strong finance people, lawyers tive externalities that encourage free- in State-owned Enterprises where then- The Philippine Senate Economic Plan- at correcting these Boards. Former Presi- al Government in its responsibilities and and experts in the field of water resourc- riding. The free-riding problem pre- Executive Director of ICD, Mr. Jonathan ning Office also published a Policy Brief dent Gloria Macapagal Arroyo, for exam- duties as Owner of its SOEs through the es”. Alikpala even attended ICD’s Profes- vents private firms from entering the Juan DC. Moreno presented the results on the Issues and Challenges with Philip- ple, tasked the Department of Finance newly-created Governance Commission sional Directors Program in preparation market so SOEs are the logical choice of the very first Corporate Governance pines’ Public Corporate Sector and men- during her term to require Directors of on GOCCs (GCG). It became one of the for his duties. to provide public goods essential to the Scorecard for SOEs. Mr. Moreno, who tioned the same arguments. The Brief GOCCs to undergo a corporate gover- first 3 laws of the Aquino administration Currently, the MWSS is now focusing economy. Public goods include nation- eventually became President and a Fellow also added another glimpse of the public nance orientation, as is required from and is maybe one of the administration’s its efforts in ensuring water security rath- al security, clean air, peace and order, of ICD in 2010, was also an active part corporate sector’s reality: the GOCC’s ac- Directors in the private sector, but the important contributions to the Republic. er than the distribution of water in Metro national defense, etc. of the ICD team with Dr. Estanislao that cess to never-ending subsidies, transfers, law lacked teeth in compliance. A most The law requires the practice and best Manila. With the leadership and gover- • Equity. Firms that are focused on helped Sen. Drilon create the first drafts and guaranteed loans. The Brief sadly recent attempt is President Aquino’s Ex- performance of good corporate gover- nance of its new Board and top officials, creating profits will offer their goods of what soon will be the Government stated, “GOCCs were initially created as ecutive Order No. 24, which outlines the nance among the SOEs, similar to the ri- the MWSS drafted the “Water Security and services to a certain target mar- Owned and/or Controlled Corporations solutions to market imperfections. It is “Prescribing Rules to Govern the Com- gidity among private corporations. It also Legacy Roadmap” with the purpose of ket, especially to individuals who can (GOCC) Governance Act of 2011. ironic, therefore, that in recent years, they pensation of Members of the Board of followed the OECD Guidelines on Corpo- addressing critical concerns in the MWSS afford these goods and services. Too Reinforced by many years of experi- have come to be seen as problems that Directors/Trustees in Government-owned rate Governance of State-Owned Enter- for the benefit of 15 Million residents in often that marginalized members of a ence in promoting its advocacy as well as need to be fixed”9. This is due to their or Controlled Corporations including prises as applied in the Philippine context. Metro Manila. The Roadmap took effect community are discriminated against the assistance of international organiza- heavy drain on government resources. Government Financial Institutions.” The GOCC Governance Act con- one month after the GOCC Governance because of price. The SOE steps in to tions such as the OECD and the Center They have not been earning their keep, In the beginning of the Senate in- tains disclosure and audit requirements, Act of 2011 was signed. n provide goods and services that will be for International Public Enterprise (CIPE), as well, considering their low remittances quiries on the corruption in GOCCs, the compensation and position classification accessed universally even at the cost of ICD possesses a wealth of knowledge to the National Government. Senate Committees were also partial to system for SOEs and the composition of About the authors: subsidized prices. about the corporate governance ter- It would seem that these subsidies drafting a law that will prescribe right- their Board of Directors. Philippine SOEs Mr. Jonathan Juan DC. Moreno is a Fellow of the Institute of Corporate Directors (ICD) and Although the objectives of most of rain in the country. With the benchmark from the government also cause detri- ful compensation among Trustees in are now more accountable to their ac- served as President of ICD in 2010-2011. He is these SOEs are noble enough to serve results of its CG Scorecard for SOEs in GOCCs. However, in the course of the in- tions because of the GCG’s oversight and ment to these GOCCs. Trustees do not currently the Country Manager (Philippines) of the general public, they can easily be cor- feel the same pressure to perform as well vestigations and interpellations, it has be- monitoring functions. The GCG has the the Palladium Group. Ms. Maria Teresa P. Garcia rupted by the greed of their Boards and 9 Senate Economic Planning Office, Senate of the Republic of the as the Boards in the private sector. Con- come apparent that a new agency should power to recommend to the Office of currently handles the Research & Communica- Philippines. “Issues and Challenges with the Philippines’ Public executives for the same reasons. Corporate Sector”. August 2010. sidering that the National Government’s be created to monitor the performance the President the dissolution of SOEs, the tions Desk at the ICD.

CorporateGovernanCeasia 22 July-september 2012 CorporateGovernanCeasia 23 July-september 2012 SPONSORED SECTION SPONSORED SECTION

MPIC also ventured and established the first cial discipline and accountability as well as integrity Excellent Corporate Governance nationwide network of tertiary care hospitals in the and transparency, from all its suppliers and business Philippines, a country known worldwide for its top-rate partners. doctors, nurses, and overall quality of care. Its major- transforms MPIC as Philippines’ ity investment in Riverside Medical Center in Bacolod International accolades City completes its presence in the three major island The company continuously test against best practices groups - Luzon (Makati Medical Center and Cardinal and peers by joining organizations focused on Corpo- leading infrastructure firm Santos Medical Center, Asian Hospital and Our Lady rate Governance, and submitting to outside evaluation of Lourdes Hospital in Metro Manila), Visayas (River- against its peers and recognized standards. side Medical Center) and Mindanao (Davao Doctors MPIC has joined, through its Corporate Gov- ithin three years of taking steps to transform the turned the company around to profitability and sustain- Hospital). ernance Officer, the Wcompany, Metro Pacific Investments Corpo- able growth – through sound corporate governance. More hospitals will be added in the future nation- Institute of Corporate ration, or MPIC, is now the leading infrastructure Under MPIC, Maynilad has transformed from a wide. All these hospitals have undergone or are un- Directors (ICD), the “MPIC has come a long investment firm in the Philippines. Poised for long public utility to customer-oriented mindset. Maynilad’s dergoing facilities renovation and buildup, equipment Good Governance way. The supreme task term-growth, it has businesses that enjoy strong market ultimate goal is to be able to provide reliable and po- purchase and modernization, staff hiring and training to Advocates and Practi- before us now, is to positions and attractive profit margins. table water at highly socialized prices to all households upgrade their operational efficiencies, and raise the level tioners of the Philip- deliver the requisite These are the fruits of the company’s adherence to in its concession area, especially to the deprived and of medical care in the country. pines (GGAPP) and the the highest standards of Corporate Governance, which marginalized communities who need it the most. Ethics and Compliance returns by improving is an integral part of the way MPIC does business. By In the power distribution sector, MPIC acquired a Corporate Governance in MPIC Investments Officers Association efficiencies, managing adhering to good corporate governance, MPIC aims to significant stake in Manila Electric Company (Meralco), As an investment and management company, MPIC (ECOA). These institu- important relationships, generate value for its shareholders, and motivate top the Philippines’ largest electrical distribution company, uses primary tools such as funding and financial over- tions regularly meet and continuing to build management as well as its rank and file. when it was invited by the Lopez group, longtime sight of its investee companies. It ensures that funding to discuss current best our businesses” owners and managers of this vital power distribution be provided by stable financial institutions that can practices and conduct MPIC’s Diverse Investments infrastructure. support their commitments. seminars on develop- MPIC has diverse investments in water utilities, power Through proper and efficient operational and finan- As such, included among the company’s business ments in Corporate Governance. distribution, toll roads, and hospitals. cial management, MPIC is maximizing Meralco’s per- partners are financial institutions that either extend MPIC’s adherence to Corporate Governance earned It is committed mitted regulatory returns, and is moving the business credit or arrange financing for companies within its for the company various recognitions from highly to meet the growing into wholesale power aggregation and power generation. sphere of influence. MPIC ensures that the financial respected organizations that promote corporate govern- “Through proper and demand for vital services The Metro Pacific Tollways Corporation (MPTC), statements of each and every company are accurate and ance. It received a Silver Award in 2011, scoring 90.8% efficient operational and reaching far and wide, is the management arm of Metro Pacific Investments reliable. - a big improvement over the 65% scored in the prior financial management, while providing continu- Corporation for the broader tollways network that it To continually be at the forefront as the leading year, from ICD on Corporate Governance. This year, it ous supply of clean and hopes to expand and build. infrastructure investment firm in the Philippines, it was awarded the Gold Medal by ICD. MPIC is maximizing potable water, efficient In cooperation with the Philippine government, adopts best practices and technologies that are appli- Additional accolades received by MPIC include Meralco’s permitted distribution of electrical MPTC and its subsidiary, Manila North Tollways Cor- cable to its businesses and forms joint-ventures for this awards for Investor Relations and Best CEO from Cor- regulatory returns, and power, state-of-the-art poration (MNTC), has undertaken what has been called purpose. porate Governance Asia along with Investor Relations is moving the business tollway systems and the largest infrastructural project in the country in the For example, MPIC partners with DMCI in jointly from Asia Money – all received during the first quarter into wholesale power world-class medical care. last ten years – the massive rehabilitation and expan- managing the majority shares over Maynilad Water Ser- of 2012. aggregation and power For water utilities sion of the North Luzon Expressway (“NLEX”), and vices. The toll road business is shared with Egis Projects “MPIC has come a long way. The supreme task be- area, MPIC has under its its systematic interconnection with other major arterial and the Sy family. While fore us now, is to deliver generation” wings Maynilad Water roads in Luzon. the aim of providing the the requisite returns by Services Inc., a conces- MPTC aims to build a seamless road network from best health care is the improving efficiencies, sion that covers the West Zone of Metro Manila and a North to South of Metro Manila, the National Capital common goal of MPIC, managing important rela- large part of Cavite province with a population of over 9 Region. It made a modest investment in the Skyway the hospital subsidiaries tionships, and continuing million. The company joined a consortium that acquired system, and has submitted a proposal to Government and the members of the to build our businesses,” it in 2007 andwww.mpic.com.ph handheld its rehabilitation out of a court- to link SLEX in the south with NLEX in the north (the medical profession. Manny V. Pangilinan, administered program. In less than a year, the consortium Connector Road). MPIC expects finan- MPIC Chairman said. n

MPIC Sponsored Section.indd 2-3 06/08/2012 11:03 PM

CAPITAL MARKETS • By: Governor Amando M. Tetangco, Jr, Bangko Sentral ng Pilipinas CAPITAL MARKETS

domestic liquidity, as these are closely any buildup of system-wide risks that related to maintaining stable monetary “There is always of course may be brewing underneath. This leads Taking the next steps conditions. that temptation to deploy to an agenda that oversees corporate Europe is said to be deleveraging. As funds to cover costs. leverage, nonbank sources of credit, central Europe deleverages away from real estate expansion, and corporate Ultimately, it is an issue peripheral Europe, it is likely that at least governance as much as it does for at a time of change of credit underwriting for some of the funds would be headed managing liquidity, yield curves, loans, towards Asia. However, if core Europe banks” and bank capital. deleverages absolutely, then we might For banks in particular, your relative economic strength. see a liquidity squeeze, not only in Asia relationship with other financial “The shift in focus to You have aptly chosen as your but across the globe as well. Capital markets were broadly in order. This institutions and with nonbank theme “The Way Forward: Building flows impact exchange rates, interest is why financial stability is now the corporates will be under increased stimulating domestic Opportunities – Riding on the Wave of rates, trading volumes and future overarching policy issue. Instead of scrutiny under Basel 3. Consistent demand has certainly Emerging Market Growth”. Data from demands on currency withdrawals. looking at growth only as a higher with the stability agenda, the new made emerging markets the BIS shows that the growth pattern These are not small concerns, as these number, we need to go beyond the Basel Accord covers a lot of ground more resilient than in the EMEs has changed since the can quickly become the stimuli for bottom line and the balance sheet. on counterparty risks and systemic advanced economies” height of the crisis. Overall, exports and systemic risk. The BSP is thus always Specifically, we must appreciate how connectedness. While many have industrial production are weakening watchful. things relate to one another, arresting complained that this will likely while household consumption On the other hand, there is sufficient am happy to join you again and continues to hold up well. In emerging domestic liquidity. You may have heard have this opportunity to discuss the Asia, consumption contributed 4.25% me say this on a number of occasions in Iprospects of our financial market. and investment 2.75% to growth the past. As I see it therefore, the issue Forums such as this seem to be last year. The Philippine experience of a liquidity squeeze and contraction occurring more frequently these days. certainly reflects this. The shift in focus of trade credits because of deleveraging To me, this is a strong indicator of to stimulating domestic demand has in Europe is not our primordial concern. interest in the Philippines. certainly made emerging markets more The strength of the Philippine banking This interest is not without basis. resilient than advanced economies. system at the height of the global Consider this…. despite the volatility This is not to say, however, that financial crisis was precisely the ability in oil prices and global uncertainties, Amando M. Tetangco, Jr, Governor, we should be complacent. Markets to source deposits, create loans while at domestic inflation has remained Bangko Sentral ng Pilipinas can turn quickly and difficulties can be the same time continuously improving manageable. Interest rates have been protracted. Was it not only 48 months the quality of the credit portfolio. There at historic lows. This has had the outlook have been upgraded by ago that the sale of Bear Stearns was is always of course that temptation to upside of sustaining consumption various rating agencies in the last two finalized (on May 30, 2008) to stem deploy funds to cover costs. Ultimately, expenditures which in 2011 years, re-affirming the consistency of the tide of market collapse? Yet when it is an issue of credit underwriting for accounted for 70.8% (in real terms) of our economic gains. We are likewise Lehman Brothers announced nine days banks. So, I say to our banks, now is not GDP. Government spending has since heartened to read of recent public later that it incurred a USD2.8 billion the time to put our avowed strength at picked up while the fiscal deficit has comments by a number of analysts loss for its second quarter results, the risk. remained under tight control. With who see the Philippines getting another chain of ensuing global difficulties could What I would, however, encourage the balance of payments remaining upgrade this year. not have been rationally foreseen by our banks to do at this time is to positive and remittances sustained, we I believe we would all be in any model or analysis. In other words, seriously consider channeling liquidity now find gross international reserves agreement when I say that, these ladies and gentlemen, things can quickly to productive investments, such as at record highs. favorable indicators have come from our change. the PPP program, instead of simply Such an economic environment collective investments in focused policy If institutions and the sovereign placing funds in financial instruments translated to a 3.7% growth in GDP for reform and implementation, post-1997. are to be best positioned at a time or engaging, even indirectly, in activities 2011. Building on this, our first quarter As policy makers kept their eyes on the of change, we need to be cognizant like shadow banking. Communication GDP growth rate has been reported at inflation ball and sustained the will to of what’s driving the momentum for lines, roads, bridges and airports… 6.4% year-on-year. This is the highest in reduce our dependence on external change…From our perspective, three these are the kinds of investments that Southeast Asia thus far and second only debt, the private sector also remained main themes stand out. affect the quality of growth and define to China’s 8.1 percent in all of Asia. engaged in policy development and First, liquidity. In thinking about our competitiveness. It is important to point out that prudently sought growth opportunities. the growth agenda, we need to pay Second, financial stability. Through these are not one-off gains. The For certain, this partnership has brought particular attention to both the potential the crisis, we managed continued real Bangko Sentral ng Pilipinas: In support, you can be assured that the BSP will craft the requisite sovereign rating and the accompanying our country to its current position of capital flows and the movements in GDP growth because our financial enabling monetary, external and banking sector policies.

CorporateGovernanCeasia 30 July-september 2012 CorporateGovernanCeasia 31 July-september 2012 CAPITAL MARKETS

increase the cost of doing business, expectations continue to be firmly we must remind the market that “We took on the difficult anchored, with the forecast close to Dr. Jesus P. Dr. Cesar G. Estanislao Saldaña there is a price for taking on more reforms to correct structural lower end of target range of 3-5%, so is Chairman of the He is one of Asia’s re- Institute of Corporate source persons in corpo- risk, because ultimately, the costs of a vulnerabilities then. Thus we interest rates can be seen to be stable… Directors which focuses rate governance, having financial blow-out are borne not just BoP is seen to post a surplus of $2.6 on corporate governance participated in various developed the defenses that reforms. Dr. Estanislao international conferences by the banks, but by the economic billion. Foreign reserves are projected has spent much of his in Asia and the U.S. career founding or sponsored by the Asian community as a whole. ensured resilience through to continue to rise to about $77.5 – rehabilitating institutions. Development Bank With his brainchild, the Institute in Tokyo, Japan, The third theme is the issue of the crisis of today.” 78 billion in 2012 while debt service Performance Governance OECD Roundtable, ICD System, Dr. Estanislao Philippines, Indonesian economic integration, which is high is expected to remain stable, or even and the Institute has been ICD and by the Associa- at the forefront of tion of Development Fi- on the agenda of Asia. ASEAN is decline… With these, the peso can be strengthening nance Institutions in Asia and the long-term cure to ensure corporations, from the and the Pacific. consolidating to take a collective expected to trade within reasonable publicly-listed to the approach from capacity building sustainable growth. Today, the market ranges.… Banks are seen to remain in government-owned. to capital markets to liberalization. welcomed the results of the Greek vote. good health. Professional One may wonder why this should But participants remain cautious and Ladies and gentlemen, if you are be high on the Asian agenda, given watchful of the next steps of the ECB, to build opportunities and ride on the experience in the Eurozone. The other major central banks, as well as the wave of our current position of Directors Program answer is simple -- we need to learn the IMF towards reaching a credible strength, you need to recognize that from others in the region, we need to resolution to the EU debt crisis. As for the choices you make today will have understand how individual markets the US, the economic fortunes there lasting consequences…. This was what work, so we can better appreciate what are just as unclear. These two are not your policy makers did in 1997. We opportunities (and threats) reside in inconsequential jurisdictions. Taken took on the difficult reforms to correct our own backyard. Integration is not together, the US and the EU represent structural vulnerabilities then. Thus we just the usual line that markets will be 14% of incremental global GDP developed the defenses that ensured extended or that market guidelines will between 2007 and 2011, increasing to resilience through the crisis of today. It be harmonized. Rather, this goes to the 16% if measured in purchasing power hasn’t been easy getting to where we heart of regional policy cooperation. parity terms. are today. So your role in this uneven During a time of crisis possible conflicts As Europe and the US face increased operating environment is to safeguard could arise between sovereign policy financial market difficulties, the the gains so far, for it is these hard- packages and regional stability efforts. It feedback loop will take the Philippines earned gains that will allow you to is therefore imperative that before that through episodes of volatile capital take advantage of the opportunities time comes, practicable regional safety flows, adjustments in liquidity, stresses going forward. In support, you can nets are already in place. Often, the in credit underwriting – all of which be assured that the BSP will craft the problems an individual country faces are could affect economic growth. Ladies requisite enabling monetary, external the same problems faced by the region and gentlemen, this simply highlights and banking sector policies. as a whole, regardless of the individual that the challenges in offshore markets There is no magic formula that Create value in the Boardroom. country circumstance. The efforts to should be onshore concerns. will allow us to accomplish all these strengthen regional cooperation in Asia In our role as bank regulator, our effortlessly. The key, however, remains to The Professional Directors Program (PDP) is a five-day are steady. The recent enhancements in concern is with respect to the potential think of the bigger picture -- no longer course designed for directors, trustees, executives, and the CMIM, of which the Philippines is a ramifications of all these developments just in terms of individual pay-offs but finance chiefs who aim to learn more about their duties part, certainly move the region closer to on banks. We have been doing a lot rather on how our respective actions and responsibilities inside the boardroom. The PDP is this goal. of pencil pushing. Under different can produce the shared goal of a strong, Friends, these three themes simulated stress scenarios, the banking steady and upward economic growth filled with key lessons on the application of the princi- comprise a full list of things to system CAR falls but still remains above trajectory that benefits the greater ples of corporate governance and real-life case studies, consider as we mull the way forward. the national standard of 10%. The majority. n facilitated by a faculty internationally-recognized for While there are a number of clear numbers may be reassuring, but these opportunities that the country’s current should not lead to complacency. Speech by BSP Governor Amando M. their expertise. position of relative strength affords us, Friends, while uncertainties surround Tetangco, Jr there remain serious storm clouds in the us today, there are many things that Taking the Next Steps at a Time of Change – 06.18.2012 – Makati Shangri-La The PDP will be offered on the following dates: external environment. Europe continues are looking up… Business confidence is Occasion: Philippine Financial Market Forum September 6, 13, 14, 20, & 21, 2012 at The Peninsula to struggle to find the appropriate rising… Private consumption continues “The Way Forward: Building Opportunities policy balance - between the short- to be resilient… Unemployment – Riding on the Wave of Emerging Market Manila. Contact Ms. Mye Angeles through run remedy to stop the contagion remains low and is declining… Inflation Growth [email protected] to reserve a seat. You may also call her at +63.2.884.1494.

CorporateGovernanCeasia 32 July-september 2012 www.icdcenter.org

sustainability • by Rhandell santos sustainability

posted a robust 6.4% increase over way to posting a new record high at The Philippines: the first three months of the year, “These initiatives can only 5,369.98 as of July 5. The PSE is bullish already far outpacing the International help improve the business on the outlook of the Philippines, Monetary Fund’s forecasttemptation climate and enhance the noting that the Philippines was able to growth rate of 3.5%. Credit has been image of the Philippines achieve unprecedented growth despite Sustaining the economic the continued uncertainty surrounding attributed primarily to expansion as an attractive in the services sector, increased the Western and Chinese economies. public and household spending, an investment destination” The local bourse further explained momentum encouraging recovery emerging in the that these impressive figures are an manufacturing sector and tempered indication of the effectiveness of the inflation. Consumer spending has been school year. reforms implemented by the country responsibility towards the greater the Philippines offers an interesting buoyed by the steady price levels, and The most recent figures compiled which has contributed to the stable “Consumer spending community while remaining financially example on the potentials and pitfalls will be a major factor in helping drive by the government in June reveal that macroeconomic environment. It has been buoyed by the sound in its operations. in the quest for economic sustainability. the economy forward. expenditures soared 13.1% to reach predicts that there would be a solid steady price levels, and As with corporations, the same Its past half century of inadequate Investors have also been drawn to the Php668.4 billion threshold during chance that the country would be able principles hold true with countries. It infrastructure and persistent corruption the lowered interest rates prevalent in the first five months of 2012, compared to extend this forward momentum in will be a major factor goes without saying that a healthy, has culminated in low economic growth the country, with the Bangko Sentral to Php591 billion mark posted over anticipation of better first half earnings in helping drive the thriving local economy provides an and widespread poverty. However, ng Pilipinas (BSP) lowering rates to the the same period in the previous year. from listed firms, as well as the latest economy forward” essential foundation for a sustainable things are starting to look brighter for tune of 50 basis points so far this year. During May alone, public spending sovereign credit rating upgrade which and liveable nation. Resources are the country. Overall, economic growth has steadily increased 16.7% to Php151.3 billion, provides additional support for future ustainability has been the efficiently allocated that allow its During the first quarter of 2012, improved since 2000 powered by a surpassing its Php129.7 billion total growth. nascent buzzword reverberating citizens and the wider society to economic growth in the Philippines robust service sector that continues to registered in the same month in 2011. The main drivers to be counted Sthroughout corporate circles prosper, leading to healthier lifestyles surpassed the expectations of numerous expand. The Asian Development Bank (ADB) on to propel the economy forward in recent years. It has carved out its and greater opportunities for personal analysts and offered a pleasant, However, a number of challenges also indicates that the Philippines has include efficiency in public spending, own niche among organisations that fulfilment. welcome surprise. The government looming on the horizon pose a threat proven its resilience in withstanding the an increase in tourism activity, strong are looking to establish a sense of Taking this into perspective, announced that the country’s economy to derail the economic momentum of shockwaves of the lingering Eurozone business confidence, and signs of life in the Philippines. A potential slowdown crisis thus far. Its sovereign credit the stagnant US economy as driven by in global economic conditions and ratings were upgraded last year on the recent optimism in the housing market. a sharp spike in oil prices could basis of sound macroeconomic stability Providing a backbone of support significantly hamper trade and limit and making solid progress on its fiscal for the solid momentum are the efforts economic growth over the remainder consolidation. Recognising the country's to rein in the excesses of corporations of the year. improved economic fundamentals and and ultimately eliminating corruption Nevertheless, the Philippines strong prospects, credit rating agencies that has manifested itself in the public remains steadfast in upholding Fitch and Standard & Poor’s upgraded and private sectors over the years. its current course. The country’s the country's rating to BB+ - one notch These initiatives can only help improve Department of Budget and below investment grade. Moody's the business climate and enhance the Management recently disclosed that rated the country at Ba2, two notches image of the Philippines as an attractive it would maintain a sustained rise in below investment grade, but revised investment destination. government spending in the second the Philippines' outlook to positive from The much-heralded Government- quarter to further bolster its gross stable, indicating a possible additional Owned or Controlled Corporations domestic product (GDP). It noted that upgrade over the next 12 to 18 (GOCC) Act 2011 is a shining testament public spending would continue to be months. to these efforts, which seeks to reform the primary component, as was the Meanwhile, the Philippine Stock and curb the excesses of GOCCs by case during the first quarter of the year. Exchange (PSE) soared to new restructuring their operations. Perhaps Public spending is poised to be more heights this year on the back of equally as important, the law will robust in the second quarter driven investors betting on the country’s solid establish the GOCC Commission on by the early implementation of salary macroeconomic fundamentals, rising Governance (GCG) spearheaded by increases under the fourth tranche of 20% the first six months of 2012. a chairman bestowed with a cabinet the Salary Standardisation Law III, the During this period, the PSE recorded rank, providing further evidence that anticipated payments of conditional all-time highs 19 separate times, the government is serious in addressing cash transfers, and expenditures catapulting it to the top performing the corruption issue. Overall, economic growth has steadily improved since 2000 powered by a robust service sector that continues to expand. allocated in preparation of the new market in Asia with a 22% gain on the The GCG will be responsible

CorporateGovernanCeasia 34 July-september 2012 CorporateGovernanCeasia 35 July-september 2012 sustainability

for monitoring and evaluating the areas and different social spectrums, performance of GOCCs based on a “It aims to achieve ensuring that economic growth and performance evaluation system and high and sustained opportunities translate to poverty periodic assessments. GOCCs are economic growth that reduction. Finally, the strategy outlines now required to maintain a website provides productive the push towards the implementation furnishing the general public with vital of effective social safety nets to offer and decent employment information including its latest financial assistance to everyone as the country statements, corporate operating opportunities.” strives towards sustainable economic budgets, and summary of borrowings, growth. among others. From top to bottom, the In this plan, NEDA underscores the GOCC Act 2011 also establishes strict and Development Authority (NEDA), significance of good governance in guidelines on the salaries and benefits the plan is anchored on President propagating the successful progress of of GOCC officials and employees to Benigno Aquino’s Social Contract with a country, highlighting that it belies the ensure that more funds are allocated the Filipino People which envisions normative standards of development. towards essential public services. inclusive growth for the country. In essence, good governance fosters Another national development Incorporating good governance and participation, ensures transparency, strategy laid out by the Philippine anticorruption measures, it aims to demands accountability, promotes Government is the Philippine achieve high and sustained economic efficiency and upholds the rule of law Development Plan 2011-2016 that growth that provides productive and in economic, political and administrative seeks to provide a framework to decent employment opportunities. The institutions and processes. Furthermore, weather the inevitable challenges plan seeks equal access to development the NEDA reiterates that a flourishing ahead. Through the National Economic opportunities across geographic economic environment backed by

The steady supply of a young work force will prove to be a boon in sustaining the Philippines’ economic growth.

CorporateGovernanCeasia 36 July-september 2012 sustainability Good Governance • By alex B. Brillantes, Jr., and Maricel T. Fernandez

good governance principles and values the number of youth compared to the is a hallmark of political maturity. It elderly, indicating that more citizens “For the initial launch, undeniably remains a requisite for would be entering the labour force Good Governance: growth and poverty reduction, since 1,600 youth will be every year for the next decade. This there are irreducible minimum levels provided with career places the Philippines at an enviable of governance needed for the influx of counselling services, grants position compared to developed The Gawad Kalinga Paradigm large scale investments into the country nations with an aging population, for vocational training, and for social programmes to be requiring them to source their labour supported. and internships with needs from developing nations. It is Thus, the Philippine Development employers” now up to the Philippines to capitalise o much has been said and written cal level anchored on an engaged citizenry Plan 2011-2016 was launched on this advantage. about governance. Good gover- “GK is a global movement coupled with transformational leadership to promote effective and honest The youth programme is only one Snance has been seen as a key fac- for poverty reduction that and changed mindsets. governance, creating an enabling of numerous initiatives that have been tor to reduce poverty. Kofi Anan said that Over the past decade, GK has become has spawned immense environment for citizens and the private improve its business climate to help planned to open up the labour market good governance is the “missing link” an emerging model for governance in the sector to reach their full potential. solve the persistent “brain drain” and make it more inclusive. Other that can explain the shortcomings of many generosity and massive Philippines. Within the reform framework, The programme specifically targets problem experienced over the years as a plans brewing in the pipeline include a development efforts and interventions in volunteerism” it demonstrates the convergence of citizen corruption to ensure that resources are result of unsatisfied workers looking for tourism industry-led skills development various parts of the world. engagement coupled with paradigm shifts. effectively and efficiently utilised for top greener pastures and opportunities in programme and a new tourism We have come to understand “good It is a movement for nation-building which priority public goods and services. To other countries. quality assurance and accreditation governance” as manifesting the following developed over the years. This article fo- brings together various stakeholders in the achieve this, the government aims to Collaborating with the ADB in system to bolster the country’s overall features. Ledivian Carino identifies these cuses on the imperatives to engage the governance process: the government, the intensify efforts to detect and prevent June, a US$350 million Increasing competitiveness in the tourism industry. as follows: (1) people’s participation in pol- citizens and to change mindsets and para- business and the civil society together. As corruption, enhance the legal and policy Competitiveness for Inclusive Growth Furthermore, the ADB points out icy and decision-making made possible by digms. the GK founder, Antonio Meloto puts it: framework for corruption prevention, Programme loan was approved. The that through the Competitiveness for a decentralized government; (2) respon- Over the past decades, the praxis of “GK is a global movement for poverty re- resolve pending corruption cases with initiative comprises a combination Inclusive Growth Programme loan, a siveness to the will of the people who are governance has been under severe chal- duction that has spawned immense gen- dispatch and conduct anticorruption of policy reforms and programmes competition policy and best practice empowered and enabled; (3) transparency lenge and continues to be under pressure erosity and massive volunteerism.” It is an advocacy campaigns. designed to promote competitiveness regulation will also be developed, and and accountability of public servants in re- to reform if it is to be responsive to the ever indigenous patriotic global development All these efforts have not gone and develop the labour skills of the the policy framework for public-private sponse to the citizens’ right to know (“the increasing demands of the society. The rel- model that promotes the “new politics of without being recognised by the astute working class, with an enhanced focus partnerships in the Philippines will be truth”) as the sovereign in a democracy; evance of government itself has been un- caring,” or “kalinga politics” and the new investment community. In the recent towards enriching the opportunities of reinforced. (4) efficiency and effectiveness in the ex- der attack with questions raised about its economics of sharing or “bayanihan eco- 2012 Global Real Estate Transparency the out-of-school youth. As a developing nation, the ercise of power and authority to save on continued relevance as an institution. The nomics.” It is not about divisive proselytiz- Index survey conducted by Jones Lang To better facilitate the integration Philippines has made significant strides scarce resources in providing public ser- declining trust in institutions of govern- ing or narrow nationalism but about local Lasalle (JLL), the Philippines – ranked of the young generation into the labour over the past decade in shaping a vices, solving problems and fulfilling goals; ment has been decried with calls for the citizenship and justice. Such description of 35th globally – was placed in the market and enhancing their workplace sustainable future and its efforts are (5) the promotion and fulfillment of social need to institute reforms if government as GK, highlights three important characteris- top ten markets that made the most skills, the ADB is working closely beginning to bear fruit. Yet, of course, justice and human rights; and (6) achiev- we know it is to survive. In the Philippine tics that embody key concepts in new pub- significant improvements for real estate with the Department of Labour and it still has a long way to go. At its core, ing ecological integrity and sustainable political context, elite and/or elite rule still lic administration, reinventing government investments since 2010. Among the Employment in meticulously crafting the economic sustainability underscores the development. Governance is partnership exists. In this context, reform of PA is not and governance. top improvers, the Philippines came in MyFirstJob youth job search programme ability to address the diverse needs of between and among the government, only inevitable; it is imperative. The Gk way is one of radical citizen- seventh tied with Indonesia, and ahead set to roll out in 2013. For the initial the country by providing what it needs business and the civil society. As mentioned above, citizen engage- ship and patriotic development. It takes of South Korea, Thailand and Vietnam. launch, 1,600 youth will be provided over the long-term. In this light, the Over the years, we have studied vari- ment is one key factor that will enable re- on a holistic approach which is sensitive to JLL points out that the improved with career counselling services, grants country still falls short across a number ous reform interventions and have begun forms in institutions and mindsets for our cultural values and social structures. It loves scores of the Philippines have helped for vocational training, and internships of areas. to conclude that reforms in public admin- collective goal of good governance. The the poor and also honors the rich who care redefine its image, undersocring that with employers. Rome certainly wasn’t built in a day. istration for good governance may be tar- following discusses a specific case – that of for them. According to Meloto, it does not increased transparency is attracting Compared to more developed But if the Philippines’ recent economic geted at four major areas: (1) Reforming Gawad Kalinga- and how it has become a condone corruption but engages all politi- more investors. As more investors flock nations, the steady supply of a growth momentum and efforts in institutions, structures and processes; paragon of good governance where gov- cians who want to follow their brand of to the country, an environment for young work force will prove to be a improving its infrastructure, stamping (2) Reforming behavior, mindsets, par- ernment, business and civil society come honest development that is their antidote even greater transparency is inevitably boon in sustaining the Philippines’ out corruption and incorporating adigms and values. These two areas of in, Gawad Kalinga, (which means “to to corruption). .It follows the old fashioned enhanced. economic growth. Data from the more people in the working sector reform must be reinforced by an enabling give care”) is an example of applied gov- Filipino philosophy called “bayanihan” or Looking ahead, the Philippines has recent Philippine Consumer Finance are any indication, it is moving in the environmentprovided by (3) committed ernance in the Philippines, providing an “cooperativism.” GK aims to restore the been active in building the foundations Survey conducted by the BSP revealed right direction towards economic and transformed leadership character- opportunity for partnership between and dignity of persons. As pointed out by Jose of a sustainable future. For a country a significant upward trend in the sustainability and a brighter future izedby political will, and (4) an engaged among government, business and the citi- Abueva, “the ultimate end of widening known for its overseas workers spread country’s young population over the befitting of a country hailed as the Pearl and involved citizenry. This is reflected zens. GK also illustrates how transforma- “bayanihan” is to promote patriotism, throughout the globe, it is looking to next decade. Currently, there are twice of the Orient. n in the following framework that we have tion and reform can be effected at the lo- societal renewal and nation-building for a

CorporateGovernanCeasia 38 July-september 2012 CorporateGovernanCeasia 39 July-september 2012 Good Governance

just and caring society.” At the core of the GK’s partnership with its stakeholders and showcase. GK are thousands of volunteers ranging is grounded on trust. This model has been Gawad Kalinga is an example of a from young men and women, students, described as indigenous and fundamental. movement that advocates good citizen- to captains of industry, retired business While GK is a faith-based initiative, it is ship. Antonio Meloto has proven that persons, all referred to as “bayani,” or nonetheless a working model of develop- transformational leadership is effective in “heroes” who have simply offered their ment that can complement with research, social transformation. It has promoted na- 3Ts- time, talents and treasure (“padugo”) training, and extension work. The initiative tion-building, it has brought out the innate or “sweat equity” to literally build homes has gone beyond providing roof for the good citizenship values of the Filipinos. GK Invest for the poor.Being a hero for others, not homeless. has by far succeeded in collapsing the so- Philippines leaving anyone behind (“walang iwanan”) Gawad Kalinga can be considered cial divide by being non-discriminatory and are central to the GK paradigm and ethic, aspecial paradigm of good governance. thus serving as a converging point for all A NEW PLATFORM CONNECTS YOU TO THE PHILIPPINES simply helping one’s neighbors. Good governance revolves around the sectors of society. It has achieved unprece- GK has veered away from partisan pol- values of transparency, accountability, dented milestones in providing land for the itics while working with politicians. It suc- participation, rule of law, equity and so- landless, homes for the homeless and food cessfully draws out Filipino ingenuity and cial justice, sustainability and continuity. for the hungry. It concretely animates the generosity. As Tony Meloto mentioned in GK revolves around the values of “Baya- indigenous principle in the “sweat equity” an interview with the Philippine Daily In- nihan” (becoming a hero to one another) concept which has brought out the pro- quirer: and addressing the root cause of poverty ductive and creative side of people while GK has become a vehicle for con- – not simply the absence of money but an promoting a sense of belonging and unity. vergence for all sectors and its model of absence of shared values, sense of com- Furthermore, it has revived the indigenous governance is now being replicated in all munity and higher purpose). Massive Mo- practice of “bayanihan” or volunteerism. levels of Philippine society. GK exempli- bilization of GK Partners and Volunteers” It has been said that GK showcases fies a governance paradigm based on (beginning with ‘padugo’- or ‘to bleed for the best of the Filipino in the Philippines cooperation and partnership among busi- the cause’ which means devoting one’s and abroad. Many dimensions of GK com- ness (corporate foundations), government own time and resources to initiate work munity life present possible areas of study (LGUs, national government agencies, leg- within the community without expecting to determine exactly how the best of Fili- islators) and civil society (non-government outside funding or support) and “Patrio- pino culture manifests in this development organizations and academic institutions). tism in Action” not just a work with the model. Nevertheless, warmth, volunteer- The initiative is not merely an act of philan- poor but more importantly a work of na- ism and hospitality are indigenous Filipino thropy, but an investment (business), not tion building that began as a simple but a cultural traits clearly manifested in GK merely humanitarian, but developmental- daring initiative of the Couples for Christ villages. Indeed Gawad Kalinga may be oriented (civil society), and not simply an (CFC) that has grown into a multi-sectoral, seen as a good strategy that harnesses the act of dole-out but of empowerment (civil and interfaith partnership driven by the key factors of an engaged citizenry and society). same faith-based spirit and vision. reformed mindsets coupled with institu- Exemplified by multi-stakeholdership, Gawad Kalinga is becoming a model tional reforms and transformational lead- GK is consistent with Article 62 of the Local for development in the sense that it has ex- ership– that would bring about, or restore Government Code of 1991, laying down tended its services to Papua New Guinea, good governance. n the direct involvement of POs, NGOs and Indonesia and Cambodia. Furthermore, the private sector in the plans, programs, Filipinos abroad are coming home to help Dr Brillantes and Ms Fernandez are with the projects or activities of LGUs. This ap- rebuild their motherland. The President National College of Public Administration and Governance of the University of the Philippines. of the Catholic Bishops Conference of proach promotes the pooling of resources This essay draws from the papers that were writ- and talents, an opportunity that LGUs, the Philippines (CBCP) Archbishop Angel ten and earlier published by the author over the hard pressed to meet the many compet- Lagdameo, describes GK as the new kind past years. Brillantes,A and M.Fernandez.2008.“Is ing priorities of their constituents should of “people power” the country needs. There A Philippines Public Administration? Or Bet- explore. On the other hand, mobilizing GK has built more than 100,000 homes ter Still, For Whom is Philippine Public Administra- tion?”; Philippine Journal of Public Administration all over the Philippines and in Southeast LGU commitment and resources in order LII (2–4) (April-October). Brillantes, Alex and M. to house the poor will generate consider- Asian countries such as Cambodia, Indo- Fernandez. 2011 “Good Governance, Social able impact and empower marginalized nesia and Papua New Guinea. More than Quality, and Active Citizenship: Gawad Kalinga in communities to meaningfully transform 1,000 GK communities have been built in the Philippines,” International Journal for Social themselves. GK partners with appropriate 350 towns and cities) These communities Quality, Vol. 1, Issue 2, Winter. Also cited in Meloto,A.(2009).Builder of Dreams. Mandaluyong are in various stages of development of national government agencies to provide City: Gawad Kalinga Community Development housing loans and resources. which there are three: start up, build up Foundation. pp 6–410

CorporateGovernanCeasia 40 July-september 2012

A d v o c A t e s AdvocAtes

GGAPP employs a multi-disciplin- ary and multi-perspective approach in tackling issues of governance, wel- coming ideas from good governance advocates and practitioners who hail from the business sector, government, civil society and the academe. It aims to GGAPP was borne out of contribute to bringing about a holistic the desire for advancing change to the governance landscape good governance on all of the entire Philippines. possible levels – corporate GGAPP in action. responsibility, ethics and right conduct and opposing At the heart of the organization’s First educational symbosium featuring Mr Steve Priest of Global Compliance Services public and private existence is its monthly roundtable corruption. meeting of members. Here, members are able to candidly and openly discuss sectors that will benefit from inputs learned from its individual members GGAPP annual planning session issues and concerns as well as solutions and knowledge on good governance and like-minded national and inter- and strategies on good governance. by providing training, knowledge and national organizations. Through its Learning by sharing in an atmosphere guidance on good governance. continuing efforts, GGAPP foresees of trust and respect is at the core of that ultimately, its vision of “ a national Good Governance Advocates and Practitioners these meetings. GGAPP also seeks to engage regu- culture anchored on good governance of the Philippines: lators, particularly the Securities and and social responsibility in accordance An emerging part of its work as ad- Exchange Commission (SEC) and Phil- with global best practices and high vocates is the conduct of educational ippine Stock Exchange (PSE), as well ethical standards” will be realized. n Advancing Good Governance discussions on good governance and as local and international governance ethics. It has conducted internal study networks and rating agencies in dia- sessions and is now crafting its eth- logues and for a. GGAPP aims to grow, ics, compliance and governance cur- expand and sustain its organization For more information visit: http://www. in the Philippines riculum for external audiences. GGAPP by leveraging on the wealth of experi- goodgovernancephilippines.org/index. intends to reach out to the un-served ence and ideas shared, developed and html

A shared Ideal. vocacy known. In 2011, the Good Gov- ernance on all possible levels – cor- ernance Advocates and Practitioners porate responsibility, ethics and right Some say it was a good idea whose of the Philippines or “GGAPP” was conduct and opposing public and pri- time had finally come. Several indi- incorporated with the Philippine Se- vate corruption. We are also practitio- viduals, each involved in the corporate curities and Exchange Commission to ners. We endeavor to apply best prac- governance concerns of various private serve as an association of professionals tices, new insights, and innovations so Philippine entities, once met at a social performing governance, compliance that we can all be better professionals gathering and discovered in each other and ethics functions in their respective working in organizations that have a shared passion for good governance. organizations and companies. progressive and evolving governance Other get-togethers ensued, active programs. In other words, we are discussions were held on various gov- The name speaks for itself. witnesses to the realities of struggles ernance issues and, as time went by, and pressures inside business but at more and more like-minded individuals GGAPP is an organization for ad- the same time are all uniquely posi- joined their ranks. Fuelled by shared vocates and practitioners of good tioned to be forces of positive change. passions and by individual generosity, governance. Its identity and purpose is It is the kind of change that hope- the numbers of this fledgling group captured in the words “advocate” and fully brings about lasting and palpable soon swelled and with this, they real- “practitioner”. GGAPP was borne out gains, while continually pushing for ized that it was time to make their ad- of the desire for advancing good gov- outstanding corporate performance. GGAPP launching April 1, 2011

CorporateGovernanCeasia 44 July-september 2012 CorporateGovernanCeasia 45 July-september 2012

MINORITY SHAREHOLDER MINORITY SHAREHOLDER

model that SharePHIL is patterned after. SharePHIL: Although SIAS and SharePHIL were born of different histories, the for- Educating the new mer out of a crisis and the latter out of an advocacy, both do share a common Filipino investor goal to promote share- holder education and participation in how com- panies are governed and managed.

Small people and public wealth Mr. Gerald emphasized the importance of forming an alliance and helping the ‘small people’ build ‘pub- lic wealth’, concepts that usually do not go together in a sentence. “With 94 (From left to right) Mr. Arnold Salvador, Executive Director of Management Association of the Philippines (MAP), Million in the Philippines, Ms. Evelyn Singson, President of SharePHIL, Mr. David Gerald, President of Securities Investors’ Association Sin- there is a lot of potential gapore, and Dr. Jesus P. Estanislao FICD, Chairman of Institute of Corporate Directors. domestic investors for the Philippine Stock Exchange educate shareholders. Mr. Gerald re- (PSE)”, Mr. Gerald said. The PSE fur- “Shareholders will now vealed that this business model worked ther commented that even a mere be more empowered to for SIAS and saw no problem why it 30% of the population would yield should not work for SharePHIL as long believe that their active a significant boost in the local bourse as these organizations do not sacri- if they choose to invest. This is in line participation will ensure fice their independence in return for with SharePHIL’s objectives as its Presi- less corruption and better financial support. A relationship with dent, Mrs. Evelyn Singson, explained operations” listed companies bodes well for Share- SharePHIL Inaugural Board Members and Officers take their oath of office to serve minority shareholders. Mr. David in her article in the Philippine Daily PHIL’s sustainability and its investee Gerald of SIAS administers the oath. Photo by the Management Association of the Philippines. Inquirer, Helping Investors Protect companies as highlighted by Mr. Ger- Themselves, “SharePHIL desires to at- ence of SharePHIL, we can expect ald’s ending statement at the launch, tract a wider base of investors into the meetings of listed companies to be “SharePHIL should be seen not solely n organization that devotes itself to the rightfully represented during important compa- market by earning their trust, by help- more transparent and less mechanical. as an activist, but as a partner”. protection of shareholder rights is the ny decisions. ing them make the right investment At the same time, SharePHIL, as a solid Dr. Estanislao definitely agreed. Amissing cog in the country’s corporate Inspired by the Singaporean experience, choices, by making them realize that voice of investors, will be able to ask “We believe that the active in- governance mechanism, according to Dr. Jesus SharePHIL invited Mr. David Gerald to deliver they are not too small to matter, that the hard questions that should make volvement of shareholders through P. Estanislao, Chairman of the Institute of Cor- the keynote address at the launch. Mr. Gerald their money deserves the same atten- management and Directors more ac- SharePHIL is good practice. Through porate Directors (ICD). This is why ICD worked is the President of the Securities Investors’ As- tion as big money”. countable,” explained Mr. Rex C. shareholder activism, companies are together with the Management Association of sociation Singapore (SIAS) which had its own SharePHIL is now tasked in keep- Drilon II, President of ICD. Mr. Drilon expected by their shareholders to fol- the Philippines (MAP) to launch the Sharehold- colourful history of shareholder activism a de- ing companies honest especially dur- also serves as Secretary in the Board of low good corporate governance and ers’ Association of the Philippines (SharePHIL) cade ago. Mr. Gerald stepped up to represent ing decision-making instances such as Trustees in SharePHIL. raise issues over financial concerns. last June 27, 2012 at the Dusit Hotel, Makati. the 172,000 Singaporean minority sharehold- the Annual Membership Meetings of SharePHIL is a partner in checks and It is hoped that the establishment of SharePHIL ers whose investments in Malaysian companies listed corporations. “SharePHIL’s in- A partner in corporate governance balance. Shareholders will now be will initiate a new wave of investments --- ones were frozen by the Malaysian government in vestee companies shall now hopefully Investee companies? Indeed. Share- more empowered to believe that their that are made by informed minority sharehold- 1999. Today, SIAS is now in the forefront of have more meaningful and engaging PHIL seeks the generous support of active participation will ensure less ers who know and practice their rights and are shareholder education in Singapore. SIAS is the stockholder meetings. With the pres- listed companies in its advocacy to corruption and better operations.” n

CorporateGovernanCeasia 46 July-september 2012 CorporateGovernanCeasia 47 July-september 2012

PRIVATE SECTOR First-Ever Private Equity Fund for Philippine Infrastructure Investments

GSIS, ADB and Macquarie and play a globally, with approximately $97 billion The fund will invest role in reducing the Philippine infrastruc- of assets under management across in Philippine core ture funding gap. PINAI provides for an 24 countries. The value of the assets is excellent investment opportunity and based on proportionate enterprise value, infrastructure assets we expect it to enjoy an early mover ad- calculated as proportionate net debt and with an initial focus on vantage and to generate attractive risk- equity value at 31 March 2012 for the existing projects that need adjusted returns for our clients: pension majority of assets. expansion or rehabilitation, funds in the Netherlands with combined ADB, based in Manila, is dedicated but will also be in a assets of over €300 billion (around $367 to reducing poverty in Asia and the Pa- position to support the billion),” said Hans-Martin Aerts, Head cific through inclusive economic growth, of Infrastructure Asia at APG Asset Man- environmentally sustainable growth and development of critical agement in Hong Kong. regional integration. Established in 1966, infrastructure projects from ADB hopes the success of the PINAI it is owned by 67 members – 48 from the the ground up. fund will also spur more private equity region. In 2011, ADB approvals including funds that will catalyze additional foreign cofinancing totaled $21.7 billion. capital into the country, and further the APG, a financial services provider in he Asian Development Bank (ADB) development of domestic capital markets. the collective pensions market, provides has approved an equity investment “Our participation in the fund will pension fund administration, asset man- Tin a $625 million private equity contribute to economic growth and in- agement, management support and fund focused exclusively on Philippine vestors’ confidence. This will also mean communication services to pension funds. infrastructure projects – the largest and enhanced returns on our investments For these pension funds and their 4.5 mil- first of its kind in the country and well- which will redound to the greater benefit lion active and retired participants from timed to capitalize on various public- of our members and pensioners,” GSIS the public and private sector, APG man- private partnership opportunities in the President and General Manager Robert ages pension assets totaling about €302 Philippines. G. Vergara said. billion (around $370 billion) (May 2012). ADB’s investment in the Philippine The fund will invest in Philippine core APG administers over 30% of all collec- Investment Alliance for Infrastructure (PI- infrastructure assets with an initial focus tive pension schemes in the Netherlands. NAI) fund is alongside commitments from on existing projects that need expansion Created in 1936 through Common- Philippines’ state-owned pension fund or rehabilitation, but will also be in a wealth Act 136, the Government Service Government Service Insurance System position to support the development of Insurance System or the GSIS provides (GSIS), Dutch pension fund asset man- critical infrastructure projects from the social security coverage to employees in ager APG, and the Macquarie Group. ground up. the government sector under a defined “Apart from our direct equity in- According to the Philippine Develop- benefit scheme. It provides protection to vestment, ADB’s participation can help ment Plan, around 12% of the country’s its 1.4 million members against the oc- mobilize additional investment in the $120 billion investment requirements currence of certain contingencies such as Philippines from top tier international need to come from the private sector. death, disability, separation, unemploy- partners, foster competition in domes- PINAI will target five to 10 investments ment or retirement on the basis of their tic infrastructure finance, and establish of approximately $50 million to $125 monthly compensation. Funding comes a secondary market for well-performing million each to provide for portfolio di- from members and the national govern- infrastructure assets,” said Philip Erqui- versification. ment and instrumentalities in the form aga, Director General for ADB’s Private PINAI will be managed by Macqua- of mandatory contributions. The GSIS Sector Operations Department. rie Infrastructure and Real Assets (MIRA), also serves more than 300,000 old-age “We are delighted to partner with the largest infrastructure fund manager and survivorship pensioners. n

CorporateGovernanCeasia 48 July-september 2012 Scaling New Heights SM Investments Corporation, over the last 50 years, has set the standards for growth, leadership and innovation in Philippine business. It has created a world all its own, one that breathes life and growth into empty spaces and builds thriving communities upon them. SM has found its momentum and strength in its five core businesses: retail, mall operations, banking, property development, and hotels and conventions. Now, SM is at the right place at the right time to seize greater opportunities, deploy more resources and to emerge as a global force. The plans are laid out and SM can’t wait to introduce its brand of products and services to millions more.

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