Profile of Independent Directors in Selected Philippine Publicly Listed

Predictors of Life Satisfaction of the Expatriate Spouse/Partner Philippine Management Review 2020, Vol. 27, 95-128.

ppendix Profile of Independent Directors in Selected Philippine ediatin oe of Sef efficac in the eationship eteen Support fro ai and Life Satisfaction Publicly Listed Companies by Sector: An Update

ebbie Chua un Pho, Ph.. ariaes oefficients niversity of the Philippines Cesar irata chool of usiness iliman ueon City 0 Philippines

Step 1: Support from family and Life satisfaction ndependent directors have a crucial and deining role in corporate governance. his paper stat loos at the etent o compliance by selected Philippinelisted companies with the new rt r ai corporate governance code (2016), which too eect on anuary 1, 201. he baning sector has the highest compliance rate among the various sectors in terms o proportion o (rt r ai a ie satisati independent directors to board sie, number o directorships in other listed companies, and separation o chairman and CE. lthough an udit Committee is required or all listed companies, not all SEC 1 reports contain inormation on board committees and their test memberships. he qualiications o the udit Committee Chairman in some companies also Step 2: Support from family and Self-efficacy appear to have not met the prescriptions by the new corporate governance code. t is suggested that a SEC 1 template be provided to listed companies, so that uniorm and stat consistent data can be obtained rom this report by the SEC to acilitate their monitoring role. rt r ai Corporate governance, independent directors, Philippine (rt r ai a eeia eywords

test Introduction Step 3: Self-efficacy and Life satisfaction stat he importance o noneecutive directors, especially independent directors, is emphasied in the new Philippine Corporate overnance Code (2016), which will be reerred to as the “new code” eeia hereater. he Philippine Securities and Echange Commission (SEC) Corporate overnance (eeia a ie satisati lueprint (201)1 eercise conducted in 201 ound that the corporate governance ramewor and practices in the country have seriously lagged behind many o its sian counterparts. n response to these indings, many o the prescriptions in the new code center on the composition o the board and test the roles o the independent directors. Eective oversight by the boards o directors over Step 4: Support from family, Self-efficacy, and Life satisfaction management’s decisions and actions is generally equated to better corporate governance. stat n developing sian countries, the role o corporate boards o directors is made tougher by the act that the ownership and management o even the largest business corporations are usually rt r ai controlled by ust one or a ew dominant groups or amilies (Claessens, anov, an, ang, 1 eeia Claessens, anov, ang, 2000 a Porta, opeeSilane, Shleier, 1 orc eung, 200, (rt r ai, eeia a ie satisati 200 oung, Peng, hlstrom, ruton, iang, 200). his creates serious riss that minority shareholders, who have little or no voice in the management o the corporation, may be severely disadvantaged by the controlling groups. test o improve the quality o corporate governance in the Philippines and to support the eort to Note. attract more oreign investments to the country, the SEC issued its irst Code o Corporate overnance in 2002 (SEC, 2002). his irst version o the corporate governance code was simply patterned ater the rganiation or Economic Cooperation evelopment (EC) Corporate overnance Principles (EC, 1). his Code o Corporate overnance (SEC, 2002) had since been revised many times, with the latest version issued in 2016 reerred to as the “Code of Corporate Governance for Publicly Listed Companies”2 in an eort to narrow down the gap between corporate governance best practices in the world and those in the Philippines (SEC, 2016). SEC’s ultimate goal is to have “a sound corporate governance framewor deeply embedded in the Philippine corporate culture by the end of 2020” (SEC, 201, p. 1). owever, a word o warning merely adopting good

Correspondence dychuabunphoup.edu.ph

1 his is a oint proect between the SEC and the nternational inance Corporation (C), a member o the orld

an roup. 2 he new code aims to improve the unctioning o the boards, strengthen shareholder protection, and promote ull disclosure o inancial and noninancial reporting. 6 Profile of ndependent irectors in elected Philippine Publicly Listed Companies by ector n pdate eie ha n h

governance practices rom the western countries, such as an active board o directors, separation o ole of the oard of Directors chairman and the CE, signiicant presence o outside directors, to name a ew, cannot solve As an integral element of a firm’s corporate governance system, the corporate boards of directors controllingshareholder epropriation (arton, Coombes, ong, 200 Chen, i, Shapiro, 2011). perform the dual role of monitoring and advising top management (dams erreira, 200 dams, his study aims to investigate and provide initial descriptive indings on the proile o ermalin, eisach, 2010 arris aviv, 200). oever, the monitoring duty mostly relies on independent directors in selected Philippine publicly listed companies (PCs) by sector. ot only independent directors (ang, ie, hu, 201). n fact, ang et al. (201, p. 2) find “that haing would the descriptive indings provide inormation on the state o compliance by selected PCs with relevant industry expertise enhances independent directors’ ability to perform their monitoring some o the speciic provisions o the new code (2016), but it would also identiy and highlight any function.” similarities or dierences in the proile o independent directors in the dierent sectors. t must be oard monitoring, especially y the udit Committees, is critically important in constraining emphasied though that merely ollowing the prescriptions and recommendations o the new code managers’ opportunistic accounting behavior (Beasley, 16 arcia ara, arcia Osma, enalva, does not ensure better governance o the corporation. he corporate governance variables or 200 lein, 2002 arcer, ichardson, una, 200 ie, avidson, adalt, 200). ecause indicators eamined do not necessarily vouch or the “character, integrity, and ethics” o the members independent oards and udit Committees influence the reliaility of financial reports, uang, oo, o the oard o irectors. he indings o this study can also serve as a benchmar or uture studies ang and hou (201) find that firms ith greater proportion of independent directors have an which attempt to assess the progress o corporate governance practices in Philippine PCs. loans ith loer costs, longer maturity, and feer covenants. his is ecause firms ith a greater his study is an update o a aculty grant research in 201 that was published as a chapter in proportion of devoted and committed independent directors have etter governance uality (asulis eadings in Corporate overnance (Chua un Pho odrigue, 2020). lthough no appreciable os, 201), that leads to etter firm performance and a loer lielihood of violating loan changes in the indings o the two years, 201 and 201, may be epected given the oneyear gap, covenants (asulis os, 201). this study provides comparison o the state o compliance between 201 and 201. Suggestions on how the SEC can improve its monitoring o the relevant corporate governance variables are also provided. oard Attributes Studies on the impact of oard sie on firm performance have mixed results. Some proponents find that smaller oard sie is more effective (ermalin eisach, 200 ensen, 1 athan, Literature eie Sully, icramanayae, 200 Stepanova vantsova, 2012), as it oasts of flexiility, cohesiveness, and loer degree of “freeriding” prolems. arge oard sie, on the other hand, can Corporate governance initiatives in the Philippines were spurred by two maor events (1) the provide more opportunities for netoring and additional silled directors, and hence, is positively structural conditions imposed by the nternational onetary und () in the atermath o the related to firm performance (dams ehran, 200 elhir, 200 iel icholson, 200), 1 sian inancial crisis (ochocoautista, 1 indgren, alino, Enoch, ulde, uintyn, particularly in ans. iven the complexity of aning operations, de ndres and allelado (200, p. 1 h hee, 1 huang, 1) and (2) the various high proile accounting scandals which 2) argue that “board size is a trade eteen adantages re nitring, re adising t occurred in the nited States (S) during the early 2000s, the most wellnown o which were the deal with problems) and disadvantages (control, coordination problems)” in ans. heir results, cases o Enron and rthur ndersen. etter corporate governance hinges primarily on enhancing hoever, do not explicitly find that excessive numers of independent directors create value for the capacity o corporate boards o directors to conduct eective oversight over the decisions and firms. nstead, it is an optimum comination of executive and nonexecutive directors that actions of the company’s management, including the Chief Executive Officer (CEO) (SEC, 2016). contriutes positively to an performance. he presence of executive directors hose noledge of the an is said to complement nonexecutive directors’ advisory ability is pointed out to be the main Corporate oernance in Asia reason for such (ndres allelado, 200). ieise, elhir (200) finds that larger oards reduce ccording to the EC (200), common in developing sian countries are concentrated performance and that the positive association eteen oard sie and performance only emerges ownership structure, prevalence o related party transactions, and the lac o independence o from their susamples of ans. boards o directors. iven the act that the ownership and management o even the biggest business ccording to rancis, asan, and u (201), oard independence is not enough to enhance oard corporations are usually controlled by ust one or a ew dominant groups or amilies (Claessens et al., efficacy. he monitoring and advising roles of directors play an important part on oard efficacy and 1 Claessens et al., 2000 a Porta et al., 1 orc eung, 200, 200 oung et al., 200), firm performance (rancis et al., 201). hile some studies claim that outside directors increase firm these indings mae the unctioning o corporate boards o directors quite challenging and value, many of these studies determine what director’s attributes contributes to better firm complicated. he riss that minority shareholders, who have little or no voice in the management o performance. Wang et al. (2015) investigate whether a firm’s board monitoring effectiveness the corporation, be severely disadvantaged by the controlling groups become more apparent and improves if their independent directors have relevant industry expertise. hey find that outside real. o strengthen oversight, ris control, and company perormance in the longrun, board directors with prior experience in the firm’s industry increase monitoring outcomes. nother study independence becomes even more crucial in marets dominated by amilies (iao ormido, 201). finds that the maret reacted positively to announcements of ne outside directors in the S 00 companies from 200 to 2010, particularly those ith relevant industry experience (von eyerinc, Oesch, Schmid, 2016). oever, drilling don their samples, it shos that investors value industry experience of inside directors more than those of outside directors. On the other side of the spectrum, ntintoli, ahle, and hao (201, p. 0) claim that “director aiiatin ith management compromises monitoring diligence.” Contrary to popular notion on the

edding (200) provides a comparison o some unique eatures o the western and sian economies. ore positive net enefits of outside director experience, Ellis, ee, and homas (201) find that the importantly, the study discusses how these eatures in sian business setting lessen the relevance o the enefits of director experience do not extend to diversified firms. his is ecause industry expert western governance regulations in the sian corporate contet. directors can e iased toards the industries in hich they are familiar ith, resulting in increased ochocoautista et al. (1) provide an indepth discussion o these structural conditions, speciically investment that is value reducing. baning sector reorms, carried out in sia ater the 1 sian inancial crisis. indgren et al. (1) also Other studies explore hether “connected” directors enhance firm value. hile oldman, provide valuable insights on the possible causes o the 1 sian inancial crisis and the lessons learned by ochool, and So (200) find that politically connected directors affect, oth positively and negatively, each adversely aected sian countries. stocprice response. ntintoli et al. (201) find that connectedness has positive effect on oth uality ppel (2002) and aylor (201) provide a brie report on the Enron and rthur ndersen scandal. 6 Profile of ndependent irectors in elected Philippine Publicly Listed Companies by ector n pdate eie ha n h

edding (200) provides a comparison o some unique eatures o the western and sian economies. ore positive net enefits of outside director experience, Ellis, ee, and homas (201) find that the importantly, the study discusses how these eatures in sian business setting lessen the relevance o the enefits of director experience do not extend to diversified firms. his is ecause industry expert western governance regulations in the sian corporate contet. directors can e iased toards the industries in hich they are familiar ith, resulting in increased ochocoautista et al. (1) provide an indepth discussion o these structural conditions, speciically investment that is value reducing. baning sector reorms, carried out in sia ater the 1 sian inancial crisis. indgren et al. (1) also Other studies explore hether “connected” directors enhance firm value. hile oldman, provide valuable insights on the possible causes o the 1 sian inancial crisis and the lessons learned by ochool, and So (200) find that politically connected directors affect, oth positively and negatively, each adversely aected sian countries. stocprice response. ntintoli et al. (201) find that connectedness has positive effect on oth uality ppel (2002) and aylor (201) provide a brie report on the Enron and rthur ndersen scandal. rie ndeendent irectrs in eected hiiine icy isted anies y ectr n date ebbie hua un ho

of financial reporting and on accounting conservatism. oreover, they find that connectedness Corporate oernance in ans improves the career prospects of udit Committee directors even in the event of misconduct. stdy of US ban holding companies by dams and ehran claims that the governance rancis et al. (201) examine hether directors from academia are associated ith higher of firms in nreglated, nonfinancial indstries, sch as manfactring firms, is very different from performance, and find that academic directors ithout administrative positions play a critical the governance of financial instittions, particlarly bans. sta points ot that the nie governance role y eing valuale advisors and effective monitors. nterestingly, they find that characteristics, sch as reglation, spervision, capital strctre, ris, ownership, and deposit academic directors ith usinessrelated degree have the most positive impact on firm performance, insrance, mae bans special and inflence their corporate governance. dams and ehran folloed y academic directors ith technology (i.e., science and engineering), and political find that ban boards are larger and have more board committees that meet slightly more freently acgrounds. Similar to ntintoli et al. (201), rancis et al. (201) find that firms ith academic than manfactring firm boards. rthermore, ban boards have slightly more otside directors and directors are less liely to engage in earnings management, hence, etter financial reporting uality. rely less on longterm incentivebased compensation. Interestingly, bank directors’ pay is lower here has een a recent trend toards genderalanced oards. Several countries, including compared to their conterparts in the manfactring firms. ifferences in board strctre between oray, the etherlands, rance, Spain, and alaysia, have already created las enforcing gender bans and manfactring firms arise primarily de to differences in sie and organiational uotas for oards (European Commission, 2012). n fact, the European Commission (2012) reuired strctre, as well as regulatory supervision. In fact, Macey and O’Hara (2003) identify opacity or the mandatory uotas for omen in corporate oards ased on the findings that companies ith compleity and reglation as two ey factors interfering with the way how financial instittions are higher female representation in their oards outperform their peers. his movement also stems from being governed de ndres allelado, . choing the same sentiment, echt, olton, and oell the critical mass theory, hich argues that in oard meetings, a critical mass of at least three omen , p. state that “financial regulation and policy have started to recognize that bank directors spurs oard activeness and performance (Shrader, lacurn, les, 1). Specifically, governance is different,” arging that “bank governance requires more radical departures from Schartiv (201, p. 1) points out that “genderaanced ards are re iey t reace traditional governance for nonfinancial firms.” ndererring chie eectie icers s and are articary actie dring erids hen s espite ban governance reforms proposed by aler emphasiing board independence, are being replaced.” oever, in an organiational demography study on top management team y two empirical stdies by elhir and dams and ehran find that althogh board sie iares (201), it is found that firm performance in terms of revenue groth is negatively affected y is positively related to performance, board independence is not. dams and ehran arge gender heterogeneity. ccording to her findings, an “increasing compositional changes in gender (i.e., that independent directors in bans may not always have the epertise necessary to oversee comple the additin ne re ersn in the gender inrity can negatively impact firm performance” baning transactions, and may not nderstand all the ris implications of these transactions. n fact, (iares, 201, p. ). his is in line ith the findings of oecs, ull, and etter (201, p. 0) that “at they claim that governance reforms which place more emphasis on board independence may have ery ees gender diersity e eae reresentatin, an increase in diersity ight worsened board governance at pblicly listed companies, which led to the global financial crisis in een e associated with reduced firm performance.” . he empirical stdy condcted by athan and aff , on a broad panel of large US ban Contrary to the reforms on improving corporate governance practices, such as limiting oard holding companies from to , find that board sie and independent directors decrease ban seats and imposing term limits of independent directors, erris, agannathan, and ritchard (200) performance. ontrary to these findings, athan et al. , sing hai bans data from to and ou, Saghal, and hang (201) find no evidence that directors holding multiple oard seats , find that while board sie is negatively related to performance, the proportion of independent negatively affect firm performance, and experienced directors have valuale contriutions to directors is positively related to performance. iewise, Stepanova and vantsova , p. find corporate governance within firms, respectively. Using large US firms’ data at the beginning of 1, that the “relationship between board size and European bank performance is either negative or erris et al. (200) not only find that directors holding multiple oard seats do not avoid their insignificant, which supports the widespread opinion that smaller boards are more effective.” he responsiilities, ut also firms ith such directors are not associated ith greater lielihood of fraud. differences in the findings may stem from the samples sed, and the time frame investigated. ang oever, ich and Shivdasani (2006), examining large S industrial firms from 1 to 1, find et al. even find that bans with a greater proportion of independent directors enoy ban that outside directors holding multiple directorships have significantly eaer firm performance in loans with lower costs, longer matrity, and fewer covenants. terms of loer marettooo ratios, loer operating return on assets, loer asset turnover ratios, as ell as loer operating returns on sales. hile “new directors will infuse innovative ideas and energy into the boardroom” (ou et al., 201, p. 61), directors ho have een serving the firm for a olution of the Philippine Corporate oernance Codes long time have accumulated firmlevel expertise over their tenure, contriuting to etter strategic o raise the ality of corporate governance in the hilippines to be at par with its sian advice and monitoring. conterparts, the S issed in the new code. able lists some of the items which evolved n the ae of the 200 gloal financial crisis, there has een a move to separate the role of the from the first and original code to the recent new code for comparison. chairman of the oard and the CEO (arcer ayan, 2016 Stocham, 201). “Several internatina able olution of the Philippine Code of Corporate oernance risdictins, sch as the nited ingd and th rica, encrage searating the res in their est 2002 2009 2016 practice codes and guidelines” (Stocham, 201, para. ). lthough many governance experts and shareholder activists elieve that the unified role leads to a lac of oversight and diminishes the Minimum At least 2 IDs or such number At least 2 IDs or such number of At least 3 IDs or such number of IDs number of of IDs as to constitute at least IDs that constitute 20% of the as to constitute at least 1/3 of the independence of the oard, research literature, hoever, yields little evidence that chairmanCEO independent 20% of the members of the members of the Board, whichever members of the Board, whichever is duality is detrimental to future performance or governance uality (arcer ayan, 2016 directors Board, whichever is lesser. is lesser, but in no case less than higher. Stocham, 201). n fact, a unified leadership ensures strong, central leadership and increases (IDs) two. efficiency (Stocham, 201, para. 2). oreover, research evidence suggests that the “benefits and Maximum Board may consider The Board may consider the Non-executive directors (NEDs) of draacs indeendent ard eadershi are sitatindependent” (arcer ayan, 2016, p. ). t number of guidelines on the number of adoption of guidelines on the the board should concurrently serve is not alays clear hen separated or comined leadership enefits a company. oever, board seats directorships for its members. number of directorships that its as directors to a maximum of five interestingly, only large companies are pressured to have separate chairman and CEO, mainly allowed The optimum number is members can hold in stock and PLCs to ensure that they have ecause they are the most visile pulic targets (arcer ayan, 2016). related to the capacity of a non-stock corporations. The sufficient time to fully prepare for director to perform his duties optimum number should take into meetings, challenge management’s diligently in general. consideration the capacity of a proposals/views and oversee the director to diligently and long-term strategy of the company. rie ndeendent irectrs in eected hiiine icy isted anies y ectr n date ebbie hua un ho

of financial reporting and on accounting conservatism. oreover, they find that connectedness Corporate oernance in ans improves the career prospects of udit Committee directors even in the event of misconduct. stdy of US ban holding companies by dams and ehran claims that the governance rancis et al. (201) examine hether directors from academia are associated ith higher of firms in nreglated, nonfinancial indstries, sch as manfactring firms, is very different from performance, and find that academic directors ithout administrative positions play a critical the governance of financial instittions, particlarly bans. sta points ot that the nie governance role y eing valuale advisors and effective monitors. nterestingly, they find that characteristics, sch as reglation, spervision, capital strctre, ris, ownership, and deposit academic directors ith usinessrelated degree have the most positive impact on firm performance, insrance, mae bans special and inflence their corporate governance. dams and ehran folloed y academic directors ith technology (i.e., science and engineering), and political find that ban boards are larger and have more board committees that meet slightly more freently acgrounds. Similar to ntintoli et al. (201), rancis et al. (201) find that firms ith academic than manfactring firm boards. rthermore, ban boards have slightly more otside directors and directors are less liely to engage in earnings management, hence, etter financial reporting uality. rely less on longterm incentivebased compensation. Interestingly, bank directors’ pay is lower here has een a recent trend toards genderalanced oards. Several countries, including compared to their conterparts in the manfactring firms. ifferences in board strctre between oray, the etherlands, rance, Spain, and alaysia, have already created las enforcing gender bans and manfactring firms arise primarily de to differences in sie and organiational uotas for oards (European Commission, 2012). n fact, the European Commission (2012) reuired strctre, as well as regulatory supervision. In fact, Macey and O’Hara (2003) identify opacity or the mandatory uotas for omen in corporate oards ased on the findings that companies ith compleity and reglation as two ey factors interfering with the way how financial instittions are higher female representation in their oards outperform their peers. his movement also stems from being governed de ndres allelado, . choing the same sentiment, echt, olton, and oell the critical mass theory, hich argues that in oard meetings, a critical mass of at least three omen , p. state that “financial regulation and policy have started to recognize that bank directors spurs oard activeness and performance (Shrader, lacurn, les, 1). Specifically, governance is different,” arging that “bank governance requires more radical departures from Schartiv (201, p. 1) points out that “genderaanced ards are re iey t reace traditional governance for nonfinancial firms.” ndererring chie eectie icers s and are articary actie dring erids hen s espite ban governance reforms proposed by aler emphasiing board independence, are being replaced.” oever, in an organiational demography study on top management team y two empirical stdies by elhir and dams and ehran find that althogh board sie iares (201), it is found that firm performance in terms of revenue groth is negatively affected y is positively related to performance, board independence is not. dams and ehran arge gender heterogeneity. ccording to her findings, an “increasing compositional changes in gender (i.e., that independent directors in bans may not always have the epertise necessary to oversee comple the additin ne re ersn in the gender inrity can negatively impact firm performance” baning transactions, and may not nderstand all the ris implications of these transactions. n fact, (iares, 201, p. ). his is in line ith the findings of oecs, ull, and etter (201, p. 0) that “at they claim that governance reforms which place more emphasis on board independence may have ery ees gender diersity e eae reresentatin, an increase in diersity ight worsened board governance at pblicly listed companies, which led to the global financial crisis in een e associated with reduced firm performance.” . he empirical stdy condcted by athan and aff , on a broad panel of large US ban Contrary to the reforms on improving corporate governance practices, such as limiting oard holding companies from to , find that board sie and independent directors decrease ban seats and imposing term limits of independent directors, erris, agannathan, and ritchard (200) performance. ontrary to these findings, athan et al. , sing hai bans data from to and ou, Saghal, and hang (201) find no evidence that directors holding multiple oard seats , find that while board sie is negatively related to performance, the proportion of independent negatively affect firm performance, and experienced directors have valuale contriutions to directors is positively related to performance. iewise, Stepanova and vantsova , p. find corporate governance within firms, respectively. Using large US firms’ data at the beginning of 1, that the “relationship between board size and European bank performance is either negative or erris et al. (200) not only find that directors holding multiple oard seats do not avoid their insignificant, which supports the widespread opinion that smaller boards are more effective.” he responsiilities, ut also firms ith such directors are not associated ith greater lielihood of fraud. differences in the findings may stem from the samples sed, and the time frame investigated. ang oever, ich and Shivdasani (2006), examining large S industrial firms from 1 to 1, find et al. even find that bans with a greater proportion of independent directors enoy ban that outside directors holding multiple directorships have significantly eaer firm performance in loans with lower costs, longer matrity, and fewer covenants. terms of loer marettooo ratios, loer operating return on assets, loer asset turnover ratios, as ell as loer operating returns on sales. hile “new directors will infuse innovative ideas and energy into the boardroom” (ou et al., 201, p. 61), directors ho have een serving the firm for a olution of the Philippine Corporate oernance Codes long time have accumulated firmlevel expertise over their tenure, contriuting to etter strategic o raise the ality of corporate governance in the hilippines to be at par with its sian advice and monitoring. conterparts, the S issed in the new code. able lists some of the items which evolved n the ae of the 200 gloal financial crisis, there has een a move to separate the role of the from the first and original code to the recent new code for comparison. chairman of the oard and the CEO (arcer ayan, 2016 Stocham, 201). “Several internatina able olution of the Philippine Code of Corporate oernance risdictins, sch as the nited ingd and th rica, encrage searating the res in their est 2002 2009 2016 practice codes and guidelines” (Stocham, 201, para. ). lthough many governance experts and shareholder activists elieve that the unified role leads to a lac of oversight and diminishes the Minimum At least 2 IDs or such number At least 2 IDs or such number of At least 3 IDs or such number of IDs number of of IDs as to constitute at least IDs that constitute 20% of the as to constitute at least 1/3 of the independence of the oard, research literature, hoever, yields little evidence that chairmanCEO independent 20% of the members of the members of the Board, whichever members of the Board, whichever is duality is detrimental to future performance or governance uality (arcer ayan, 2016 directors Board, whichever is lesser. is lesser, but in no case less than higher. Stocham, 201). n fact, a unified leadership ensures strong, central leadership and increases (IDs) two. efficiency (Stocham, 201, para. 2). oreover, research evidence suggests that the “benefits and Maximum Board may consider The Board may consider the Non-executive directors (NEDs) of draacs indeendent ard eadershi are sitatindependent” (arcer ayan, 2016, p. ). t number of guidelines on the number of adoption of guidelines on the the board should concurrently serve is not alays clear hen separated or comined leadership enefits a company. oever, board seats directorships for its members. number of directorships that its as directors to a maximum of five interestingly, only large companies are pressured to have separate chairman and CEO, mainly allowed The optimum number is members can hold in stock and PLCs to ensure that they have ecause they are the most visile pulic targets (arcer ayan, 2016). related to the capacity of a non-stock corporations. The sufficient time to fully prepare for director to perform his duties optimum number should take into meetings, challenge management’s diligently in general. consideration the capacity of a proposals/views and oversee the director to diligently and long-term strategy of the company. 00 rofile of ndependent irectors in Selected hilippine ublicly isted ompanies by Sector n pdate eie ua u o 0

2002 2009 2016 e main focus of te new code is te establisment of a competent and effective oard. Maority eicientl em his ties an iect shl nti the a of its principles and prescriptions revolve around tis teme. mpasis is given on te role of te esnsiilities hee heshe is an incment noneecutive directors, particularly te independent directors. e new code (20, p. ) defines iect ee acceting a  oeecutie director as a director o as o eecutie resosiilit ad does ot erorm iectshi in anthe cman a or related to te oeratios o te cororatio. Tenure Limit ne ne Board’s IDs should serve for a  ideedet director as a erso o is ideedet o maaemet ad te cotrolli of IDs6 maimm cmlatie tem eas sareolder ad is ree rom a usiess or oter relatiosi ic could or could n the instance that a cman ants reasoal e erceied to materiall iterere it is eercise o ideedet udmet i t etain an ineenent iect h has see eas, the a carri out is resosiilities as a director. shl ie meitis rom te definition, bot noneecutive and independent directors are epected to be justification/s and seek shareholders’ independent of bot te controlling owner and management in order to render an effective, aal ing the annal independent ceck and obective evaluation of management’s performance, not to mention, shareholders’ meeting. constructive callenge to eecutive directors. ince te board of directors is te primary driver of Qualification hee is n seciic hee is n seciic aliicatin s shl ssess the necessa corporate governance, te new code focuses on te following prescriptions (, 20, pp. , 22 of IDs aliicatin s s aliicatins an nne the 2, 2) isaliicatins an t hl the  e oard sould be composed of directors wit an appropriate mi of competence and sitin neenence an epertise (ecommendation .) cmetence shl g haninhan  e oard sould be composed of a maority of noneecutive directors wo possess te Role of NEDs ne ne a cmse a mait necessary ualifications (ecommendation .2) s asses tectin the  e company sould provide training of directors, including an orientation program for first company’s interest over the interest time directors (at least eigt ours) and relevant annual continuing training (at least four the iniial shaehles ours) on mandated topics (ecommendation .3) he s shl hae seaate  e oard sould ave a policy on board diversity, not only in terms of gender but also of eiic meetings ith the etenal ait an heas the intenal age, etnicity, culture, skills, competence, and knowledge (ecommendation .) ait, cmliance an is nctins  e directors sould attend and actively participate in all meetings of te oard, itht an eectie iects ommittees, and areolders in person or troug televideoconferencing esent t ense that e checs (ecommendation .) an alances ae in lace ithin the  e noneecutive directors of te oard sould concurrently serve as directors to a eatins he meetings shl e maimum of five s to ensure tat tey ave sufficient time to fully prepare for meetings chaie the lea ineenent (ecommendation .2) iect  e oard sould ave at least tree independent directors, or suc number as to constitute Attendance n shl alas e in s shl alas atten a he iects shl atten an at least onetird of te members of te board, wicever is iger (ecommendation .) of board attenance ee, the meetings nless theise actiel aticiate in all meetings meetings asence an ma nt ie in the las, thei the a, mmittees, an  e oard sould ensure tat its independent directors possess te necessary ualifications aect the m asence shall nt aect the haehles in esn thgh and none of te disualifications for an independent director to old te position eiements i he is l m eiement ee, teleiecneencing cncte in (ecommendation .2) ntiie the meeting t the a ma, t mte accance ith the les an  The Board’s independent directors should serve for a maximum cumulative term of nine elieatel an itht tansaenc, eie the eglatins the , ecet hen years (ecommendation .3) stiiale case ails t atten esence at least ne stiiale cases, sch as, illness,  e positions of airman of te oard and O sould be eld by separate individuals and the meeting stiiale ineenent iect in all its eath the immeiate amil an eac sould ave clearly defined responsibilities (ecommendation .) and cases ma nl incle meetings. seis accients, eent them m gae illness eath ing s n a an mmittee  ompanies sould disclose board and eecutive remuneration on an individual basis, To monitor the directors’ including termination and retirement provisions (ecommendation .). immeiate amil an seis cmliance ith the attenance meetings, the iect shl eie accients eiements, catins shall meeting mateials an i calle , ese prescriptions ensure tat independent directors not only possess te necessary atins ma, at the en smit t n ee as the necessa estins see ualifications, but also are independent, competent, and committed in teir fiduciary duties to te ee iscal ea, ie ana the lling ea, claiicatins an elanatins company tey serve, assuring the protection of the company’s interest over the interest of the the ith a sn a sn cetiicatin at the individual sareolders. o ensure tat independent directors devote sufficient time and attention to certification of directors’ directors’ record of attendance in perform their duties and responsibilities to the company’s business and affairs, noneecutive meeting attenance a meetings directors can only serve as directors to a maimum of five s concurrently. o reinforce board ource (2002, 200a, 20) atan et al. (200) refer to noneecutive director as “outside director.” ursuant to (20) Independent irectors (Is) elected in 202 may be reelected as suc until 20, atan et al. (200) refer to independent directors as an outside director wit no “material” relationsip wit wen te two (2) years coolingoff period sall commence. However, if tere is no suitable replacement, said Is te firm ecept for board directorsip. is definition is similar to tat of te new corporate governance code may be reelected in 20 until 202, at wic time, tey may no longer be ualified as Is for te same (, 20). companies. aid reelection in 20 until 202 sall be wit prior written notice and ustification to te e imposition of a maimum five () s is already being implemented in two outeast sian countries, ommission addressed to te orporate overnance and inance epartment. Malaysia and ailand (, 20, p. ).

00 rofile of ndependent irectors in Selected hilippine ublicly isted ompanies by Sector n pdate eie ua u o 0

roile o deedet irectors i elected iliie ulicl isted omaies ector date ebbie Chua Bun ho 1

independence, a tenure limit is imposed on independent directors, in hich case the maximum update of the first study. ence only the 1 SEC 17 reports of companies included in the first cumulative term is for nine years only ndependent directors ho have served for nine years can be study are collected. This allows comparison of findings between the two years 17 and 1. reelected only after rigorous revie and under exceptional cases hen the board provide a The SEC 17 report is used as the primary data source because it is the official report to be meritorious ustification for reelection , , p astly, the positions of the hairman of the submitted to both the SEC and the SE. ence using the SEC 17 report to gather the reuired Board and should be held by separate individuals to ensure “appropriate balance of power, corporate goernance ariables being inestigated in this study facilitates the data gathering and icreased accoutailit ad etter caacit or ideedet decisiomaking” , , p allows the determination of whether all Cs proide the same corporate goernance information. lthough the ne code does not specify the age limit of the directors, the epartment of inance Table proides a list of the sectors included in the sample as well as the respectie companies issued an order stating that one of the ideal ualifications of an independent director is that under each sector. There is a total of Cs included in the sample1. heshe must not be more than years of age , This same order provides for a “fit and proper rule” for directors of insurance companies and public companies The Bango able Companies Included per Sector entral ng ilipinas B, has its version of this “fit and proper rule,” hich applies not only to ans oldin Companies Property Companies directors of bans, but also to its senior management This reuirement ensures that an effective niersal an boiti Euity entures Inc. E nchor and oldings Inc. I board stems from having directors ho are “it ad roer” to do their function urthermore, though an of the hilippine Islands yala Corporation C yala and Inc. I the ne code does not reuire a minimum number of female directors in the board, as in the case of I alaysia ecurities ommission alaysia, , companies are encouraged to elect female China aning Corporation lliance Global Group Inc. GI elle Corporation E directors, particularly female independent directors and female senior managers , , p CI East est aning Corporation T oldings Inc. T Cebu andmaster Inc. CI E Sample Data Source and ariables etropolitan an and Trust CI oldings Inc. C ilinest and Inc. I Company T The sample consists of companies listed in the hilippine toc xchange The sectors hilippine usiness an GT Capital oldings Inc. GTC GlobalEstate esorts Inc. GEI chosen are primarily based on ho the sector affects the general public or example, the failure of a hilippine ational an G Summit oldings Inc. GS egaworld Corporation EG publicly listed ban may bring significant negative conseuences and ripples into the hilippine economy, since the country is very dependent on bans for its financial intermediary functions ue ial Commercial aning ope oldings Corporation obinsons and Corporation C Corporation CC to this criterion, bans, utility electricity and energy, telecommunication, industrialenergy Security an Corporation T Group Inc. TG Shang roperties Inc. SG companies, and property companies are the first sectors included ood companies are included SEC because they sell tangible, staple commodities in contrast to services provided by bans and utility nion an of the hilippines etro acific Inestments S rime oldings Inc. S companies olding companies are added as most of the bigger s are under the umbrella of a Corporation IC holding company astly, transportation and logistics companies are included because their San iguel Corporation SC operations are different from the other sectors included in the sample S Inestments Corporation The “advance search” feature in the ebsite as employed to generate a list of all s per SIC sector Based on maret capitaliation from largest to smallest, a list of companies per sector as Food Companies (7) Transportation and Logistics Utilities – Power (5), then generated The aim as to get the top companies per sector Companies (5) Telecommunication (2), and fter enumerating the top companies per sector, the of each of the listed company Industrial (3) as retrieved from the ebsite f the report as not available in the ebsite, then grinurture Inc. I sian Terminals Inc. TI boiti ower Corporation C the next possible sources explored are the company’s website and the Google search engine. If the el onte acific td. E Cebu ir Inc. CE irst General Corporation GE report of any of the top companies per sector could not be found, then the next company listed served as the substitute oever, if the next to substitute companies’ SEC 17 ollibee ood Corporation C Chelsea ogistics oldings irst hilippine oldings Corporation CC Corporation report could not be found, then no more substitute company as generated acay oldings Inc. C International Container Terminal anila Electric Company E is generally submitted to the ithin calendar days after the end of the fiscal Serices Inc. ICT year covered by the report , The ne code becomes effective starting anuary , Max’s Group, Inc. (MAXS) acrosia Corporation C hinma Energy Corporation E , ence, the relevant corporate governance variable data for the first study done in San iguel oods and eerages Globe Telecom Inc. G ecember are gathered from the reports deadline for the collection of data is Inc. set on ovember , in order to generate the first study’s findings. The current study is an Shakey’s Pizza Asia Ventures, Inc. hilippine ong istance I Corporation T “An independent director is not more than eighty (80) years old, unless otherwise found fit to continue serving as etron Corporation C such by SEC or IC (Insurance Commission)” , ence, as long as the director is physically fit and ilipinas Shell etroleum mentally alert, heshe can continue being part of the board Corporation S epublic ct o “The General Banking Law of 2000,” ith amendments from the B – ircular o hoenix etroleum hilippines Inc. B, , ircular o B, , and ircular o B, The sectors of listed companies in this study are based on the classification n order to generate the results in ecember , a deadline for the collection of data is set on ovember , or example, as of this date, the report of sia nited Ban orporation B, ouble ragon roperties , mperador nc , niversal obina orporation , oldings, nc , and o roup nc o cannot be found, hence, these companies are not included in the 1 Energy eelopment Corporation EC is included in the samples for the first study prepared in ecember companies investigated oreover, tarmalls, nc T is no longer listed in the 1. oweer since this company was delisted in oember 1 it is excluded in both the first and current f the company’s yearend is ecember , the day deadline falls on pril study for comparison purpose. roile o deedet irectors i elected iliie ulicl isted omaies ector date ebbie Chua Bun ho 1

independence, a tenure limit is imposed on independent directors, in hich case the maximum update of the first study. ence only the 1 SEC 17 reports of companies included in the first cumulative term is for nine years only ndependent directors ho have served for nine years can be study are collected. This allows comparison of findings between the two years 17 and 1. reelected only after rigorous revie and under exceptional cases hen the board provide a The SEC 17 report is used as the primary data source because it is the official report to be meritorious ustification for reelection , , p astly, the positions of the hairman of the submitted to both the SEC and the SE. ence using the SEC 17 report to gather the reuired Board and should be held by separate individuals to ensure “appropriate balance of power, corporate goernance ariables being inestigated in this study facilitates the data gathering and icreased accoutailit ad etter caacit or ideedet decisiomaking” , , p allows the determination of whether all Cs proide the same corporate goernance information. lthough the ne code does not specify the age limit of the directors, the epartment of inance Table proides a list of the sectors included in the sample as well as the respectie companies issued an order stating that one of the ideal ualifications of an independent director is that under each sector. There is a total of Cs included in the sample1. heshe must not be more than years of age , This same order provides for a “fit and proper rule” for directors of insurance companies and public companies The Bango able Companies Included per Sector entral ng ilipinas B, has its version of this “fit and proper rule,” hich applies not only to ans oldin Companies Property Companies directors of bans, but also to its senior management This reuirement ensures that an effective niersal an boiti Euity entures Inc. E nchor and oldings Inc. I board stems from having directors ho are “it ad roer” to do their function urthermore, though an of the hilippine Islands yala Corporation C yala and Inc. I the ne code does not reuire a minimum number of female directors in the board, as in the case of I alaysia ecurities ommission alaysia, , companies are encouraged to elect female China aning Corporation lliance Global Group Inc. GI elle Corporation E directors, particularly female independent directors and female senior managers , , p CI East est aning Corporation T oldings Inc. T Cebu andmaster Inc. CI E Sample Data Source and ariables etropolitan an and Trust CI oldings Inc. C ilinest and Inc. I Company T The sample consists of companies listed in the hilippine toc xchange The sectors hilippine usiness an GT Capital oldings Inc. GTC GlobalEstate esorts Inc. GEI chosen are primarily based on ho the sector affects the general public or example, the failure of a hilippine ational an G Summit oldings Inc. GS egaworld Corporation EG publicly listed ban may bring significant negative conseuences and ripples into the hilippine economy, since the country is very dependent on bans for its financial intermediary functions ue ial Commercial aning ope oldings Corporation obinsons and Corporation C Corporation CC to this criterion, bans, utility electricity and energy, telecommunication, industrialenergy Security an Corporation T Group Inc. TG Shang roperties Inc. SG companies, and property companies are the first sectors included ood companies are included SEC because they sell tangible, staple commodities in contrast to services provided by bans and utility nion an of the hilippines etro acific Inestments S rime oldings Inc. S companies olding companies are added as most of the bigger s are under the umbrella of a Corporation IC holding company astly, transportation and logistics companies are included because their San iguel Corporation SC operations are different from the other sectors included in the sample S Inestments Corporation The “advance search” feature in the ebsite as employed to generate a list of all s per SIC sector Based on maret capitaliation from largest to smallest, a list of companies per sector as Food Companies (7) Transportation and Logistics Utilities – Power (5), then generated The aim as to get the top companies per sector Companies (5) Telecommunication (2), and fter enumerating the top companies per sector, the of each of the listed company Industrial (3) as retrieved from the ebsite f the report as not available in the ebsite, then grinurture Inc. I sian Terminals Inc. TI boiti ower Corporation C the next possible sources explored are the company’s website and the Google search engine. If the el onte acific td. E Cebu ir Inc. CE irst General Corporation GE report of any of the top companies per sector could not be found, then the next company listed served as the substitute oever, if the next to substitute companies’ SEC 17 ollibee ood Corporation C Chelsea ogistics oldings irst hilippine oldings Corporation CC Corporation report could not be found, then no more substitute company as generated acay oldings Inc. C International Container Terminal anila Electric Company E is generally submitted to the ithin calendar days after the end of the fiscal Serices Inc. ICT year covered by the report , The ne code becomes effective starting anuary , Max’s Group, Inc. (MAXS) acrosia Corporation C hinma Energy Corporation E , ence, the relevant corporate governance variable data for the first study done in San iguel oods and eerages Globe Telecom Inc. G ecember are gathered from the reports deadline for the collection of data is Inc. set on ovember , in order to generate the first study’s findings. The current study is an Shakey’s Pizza Asia Ventures, Inc. hilippine ong istance I Corporation T “An independent director is not more than eighty (80) years old, unless otherwise found fit to continue serving as etron Corporation C such by SEC or IC (Insurance Commission)” , ence, as long as the director is physically fit and ilipinas Shell etroleum mentally alert, heshe can continue being part of the board Corporation S epublic ct o “The General Banking Law of 2000,” ith amendments from the B – ircular o hoenix etroleum hilippines Inc. B, , ircular o B, , and ircular o B, The sectors of listed companies in this study are based on the classification n order to generate the results in ecember , a deadline for the collection of data is set on ovember , or example, as of this date, the report of sia nited Ban orporation B, ouble ragon roperties , mperador nc , niversal obina orporation , oldings, nc , and o roup nc o cannot be found, hence, these companies are not included in the 1 Energy eelopment Corporation EC is included in the samples for the first study prepared in ecember companies investigated oreover, tarmalls, nc T is no longer listed in the 1. oweer since this company was delisted in oember 1 it is excluded in both the first and current f the company’s yearend is ecember , the day deadline falls on pril study for comparison purpose. 1 rofile of Independent irectors in Selected hilippine ublicly Listed Companies by Sector An pdate ebbie Chua Bun ho

The corporate goernance ariables pertaining to the profile of independent directors able oard Sie inestigated are the following 1. roportion of Independent irectors umber of independent directors oard sie Panel A oard Sie per Sector in . ge of Independent irectors umber of Directors to to to to aboe otal . Gender of Independent irectors Banks . Educational acground of Independent irectors olding ompanies . ighest Educational ttainment of Independent irectors ropert ompanies . Tenure of Independent irectors ears as independent director ood ompanies 7. umber of directorships in other Cs Transportation and ogistics ompanies . Separation of Chairman of the oard and the CE These ariables are inestigated because the new code 1 p. 7 which puts emphasis lectricit and nerg ompanies on the establishment of a competent and effectie board prescribes the following Telecommunication ompanies  The oard should hae a policy on board diersity not only in terms of gender but also of ndustrialnerg ompanies age ethnicity culture sills competence and nowledge ecommendation 1. Total  The nonexecutie directors of the oard should concurrently sere as directors to a ource reports of the companies enumerated in Table maximum of fie Cs to ensure that they hae sufficient time to fully prepare for meetings ecommendation . Panel oard Sie per Sector in  The oard should hae at least three independent directors or such number as to constitute umber of Directors to to to to aboe otal at least onethird of the members of the board whicheer is higher ecommendation .1 Banks  The Board’s independent directors should serve for a maximum cumulative term of nine olding ompanies years ecommendation . and ropert ompanies  The positions of Chairman of the oard and CE should be held by separate indiiduals and ood ompanies each should hae clearly defined responsibilities ecommendation .. The corporate goernance ariables enumerated are considered to be the minimum reuirements Transportation and ogistics ompanies to ensure Cs hae independent and competent independent directors that will loo after the long lectricit and nerg term iability of the company they sere as well as the rights of the minority shareholders. The Telecommunication results proide the initial status of compliance to the new code during its first two years of ndustrialnerg implementation – 17 and 1. Since the data on these ariables are tabulated by sector the Total results can also show whether similarities and differences exist among the arious ariables by ource reports of the companies enumerated in Table sector. The number of companies ith directors increased from in to in . aorit indins of the companies have directors from in to in , a slight improvement. n terms of average board size in , hilippine banks have the highest number of board oard Sie by Sector members at , folloed b telecommunication and industrialenerg companies at . n , these three sectors remain to have the highest average board size at . This confirms the findings in The sie of the board1 is dependent on arious factors such as the corporation’s size, risk profile, existing literature that banks generall have larger boards to accommodate more committees and complexity of operations. rom Table anels and hilippinelisted bans consistently hae dams ehran, Belkhir, . ropert and transportation and logistics companies the biggest board sie. This may be due to the many other committees that bans hae to establish maintained the smallest average board size among the various sectors in both ears. Table aside from the mandatory udit Committees and Corporate Goernance Committees17 wC provides a comparison of the average board size per sector. GG 1. This finding confirms the results of dams and ehran that ban holding companies’ boards are larger and have more committees. able Aerae oard Sie per Sector

Aerae oard Sie Sector Banks 13 12 olding ompanies ropert ompanies 1 Some companies presented their list of directors together with their executiesofficers. It was therefore ood ompanies difficult to determine if these executiesofficers were part of the board sering as executie directors. In such Transportation and ogistics ompanies case the author only included the directors and excluded the executiesofficers since it was not certain whether these executiesofficers sered as executie directors. lectricit and nerg ompanies 17 ccording to the 1 surey prepared by wC and GG aside from the board committees recommended Telecommunication ompanies by the new code organiations hae instituted other committees such as executie committee finance ndustrialnerg ompanies committee and information technology IT steering committee to focus on specific areas of corporate ource reports of the companies enumerated in Table goernance and management oersight.

1 rofile of Independent irectors in Selected hilippine ublicly Listed Companies by Sector An pdate ebbie Chua Bun ho

rofile of Independent irectors in Selected hilippine ublicly Listed Companies by Sector An pdate ebbie ha ho

umber of Independent Directors and Proportion of Independent b the ne code in both ears. Three banks did not meet the onethird proportion of independent Directors to oard Sie directors in – B, BB, and B. oever, it is noteorth to point out that although B The original and revised , hilippine ode of orporate overnance specified has onl three independent directors, there are nonexecutive directors in their board. s of , the minimum number of independent directors that companies should have from to to three, onl B remains noncompliant of this reuirement. respectivel. t is onl in the ne code that the minimum number of independent directors increased to three, and the proportion of independent directors to board size increased from at least to at able Compliance ith the nehird Proportion of Independent Directors to oard Sie per Sector Compliance ith onethirdreuirement least onethird. Table shos the number of independent directors b sector. t shos that maorit Sector of the companies in all sectors compl ith having three independent directors. s shon in Table anels and B, maorit of the banks consistentl have more than three independent directors. This ans out of bans did not out of bans did not confirms the findings of dams and ehran , p. that bank boards have slightl more comply comply outside directors. olding ompanies out of holding companies out of holding companies did not compl did not compl ropert ompanies out of propert companies out of propert companies able umber of Independent Directors did not compl did not compl

ood ompanies out of food companies did out of food companies did Panel A umber of Independent Directors by Sector in not compl not compl Sector IDs IDs ore than IDS otal Transportation and out of transportation and out of transportation and Banks ogistics ompanies logistics companies did not compl logistics companies did not compl olding ompanies lectricit and nerg out of electricit and energ out of electricit and energ ompanies companies did not compl companies did not compl ropert ompanies Telecommunication Both telecommunication Both telecommunication ood ompanies ompanies companies did not compl companies did not compl Transportation ogistics ompanies ndustrialnerg ll three industrialenerg ll three industrialenerg lectricit and nerg ompanies ompanies companies did not compl companies did not compl Telecommunication ompanies ource reports of the companies enumerated in Table ndustrialnerg ompanies Total Aerae Ae of Independent Directors by Sector ource reports of the companies enumerated in Table Table anels and B sho that ver fe directors are belo ears of age, and that these oung directors are part of the propert and food companies. aorit of the directors are in their Panel umber of Independent Directors by Sector in s and s. n order to gain the reuired experience, knoledge, and expertise, directors need to be Sector IDs IDs ore than IDs otal of a certain age bracket . ne compan, , did not disclose the age of its directors in both and . side from , ma have inadvertentl missed indicating the age of one of its Banks independent directors, ilia . Bautista, in . olding ompanies ropert ompanies able Ae of Independent Directors ood ompanies Transportation and ogistics ompanies Panel A Ae of Independent Directors by Sector in lectricit and nerg ompanies belo yo Ae D otal yo yo yo yo yo up Telecommunication ompanies ndustrialnerg ompanies Banks Total olding ompanies ource reports of the companies enumerated in Table ropert ompanies ood ompanies Transportation and ogistics ecommendation . of the ne code states “at least three independent directors, or such number as to constitute at least onethird of the members of the board, whichever is higher” , , p. . ompanies t is, therefore, not surprising that in terms of compliance ith the onethird proportion of lectricit and nerg ompanies independent directors shon in Table , the banking sector has the highest compliance rate at Telecommunication ompanies and in and , respectivel. The high compliance rate of banks ma be due to stringent ndustrialnerg ompanies rules and examination b the B. n , the highest proportion of independent directors to board Total size is b B, folloed b b B and B. n , B has the highest proportion of – ot disclosed independent directors at , folloed b B and B at and , respectivel. ource reports of the companies enumerated in Table mprovement in compliance ith the onethird proportion of independent directors in is seen in the folloing sectors banks, holding companies, propert, and transportation and logistics companies. t is uite alarming that both the telecommunication and industrialenerg companies in the sample do not compl ith the minimum of onethird proportion of independent directors as set hilippine companies prefer to hire independent directors ho are industr experts. uch experts usuall retire around 65, pushing up the average age of the country’s directors (Jiao & Dormido, 2019). rofile of Independent irectors in Selected hilippine ublicly Listed Companies by Sector An pdate ebbie ha ho

ood ompanies out of food companies did out of food companies did Panel A umber of Independent Directors by Sector in not compl not compl Sector IDs IDs ore than IDS otal Transportation and out of transportation and out of transportation and Banks ogistics ompanies logistics companies did not compl logistics companies did not compl olding ompanies lectricit and nerg out of electricit and energ out of electricit and energ ompanies companies did not compl companies did not compl ropert ompanies Telecommunication Both telecommunication Both telecommunication ood ompanies ompanies companies did not compl companies did not compl Transportation ogistics ompanies ndustrialnerg ll three industrialenerg ll three industrialenerg lectricit and nerg ompanies ompanies companies did not compl companies did not compl Telecommunication ompanies ource reports of the companies enumerated in Table ndustrialnerg ompanies Total Aerae Ae of Independent Directors by Sector ource reports of the companies enumerated in Table Table anels and B sho that ver fe directors are belo ears of age, and that these oung directors are part of the propert and food companies. aorit of the directors are in their Panel umber of Independent Directors by Sector in s and s. n order to gain the reuired experience, knoledge, and expertise, directors need to be Sector IDs IDs ore than IDs otal of a certain age bracket . ne compan, , did not disclose the age of its directors in both and . side from , ma have inadvertentl missed indicating the age of one of its Banks independent directors, ilia . Bautista, in . olding ompanies ropert ompanies able Ae of Independent Directors ood ompanies Transportation and ogistics ompanies Panel A Ae of Independent Directors by Sector in lectricit and nerg ompanies belo yo Ae D otal yo yo yo yo yo up Telecommunication ompanies ndustrialnerg ompanies Banks Total olding ompanies ource reports of the companies enumerated in Table ropert ompanies ood ompanies Transportation and ogistics ecommendation . of the ne code states “at least three independent directors, or such number as to constitute at least onethird of the members of the board, whichever is higher” , , p. . ompanies t is, therefore, not surprising that in terms of compliance ith the onethird proportion of lectricit and nerg ompanies independent directors shon in Table , the banking sector has the highest compliance rate at Telecommunication ompanies and in and , respectivel. The high compliance rate of banks ma be due to stringent ndustrialnerg ompanies rules and examination b the B. n , the highest proportion of independent directors to board Total size is b B, folloed b b B and B. n , B has the highest proportion of – ot disclosed independent directors at , folloed b B and B at and , respectivel. ource reports of the companies enumerated in Table mprovement in compliance ith the onethird proportion of independent directors in is seen in the folloing sectors banks, holding companies, propert, and transportation and logistics companies. t is uite alarming that both the telecommunication and industrialenerg companies in the sample do not compl ith the minimum of onethird proportion of independent directors as set hilippine companies prefer to hire independent directors ho are industr experts. uch experts usuall retire around 65, pushing up the average age of the country’s directors (Jiao & Dormido, 2019). 10 rofile of deedet irectors i elected hiliie blicl isted omaies b ector date ebbie ha ho

Panel Ae of Independent Directors by Sector in Sector umber of IDs and aboe IDs Ae and aboe belo Ae D otal ransportation and ogistics ompanies yo yo yo yo yo up  rtemio Panganiban ans 0 0 5 6 0 9  ornelio Peralta oding ompanies 0 0 6 1 6  esar uenaventura roperty ompanies 0 1 0 29 lectricity and nergy ompanies ood ompanies 2 2 6 0 0 21  P rtemio Panganiban and uan antos ransportation and ogistics 0 1 0 0 15  rtemio Panganiban ompanies ectricity and nergy elecommunication ompanies 0 0 5 0 16 ompanies  P rtemio Panganiban eecommunication ompanies 0 0 2 1 0 6 ndustrialnergy ompanies ndustrianergy ompanies 0 0 2 1 9  P rtemio Panganiban ota 2 2 2 11 r amberto campo is years old as stated in the report D – ot discosed ource reports o the companies enumerated in able ource 1 reports of the companies enumerated in ae 2 ender of Independent Directors by Sector Despite the issuance of the D (2015) that ideay no directors shoud e 0 years od and up, a imilar to the indings o the in its Philippine orporate overnance lueprint report, 19 numer of directors in the sampe, as presented in ae , are 0 years of age and aove . he male directors dominate the board ut o total directors in the sample, only are resuts as tauated in ae confirm the findings of Jiao and Dormido (2019), that oder directors emale n all sectors, male directors consistently dominate the board imilar results are garnered in dominate ans, hoding firms, and mining and oi companies, ith younger directors in technoogy he industrialenergy companies have consistently reported the highest proportion o emale and retai. though 2 directors age 0 and aove seem to e uite a siae numer, one such independent directors ence, in terms o gender diversity, Philippine companies have a long ay to 20 21 director is seated in seven of the sampe companies, hie three such directors are seated in to go of the sampe companies. ence, eiminating dupication, there are ony 15 independent directors ho are 0 and aove instead of the 2 tauated in 201. here is one independent director, able ender of Independent Directors amerto . campo, ho is 9 years od. Panel A ender of Independent Directors by Sector in able Independent Directors Ae and Aboe in Sector ale emale otal ale emale Sector umber of IDs and aboe IDs Ae and aboe ans ans (6) olding ompanies  D (2) Jose . uenaventura and Jimmy . ang Property ompanies  (1) aros . indada ood ompanies  (1) aterno . Dion ransportation and ogistics ompanies  (2) Juan . antos and iia . autista lectricity and nergy ompanies oding ompanies () elecommunication ompanies  (1) Jose . itug Industrialnery Companies  (2) esar .. irata and iia . autista otal  (2) ifrido . anche and oin . y ource reports o the companies enumerated in able  (2) rtemio . anganian and dard . o roperty ompanies () Panel ender of Independent Directors by Sector in  (1) esar .. irata Sector ale emale otal ale emale  (1) amerto . campo ans  (2) rtemio . anganian and mmanue . oas Jr. olding ompanies ood ompanies (0) Property ompanies ood ompanies

19 Philippine companies have the region’s oldest directors and the longest board tenures, particularly in the ransportation and ogistics ompanies aning, property, and retai sectors (Jiao & Dormido, 2019). he average age of oard memers is aso the lectricity and nergy ompanies highest in outheast sia at 65. years compared ith a regiona average of 5. years (Jiao & Dormido, 2019). elecommunication ompanies 20 rtemio . anganian is 1 years od and sits as an independent director in the oards of seven of the sampe Industrialnery Companies companies , , eraco, , D, , and . 21 iia . autista is 2 years od and sits as an independent director in the oards of and . esar . . otal irata is years od and sits as an independent director in the oards of and . Juan . antos is 0 years ource reports o the companies enumerated in able od and sits as an independent directors in the oards of and . 10 rofile of deedet irectors i elected hiliie blicl isted omaies b ector date ebbie ha ho

19 Philippine companies have the region’s oldest directors and the longest board tenures, particularly in the ransportation and ogistics ompanies aning, property, and retai sectors (Jiao & Dormido, 2019). he average age of oard memers is aso the lectricity and nergy ompanies highest in outheast sia at 65. years compared ith a regiona average of 5. years (Jiao & Dormido, 2019). elecommunication ompanies 20 rtemio . anganian is 1 years od and sits as an independent director in the oards of seven of the sampe Industrialnery Companies companies , , eraco, , D, , and . 21 iia . autista is 2 years od and sits as an independent director in the oards of and . esar . . otal irata is years od and sits as an independent director in the oards of and . Juan . antos is 0 years ource reports o the companies enumerated in able od and sits as an independent directors in the oards of and . rofile of deedet irectors i elected hiliie blicl isted omaies b ector date ebbie ha ho

ducational acround of Independent Directors by Sector Panel ihest ducational Attainment by Sector in Majority of the independent directors in the sample have bachelor’s degrees in accounting, Sector achelor asters PhD D otal management, and other business courses, economics, and engineering ue to the technical nature o ans their operations, independent directors ith engineering degree eature uite prominently in the olding ompanies transport and logistics and electricity and energy companies roperty ompanies

ood ompanies able ducational acround of Independent Directors by Sector in ransportation and ogistics ompanies Sector irst Second hird lectricity and nergy ompanies ans ccounting conomics ngineering elecommunication ompanies ccounting and olding ompanies ot isclosed a conomics ndustrialnergy ompanies ccounting and ot otal Property ompanies conomics thers isclosed ot isclosed ccounting and ot ource reports of the companies enumerated in able ood ompanies thers conomics isclosed ransportation and ogistics ccounting and ngineering conomics and a ompanies thers enure of Independent Directors by Sector lectricity and nergy “Corporate directors in the Philippines sit on boards for an average of 10.6 years, more than four ccounting ngineering conomics ompanies ears beod the average ears i siaPacific boards” iao ormido, , para Moreover, elecommunication ompanies ccounting thers companies with the longest board tenures in the country are mostly led by prominent families ndustrialnergy ompanies ccounting conomics lthough it may tae years for an independent director to acuire the necessary nowledge and experience about a certain industry or company’s operations, the maximum cumulative nine years ccounting, management, and other business courses **Given the small sample size of these two sectors, only the top two bachelor’s degrees are tabulated tenure is imposed to ensure that independent directors remain independent of the company ource reports o the companies enumerated in able s shown in able anels and , and of the independent directors in the sample are within the maimum cumulative tenure of nine years for and , respectively his ihest ducational Attainment of Independent Directors by Sector means that and of the independent directors in the sample has already breached the nine ore than o the independent directors have a master’s degree, mostly from abroad rather year tenure limit than rom the Philippines able Panels and sho that bans and ood companies source their independent directors rom the academe ence, these to sectors report the highest percentage o able enure of Independent Directors independent directors ith Phs here are a number o sample companies that do not disclose the Panel A enure of Independent Directors by Sector in highest education attainment o its independent directors ore than enure D otal years years years years years able ihest ducational Attainment by Sector ans Panel A ihest ducational Attainment by Sector in olding ompanies Sector achelor asters PhD D otal roperty ompanies ans ood ompanies olding ompanies ransportation and ogistics Property ompanies ompanies ood ompanies lectricity and nergy ompanies ransportation and ogistics ompanies elecommunication ompanies lectricity and nergy ompanies ndustrialnergy ompanies elecommunication ompanies otal * – ot disclosed ndustrialnergy ompanies ource reports of the companies enumerated in able otal ot isclosed ource reports o the companies enumerated in able

he percentage is computed by adding the number of directors under the years and years columns divided by the total number of directors less “Not Disclosed” items or eample, in , there are and independent directors under years and years for a total of he denominator is computed using the total of less “Not Disclosed” items or ence, the percentage in is computed using divided by rofile of deedet irectors i elected hiliie blicl isted omaies b ector date ebbie ha ho

he percentage is computed by adding the number of directors under the years and years columns divided by the total number of directors less “Not Disclosed” items or eample, in , there are and independent directors under years and years for a total of he denominator is computed using the total of less “Not Disclosed” items or ence, the percentage in is computed using divided by Profile of ndependent Directors in elected Philippine Publicly isted Companies by ector n pdate ebbie Cha n ho

Panel enure of Independent Directors by Sector in able umber of Directorship in ther PLCs 1-5 6-9 10-15 16-20 more than Tenure ND* Total years years years years 20 years Panel A umber of Directorship in ther PLCs in ore ans umber of Directorship in other PLCs one D otal than olding ompanies roperty ompanies ood ompanies ransportation and ogistics ompanies lectricity and nergy ompanies elecommunication ompanies ndustrialnergy ompanies otal * – ot disclosed ource reports of the companies enumerated in able – elow is a list of the sectors and companies with all their independent directors within the nine year maimum tenure limit Panel umber of Directorship in ther PLCs in  ans – M, , and ore umber of Directorship in other PLCs one D otal  olding ompanies – G, M, and M than  roperty ompanies – , , , G, and G  ood ompanies – , M, , and  ransport and ogistics ompanies –  lectricity and nergy ompanies – and G and  elecommunication ompanies – G umber of Directorship in other PLCs oneecutive directors are only allowed to have a maimum of five directorships in other s , his is to ensure that these directors can devote and commit their time and full attention on the matters of the companies which they serve , t is eplicit in the new code that a – director should notify the board where heshe is an incumbent director before accepting a directorship in another company , , p s shown in able anels and , only bans comply with the reuirement of maimum directorship in five s t appears that has been stringent in ensuring compliance with the Separate Chairman and C various reuirements of the new code lthough the property and food companies do not have directorships beyond five s in , they have companies with undisclosed data ence, it cannot be conclusively considered that these two sectors are completely compliant with the number of directorships in other s n , has no disclosure of the directorships in other s of its independent directors his omission is observed because one of its independent directors, rtemio anganiban, who sits in various s, has no other directorships indicated in its

“a lead independent director be elected by the board among its independent directors i the chairman o the board is not independent inclding i the positions o the chairman and CEO are held by one person.” –

or ease in the computation of years in service, the month is not considered he computation of tenure years is simply or less the year the independent director is first appointed as such plus or eample, in computing the tenure years in , an independent director who is first elected in has nine years of service Profile of ndependent Directors in elected Philippine Publicly isted Companies by ector n pdate ebbie Cha n ho

or ease in the computation of years in service, the month is not considered he computation of tenure years is simply or less the year the independent director is first appointed as such plus or eample, in computing the tenure years in , an independent director who is first elected in has nine years of service roile o ndependent irectors in elected hilippine blicly isted Companies by ector n pdate eie Ca n o

able Unified Chairman and C ith or ithout Lead Independent Directors in ther indins Lead Independent he ontents of the reports smitted the Ps do not ontain niform and Companies Chairman and C Ae Independent Chair Director onsistent information, partilarl on orporate goernane ariales inestigated in this std Holding Companies a peifiall, man of the ompanies do not speif or indiate who among their diretors are onsidered noneetie diretors his maes it diffilt to determine if the hae omplied with eommendation , whih reires maorit of the oard shold e noneetie diretors ome ompanies omine the diretors and eeties in one list, maing it onfsing to determine oard sie his is so ease some eeties an e eetie diretors Property Companies ot all ompanies proide the oard ommittees, their memers and dties in their lthogh this information may be available in the company’s website, it is more onenient to hae this information aailale in the report Food Companies d ot all ompanies proide meeting attendane information, as well as details on annal orientation and training programs proided to their diretors e lthogh the new ode adopts a “comply or explain” approah, the eplanation for non ompliane with presriptions of the new ode is reired to e made aailale to the Transport and Logistics Companies pli , he has proided a template for the ompliane or non ompliane with the reommendations of the new ode his report is referred to as the ntegrated nnal orporate oernane eport , Plil listed Electricity and Energy Companies ompanies are reired to smit this to the annall on or efore a or those reommendations whih the ompan did not ompl, an eplanation has to e proided , ine it is a “comply or explain” approah, nonompliane to Telecommunication Companies ertain presriptions does not atomatiall reslt in santions and penalties he needs to ealate the eplanation first efore an santions and penalties an e imposed oweer, late filing or nonsmission of this report at the designated de date definitel reslts in santions and penalties f hile some ompanies proide a “Corporate Governance” setion in their , this Summary of indins setion sall ontains different information on orporate goernane reiring the identifiation of an areas of nonompliane and the reasons for nonompliane to e stated in the “Corporate Governance” setion of the report, the an proide the pli with the reired information and an failitate its monitoring if all releant information are fond in one report f all the releant orporate goernane ariales that the monitors an e fond in one report, , and if a niform template is proided, then monitoring an e done more effiientl and effetiel the ll Ps are reired to estalish an dit ommittee and the role of this ommittee is ite rial n fat, the setting p of an dit ommittee is one of the first reirements of the earlier odes of orporate goernane, originating from the aranes and le t of s per the new ode , p , all the memers of the dit ommittee are reired to hae releant agrond, nowledge, sills, andor eperiene in the areas of aonting, aditing, and he ACGR is a separate submission from the companies’ annual report or SEC 17 he ACGR of the banks and holding companies’ samples are retrieved either from the company’s wesite or from the P wesite aorit of the ans in the sample do not ompl with one presription, master’s degree, whether from the Philippines or whih is reporting the remneration of eah diretor indiidall he eplanations for this nonompliane largel point to the protetion of the personal safet and serit of the indiidal diretor mong the holding ompanies inlded in the sample, some of the more ommon presriptions not omplied with are that the orporate seretar shold e a separate indiidal from the ompliane offier and the separation of hairman and , and the indiidal remneration of diretors s of the writing of this paper, the athor has not fond the sales of fines and penalties related to the late filing or nonsmission of this report emorandm irlar o eries of , does not inlde fines and penalties related to latefiling, nonsmission or wrong information in the he athor is not sre whether late filing, nonsmission or wrong information in the falls nder emorandm irlar o eries of , whih oers the sale of fines for nonompliane with the finanial reporting reirements of roile o ndependent irectors in elected hilippine blicly isted Companies by ector n pdate eie Ca n o

able Unified Chairman and C ith or ithout Lead Independent Directors in ther indins Lead Independent he ontents of the reports smitted the Ps do not ontain niform and Companies Chairman and C Ae Independent Chair Director onsistent information, partilarl on orporate goernane ariales inestigated in this std Holding Companies a peifiall, man of the ompanies do not speif or indiate who among their diretors are onsidered noneetie diretors his maes it diffilt to determine if the hae omplied with eommendation , whih reires maorit of the oard shold e noneetie diretors ome ompanies omine the diretors and eeties in one list, maing it onfsing to determine oard sie his is so ease some eeties an e eetie diretors Property Companies ot all ompanies proide the oard ommittees, their memers and dties in their lthogh this information may be available in the company’s website, it is more onenient to hae this information aailale in the report Food Companies d ot all ompanies proide meeting attendane information, as well as details on annal orientation and training programs proided to their diretors e lthogh the new ode adopts a “comply or explain” approah, the eplanation for non ompliane with presriptions of the new ode is reired to e made aailale to the Transport and Logistics Companies pli , he has proided a template for the ompliane or non ompliane with the reommendations of the new ode his report is referred to as the ntegrated nnal orporate oernane eport , Plil listed Electricity and Energy Companies ompanies are reired to smit this to the annall on or efore a or those reommendations whih the ompan did not ompl, an eplanation has to e proided , ine it is a “comply or explain” approah, nonompliane to Telecommunication Companies ertain presriptions does not atomatiall reslt in santions and penalties he needs to ealate the eplanation first efore an santions and penalties an e imposed oweer, late filing or nonsmission of this report at the designated de date definitel reslts in santions and penalties f hile some ompanies proide a “Corporate Governance” setion in their , this Summary of indins setion sall ontains different information on orporate goernane reiring the identifiation of an areas of nonompliane and the reasons for nonompliane to e stated in the “Corporate Governance” setion of the report, the an proide the pli with the reired information and an failitate its monitoring if all releant information are fond in one report f all the releant orporate goernane ariales that the monitors an e fond in one report, , and if a niform template is proided, then monitoring an e done more effiientl and effetiel the ll Ps are reired to estalish an dit ommittee and the role of this ommittee is ite rial n fat, the setting p of an dit ommittee is one of the first reirements of the earlier odes of orporate goernane, originating from the aranes and le t of s per the new ode , p , all the memers of the dit ommittee are reired to hae releant agrond, nowledge, sills, andor eperiene in the areas of aonting, aditing, and he ACGR is a separate submission from the companies’ annual report or SEC 17 he ACGR of the banks and holding companies’ samples are retrieved either from the company’s wesite or from the P wesite aorit of the ans in the sample do not ompl with one presription, master’s degree, whether from the Philippines or whih is reporting the remneration of eah diretor indiidall he eplanations for this nonompliane largel point to the protetion of the personal safet and serit of the indiidal diretor mong the holding ompanies inlded in the sample, some of the more ommon presriptions not omplied with are that the orporate seretar shold e a separate indiidal from the ompliane offier and the separation of hairman and , and the indiidal remneration of diretors s of the writing of this paper, the athor has not fond the sales of fines and penalties related to the late filing or nonsmission of this report emorandm irlar o eries of , does not inlde fines and penalties related to latefiling, nonsmission or wrong information in the he athor is not sre whether late filing, nonsmission or wrong information in the falls nder emorandm irlar o eries of , whih oers the sale of fines for nonompliane with the finanial reporting reirements of roile o nepenent irector in electe ilippine licly ite Companie y ector n pate ebbie hua Bun Pho

finane oweer, it appears nlear whether this reirement is eing omplied with all ‘the ne code has high epectations from independent directors in terms of protecting the setors his is important ease the new ode speifies that independene and ompetene interests of the shareholders, particularl the minorit oners, and other stakeholders. t is, shold go hand in hand ppendi proides a smmar of the dit ommittee hairman per hoever, important to realie that despite the increase in the proportion of independent setor as dislosed in the report directors to the total board sie, independent directors remain a minorit in the board. ence, lthogh not all ompanies proide dit ommittee information, improement in this independent directors can easil be outvoted. oreover, the requirement of the ne code of dislosre is noted in or the ans, and started to proide the dit ommittee at least three independent directors or such number as to constitute at least onethird of the information in or propert ompanies, and hae omplied together with other members of the board is belo the global best practice of independent directors filling at setors, ompanies sh as P for food, P and P for indstrialenerg least 50% of the board seats.” ppendi shows that eept for ans, the alifiations of the dit ommittee hairpersons do not appear to comply with the new code’s injunction that they must have the training According to arton et al. , p. , the requirement that a majority of the directors be appropriate to the nature of the committee’s mandate. Perhaps the previous business exposure independent can be unrealistic as the “pool of qualified independent directors is quite small in many and eperiene of these dit ommittee hairpersons somehow ompensate for their Asian countries.” oreover, where noncompetition and confidentiality provisions are difficult to edational agronds in sh nrelated fields as philosoph, indstrial pharma, hemial enforce, familycontrolled companies may be reluctant to divulge too much of their strategies to and iil engineering nother oseration that an e drawn is that the arios restritions outside directors arton et al, . uch definitely defeats the purpose and oversight roles of imposed on independent diretors, as listed in ppendi , ma somehow limit the nmer of independent directors. In fact, Chen et al. , p. find that good governance practices that are alified dit ommittee memers with the releant nowledge and agrond in aonting, adopted from the CD Principles cannot truly mitigate the negative effect of controlling aditing, and finane shareholder expropriation. his is because most of these good governance practices are primarily designed to resolve conflicts between shareholders and the management, and not conflicts between Directors’ remunerations on an individual basis are required to be disclosed as per eommendation his is to foster aontailit and transparen oweer, onl two controlling and minority shareholders. Chen et al. suggest that improving the true ompanies, and , proided for this speifi information in their reports an independence and monitoring power of independent directors, as well as the strengthening of the of these ompanies showed the aggregate remneration of diretors and offierseeties legal and financial market infrastructures are the real solutions for minority shareholder omined oreoer, the aggregate remneration is presented in different was these expropriation. choing the same sentiment, erglof and Claessens , p. state that ompanies nterestingl, two ompanies nder the leadership of anel Pangilinan, P and “enforcement more than regulations, lawsonthebooks or voluntar codes is ke to effective corporate , offer sto options to their diretors n the other hand, alaowned ompanies, and governance, at least in transition and developing countries.” ALI, provide a sizable annual retainer’s fee to their directors. Appendix C provides an overview of the remneration dislosre of Ps in nformation on this tale an e fond in the Limitations of the Study and Direction for uture esearch etie ompensation setion of the report here are some limitations of the study. irst and foremost is that the results are from the first Conclusion two years of implementation of the new code. ence, it is possible that many of the sample companies have not complied with all the requirements yet. Corporate governance variables

ien that and are the first two ears of implementation of the new ode, it is not investigated are limited, and hence, can be expanded to provide more meaningful analysis of board srprising that nmeros departres from the letter and spirit of its proisions are fond in the effectiveness and competence in the Philippines. xtant literature has documented that other std t is reassring, howeer, that the Philippine ans, whih is possil the single indstr corporate governance variables such as board diversity, insiders versus outsiders combination, where the Philippine pli has the largest finanial interest, hae the highest ompliane rate in chairman and CEO duality, CEO age, CEO compensation, directors’ educational and professional terms of the orporate goernane praties inestigated t appears that the Philippine aning affiliations contribute to board effectiveness Pathan et al., ictor Peter, . ncoding of reglator, the P, has een er onsientios in its monitoring of this partilar indstr he onl educational background can be further enhanced to indicate the specific university or universities ariale whih the aning indstr does not ompl with is the tenre limit he other Philippine attended. o provide a more complete picture of the “independence and objectivity” of an independent setors, howeer, need to enhane their ompliane with good goernane praties nder the new director, the year in which heshe is first elected as such in the company should also be indicated. ode, partilarl in terms of proportion of independent diretors, age, gender diersit, separation oreover, adding a variable to indicate whether an independent director had previously served in of hairman, and alifiations of the hairpersons of their dit ommittees public office, such as but not limited to any regulatory agencies or governmentowned entities, can s aptl osered in the orporate goernane hapter oathored ha n Pho and help in establishing the reason why heshe is recruited. ore importantly, the major limitation of odrige , p this study is that the corporate governance variables being studied and investigated do not necessarily assure the “independence and objectivity” of the independent directors. hese variables cannot vouch for the “character, integrity, and moral values” of the board members, but can merely

nother ommittee that reires at least one memer to hae releant thorogh nowledge and eperiene suggest that possessing these qualities can help improve the monitoring and advising roles and on ris and ris management the new ode is the oard is ersight ommittee functions of the board. hose Ps that do not indiate the dit ommittee hairperson in their report are elded from his study can be extended further to include all the PLCs in the P not only to see the extent of the table. Although the identity of the Audit Committee Chairperson can be found in the company’s annal compliance, but also to find out which sectors respond more quickly and seriously to the report, the remain elded ease the goal is to show that the ontents of the reports are not the requirements of the regulators. here may be differences by sector, and it would be interesting to same for all Ps find out why these differences exist. lmost all the ACGRs examined for the banks and holding companies’ samples are nonompliant of this his study can also be a comparative study, highlighting similarities andor differences between presription the profile on independent directors by the Philippines and other Asian countries. oreover, or ans and other finanial instittions, the P has issed its own orporate goernane est praties empirical studies investigating whether and how these variables can affect firm performance can also side from the “fit and proper rule”, P issed P irlar o “Amendment to the guidelines on the be done. qualifications of a director” and P irlar o “Enhanced corporate governance guidelines for BSP pervie inancial intittion amenin te manal o relation or nonbank financial institutions.” roile o nepenent irector in electe ilippine licly ite Companie y ector n pate ebbie hua Bun Pho

nother ommittee that reires at least one memer to hae releant thorogh nowledge and eperiene suggest that possessing these qualities can help improve the monitoring and advising roles and on ris and ris management the new ode is the oard is ersight ommittee functions of the board. hose Ps that do not indiate the dit ommittee hairperson in their report are elded from his study can be extended further to include all the PLCs in the P not only to see the extent of the table. Although the identity of the Audit Committee Chairperson can be found in the company’s annal compliance, but also to find out which sectors respond more quickly and seriously to the report, the remain elded ease the goal is to show that the ontents of the reports are not the requirements of the regulators. here may be differences by sector, and it would be interesting to same for all Ps find out why these differences exist. lmost all the ACGRs examined for the banks and holding companies’ samples are nonompliant of this his study can also be a comparative study, highlighting similarities andor differences between presription the profile on independent directors by the Philippines and other Asian countries. oreover, or ans and other finanial instittions, the P has issed its own orporate goernane est praties empirical studies investigating whether and how these variables can affect firm performance can also side from the “fit and proper rule”, P issed P irlar o “Amendment to the guidelines on the be done. qualifications of a director” and P irlar o “Enhanced corporate governance guidelines for BSP pervie inancial intittion amenin te manal o relation or nonbank financial institutions.” Profile of ndependent irectors in Selected Philippine Publicl isted ompanies b Sector An pdate ebbie hua Bun Pho 9

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ecurities and Exchane oission (2016, oveer 22). Appendi A ualifications of an Independent Director SC ecurities and Exchane oission (201, arch ). An ineenent irectr reers t a ersn h, ieay ecurity an orporation. (201, 201). . a. Is nt, r has nt een a senir icer r eyee the cere cany uness there has ecurity an orporation. (201). . een a chane in the cntrin nershi the cany ecurities oission alaysia. (2011). . etrieved fro https:www.sc.co.yapidocuentsdownload.ashxid0a22101e0ac6 . Is nt, an has nt een in the three years ieiatey recein the eectin, a irectr the 16d covered company; a director, officer, employee of the covered company’s subsidiaries, associates, Shakey’s Pizza Asia Ventures, Inc. (2017, 2018). . aiiates r reate canies r a irectr, icer, employee of the covered company’s han roperties, nc. (201, 201). . sustantia sharehers an its reate canies hrader, . ., lacurn, . ., les, . (1). oen in anaeent and fir financial perforance: c. as nt een ainte in the cere cany, its susiiaries, assciates, aiiates r reate An exploratory study. (), 2. canies as hairan “Emeritus,” “ExOfficio” irectrsicers r eers any Aisry nvestents orporation. (201, 201). . ar, r therise ainte in a caacity t assist the ar in the errance its uties nvestents orporation. (201). . an resnsiiities ithin three years ieiatey recein his eectin rie oldins, nc. (201, 201). . . Is nt an ner re than t ercent (2) the utstanin shares the cere tepanova, A., vantsova, . (2012). cany, its susiiaries, assciates, aiiates r reate canies (iher chool of Econoics inancial e. Is nt a reatie a irectr, icer, r sustantia shareher the cere cany r any Econoics orin apers asic esearch rora 10E2012). ational esearch niversity. its reate canies r any its sustantia sharehers. r this urse, reaties, incue etrieved fro https:pulications.hse.ruenpreprints126 suse, arent, chi, rther, sister an the suse such chi, rther r sister tocha, . (201, July ). plit decisions: The pros and cons of separatin E and chairan roles. . Is nt actin as a ninee r reresentatie any irectr the cere cany r any its etrieved fro https:www.corporatecoplianceinsihts.cosplit reate canies decisionstheprosandconsofseparatinceoandchairanroles . Is nt a securities rkereaer iste canies an reistere issuers securities. nion an of the hilippines. (201, 201). . “Securities brokerdealer” reers t any ersn hin any ice trust an resnsiiity in a nion an of the hilippines. (201). . rkereaer ir, hich incues, an thers, a irectr, icer, rincia stckher, ictor, .A., eter, . (200). oes the coposition and practice of oard of directors ear any ninee the ir t the chane, an assciate ersn r saesan, an an authrize cerk relationship to the perforance of their copanies the rker r eaer (), 2620. on eyerinc, ., esch, ., chid, . (2016). s director industry experience valuale h. Is nt retaine, either in his ersna caacity r thruh a ir, as a ressina aiser, (1) 202. auitr, cnsutant, aent r cunse the cere cany, any its reate canies r aler, . . (200). sustantia shareher, r is therise ineenent anaeent an ree r any usiness Treasury overnent. etrieved fro https:wearchive. r ther reatinshi ithin the three year ieiatey recein the ate his eectin nationalarchives.ov.uhttp:www.htreasury.ov.udwaler review26110.pdf i. es nt enae r has nt enae, hether y hise r ith ther ersns r thruh a ir an, . ie, ., hu, . (201). ndustry expertise of independent directors and oard onitorin. hich he is a artner, irectr r sustantia shareher, in any transactin ith the cere , 262. cany r any its reate canies r sustantia sharehers, ther than such ie, ., avidson, . ., adalt, . (200). Earnins anaeent and corporate overnance: The roles of transactions that are conducted at arm’s length and could not materially interfere with or the oard and the audit coittee. (), 216. inuence the eercise his ineenent uent oun, . ., en, . ., Ahlstro, ., ruton, . ., Jian, . (200). orporate overnance in eerin . Is nt aiiate ith any nnrit ranizatin that receies siniicant unin r the econoies: A review of the principalprincipal perspective. (1), cere cany r any its reate canies r sustantia sharehers an 16220. k. Is not employed as an executive officer of another company where any of the covered company’s huan, J. (1). (Asian evelopent eecuties sere as irectrs. an E riefin otes uer 1). Asian evelopent an. etrieved fro https:www.ad.orsitesdefaultfilespulication20n01.pdf eate canies reer t (a) covered entity’s holding/parent company; (b) its subsidiaries; and (c) susiiaries its hinarent cany.

122 ebbie ua u o 12

rofile of deedet irectors i Selected iliie ublicl isted omaies b Sector date ebbie ua u o

Appendi Companies AC Chairman ualifications Audit Committee AC Chairman per Sector as Disclosed in the SC A PIA Fernan ictor P ukban Consultant mentor and guest lecturer in AP; ell recognied consultant in famil business strateg Companies AC Chairman ualifications entrepreneurship and goernance FB Carmelo antiago Founder/Owner of Melo’s Restaurant and Wagyu Restaurant

Banks and ose uenaventura ( awyer, enior artner at omulo abanta ayoc delos Transportation and Logistics Companies and ) ngeles aw ffice CC iguel ene A omingue ice President of Alsons Agribusiness nit; AB conomics I avier oina ( and ormer /resident of I ) AI eodoro ocsin r ditor; Publisher and host; peechriter of former I lberto ao ( and /resident of various unlisted companies; achelor in and oberto C im presidents ) usiness dministration aer former ndersecretar of Aiation and Airports at the arlos lindada () ormer hairman and anaging artner of dgar hua () urrent resident/ of avitex oldings Inc ICI ctaio ictor spiritu Former CPresident of FBC; asters in conomics dgar ua ( and eld various managerial and staff position at ; asters in and ) conomics and rban lanning and egional nvironment AC ohnip G Cua and Former CPresident of PG; Bachelor in Chemical elito alaar ( and ormer ember of the onetary oard of ; ormer ngineering ) ndersecretary of epartment of rade and Industries Electricity and Energy Companies ames ung ( and hairman of sia ecurities lobal roup () and ingya eal APC Carlos C ercito and CPresident of ount Grace ospitals Inc; Former ) state evelopment orporation (hina) Chairman of CPB; Former CPresident of nilab arlos ell aymond, r etired from li illy, a based pharmaceutical company FGN aime I Aala and Former CPresident of AI; enior anaging irector of AC () and oberto , first eneral ccountant of anabat () FPC uan B antos and Former Chairman of ; Former ecretar of rade and Holding Companies Industr; Former ChairmanC of Nestle Philippines et ustice ose itug awyer; ormer ssociate ustice of the upreme ourt; Artemio Panganiban Former Chief ustice of the upreme Court ( and ) asters in ational ecurity dministration and I leo illanueva, r ( rofessional consultant in the fields of training and PN aid Balangue Chairman of the Philippine Financial eporting tandards and ) development, public relations PF Council avier oina ( and ormer resident of I Telecommunication Companies ) P Pedro oas and ChairmanC of oas and Compan Inc ilfredo aras () Industrial harmacist; asters in usiness dministration and enato alencia () () G Cirilo P Noel and CPAaer; enior Adisor to Global; Former Chairman ormer resident/ of and hairman/ of and anaging Partner of G I dward o ( and ormer hairman and of hina aning orporation Industrial-Energy Companies ) PC enaldo G aid and CPA; Former CPresident of BP I omasa ipana ( and ormer hairperson and enior artner of Isla, ipana o ) PN Carolina Ine Angela ees Corporate marketing eecutie oner and coC of ees argarito eves ( ormer ecretary of epartment of inance; ormer Barbeue founded b her husband and ) /resident of and an of the hilippines P Cesar A Buenaentura Chairman of Buenaentura chau and Partners; Chairman of Property Companies and itsubishi itachi Poer stem Philippines; asters in Ciil I aime aya ( and ormer overnor of the ; h in inancial anagement ngineering ) ears old and aboe regorio ilayo () Former Chairman of ABN Amro’s banking operations in the ource C A reports of the companies enumerated in able Philippines; founding head of ING Baring’s stock brokerage and investment baning business in the hilippines

I al ntonio uare ( awyer; anaging artner of uare eyes aw ffice; and ) ormer /resident of the mar yron ier ( ormer /resident of and ) aximo icuaco III () resident of ilstar istributors orporation (licensee of allmar cards and exclusive distributor of and I products) ose uisia, r ( and ormer overnor of the ; ormer /resident of ) hilamlife Food Companies I tty loriosa e ( awyer; artner at im and utatcoe aw irm and ) onico acob ( and awyer; /resident of I ) oberto nonas, r ( rofessor of ; and ) rofile of deedet irectors i Selected iliie ublicl isted omaies b Sector date ebbie ua u o

Appendi C omanies Remuneration Detais reate Directors’ Remuneration in 2018 No disclosure No disclosure Php50,000 per meeting Php5 million directors and Companies emuneration Details Areate officers combined R Performancebased compensation scheme with stoc Php1 million directors and Banks options officers combined O er oard eetng and er llon dretors and Reasonable per diem Php00,000 directors onl ottee eetng offers oned R No disclosure Php15 million directors and No specification but directors’ oensaton s not to llon dretors only officers combined eeed of reous net noe efore ta N No per diem Php million directors and Php500 per board and committee meeting; directors’ llon dretors and officers combined oensaton s not to eeed of reous net offers oned P Regular standard per diem Php5 million directors and earnngs officers combined W er oard eetng and er llon dretors only ottee or seal eetng Food Companies N Php5,000 per meeting Php3 million directors and M erage of er ont er dretor llon dretors and officers combined offers oned D 3,00 per annum per director 13,00 directors onl er oard eetng er ottee llon dretors and Php0,000 per meeting plus performancebased Php513 million directors and eetng and ontly gasolne allowane offers oned incentie officers combined Reasonale er de lus nonas enefts su as llon dretors only No disclosure Php million directors onl ealtare and lfe nsurane Php5,000 per board meeting and Php35,000 per Php0 million directors and R Reasonale er de lus roft sarng llon dretors only committee meeting officers combined Directors’ fees, bonuses and allowances llon dretors only Php10,000 per meeting Php1 million directors onl aran er oard eetng and llon dretors and Breakdown of 2018 Directors’ Remuneration: er ottee eetng offers oned Php0,000 for ecutie Directors s er oard eetng and Php10,000 for Nonecutie Directors er ottee eetng Php0,000 for ndependent Directors Holding Companies P Php11, per annum per director Php million directors and Retainer’s fee of Php3 million er oard o dslosure officers combined eetng and er ottee eetng Transport and Logistics Companies aran Montly allowane of llon dretors and hairman Php0,000 per board meeting Php30 million directors onl er oard eetng and er offers oned ther Directors Php50,000 per board meeting ottee eetng Reasonable per diem Php103 million directors and Oter retors Montly allowane of officers combined er oard eetng and er Php30,000 per meeting Php35 million directors and ottee eetng officers combined Reasonale er de er oard eetng o dslosure No disclosure million directors and er eetng o dslosure officers combined M Reasonale er de allowane llon dretors and Php0,000 to Php50,000 per board and committee Php10 million directors and offers oned meeting officers combined Reasonale er de transortaton allowane and llon dretors only onuses Electricity and Energy Companies P hairman Php150,000 per board meeting and Php3 million directors and Reasonale er de llon dretors and Php100,000 per committee meeting officers combined offers oned NDs Php100,000 per board meeting and Php0,000 ontly allowane er oard llon dretors and per committee meeting eetng and er ottee eetng offers oned N Php50,000 per board meeting Php515 million directors and er oard eetng and er llon dretors and officers combined ottee eetng offers oned P Php0,000 per board meeting Php535 million directors onl M er oard eetng er llon dretors and R Php10,000 per board meeting, Php,000 per Php35 million directors onl ottee eetng and sto otons offers oned committee meeting, and stoc options M er oard eetng and er llon dretors and PN llowance, per diem, and bonuses Php10 million directors and ottee eetng offers oned officers combined M er oard eetng and er llon dretors and ottee eetng offers oned Telecommunication Companies Php00,000 per board meeting and Php100,000 per Php1 million directors onl Property Companies committee meeting Retainer’s fee of Php1 million er oard llon dretors and PD Php50,000 per board meeting and Php15,000 per Php3 million directors onl eetng and er ottee eetng offers oned committee meeting Reasonale er de llon dretors only ndeendent retors er eetng llon dretors and Oter retors er eetng offers oned rofile of deedet irectors i Selected iliie ublicl isted omaies b Sector date ebbie ua u o 1

Appendi C omanies Remuneration Detais reate Directors’ Remuneration in 2018 No disclosure No disclosure Php50,000 per meeting Php5 million directors and Companies emuneration Details Areate officers combined R Performancebased compensation scheme with stoc Php1 million directors and Banks options officers combined O er oard eetng and er llon dretors and Reasonable per diem Php00,000 directors onl ottee eetng offers oned R No disclosure Php15 million directors and No specification but directors’ oensaton s not to llon dretors only officers combined eeed of reous net noe efore ta N No per diem Php million directors and Php500 per board and committee meeting; directors’ llon dretors and officers combined oensaton s not to eeed of reous net offers oned P Regular standard per diem Php5 million directors and earnngs officers combined W er oard eetng and er llon dretors only ottee or seal eetng Food Companies N Php5,000 per meeting Php3 million directors and M erage of er ont er dretor llon dretors and officers combined offers oned D 3,00 per annum per director 13,00 directors onl er oard eetng er ottee llon dretors and Php0,000 per meeting plus performancebased Php513 million directors and eetng and ontly gasolne allowane offers oned incentie officers combined Reasonale er de lus nonas enefts su as llon dretors only No disclosure Php million directors onl ealtare and lfe nsurane Php5,000 per board meeting and Php35,000 per Php0 million directors and R Reasonale er de lus roft sarng llon dretors only committee meeting officers combined Directors’ fees, bonuses and allowances llon dretors only Php10,000 per meeting Php1 million directors onl aran er oard eetng and llon dretors and Breakdown of 2018 Directors’ Remuneration: er ottee eetng offers oned Php0,000 for ecutie Directors s er oard eetng and Php10,000 for Nonecutie Directors er ottee eetng Php0,000 for ndependent Directors Holding Companies P Php11, per annum per director Php million directors and Retainer’s fee of Php3 million er oard o dslosure officers combined eetng and er ottee eetng Transport and Logistics Companies aran Montly allowane of llon dretors and hairman Php0,000 per board meeting Php30 million directors onl er oard eetng and er offers oned ther Directors Php50,000 per board meeting ottee eetng Reasonable per diem Php103 million directors and Oter retors Montly allowane of officers combined er oard eetng and er Php30,000 per meeting Php35 million directors and ottee eetng officers combined Reasonale er de er oard eetng o dslosure No disclosure million directors and er eetng o dslosure officers combined M Reasonale er de allowane llon dretors and Php0,000 to Php50,000 per board and committee Php10 million directors and offers oned meeting officers combined Reasonale er de transortaton allowane and llon dretors only onuses Electricity and Energy Companies P hairman Php150,000 per board meeting and Php3 million directors and Reasonale er de llon dretors and Php100,000 per committee meeting officers combined offers oned NDs Php100,000 per board meeting and Php0,000 ontly allowane er oard llon dretors and per committee meeting eetng and er ottee eetng offers oned N Php50,000 per board meeting Php515 million directors and er oard eetng and er llon dretors and officers combined ottee eetng offers oned P Php0,000 per board meeting Php535 million directors onl M er oard eetng er llon dretors and R Php10,000 per board meeting, Php,000 per Php35 million directors onl ottee eetng and sto otons offers oned committee meeting, and stoc options M er oard eetng and er llon dretors and PN llowance, per diem, and bonuses Php10 million directors and ottee eetng offers oned officers combined M er oard eetng and er llon dretors and ottee eetng offers oned Telecommunication Companies Php00,000 per board meeting and Php100,000 per Php1 million directors onl Property Companies committee meeting Retainer’s fee of Php1 million er oard llon dretors and PD Php50,000 per board meeting and Php15,000 per Php3 million directors onl eetng and er ottee eetng offers oned committee meeting Reasonale er de llon dretors only ndeendent retors er eetng llon dretors and Oter retors er eetng offers oned 128 rofile of deedet irectors i Selected iliie ublicl isted omaies b Sector date Philippine Management Review 2020, Vol. 27, 129-148.

omanies Remuneration Detais reate Bilateral Trade Flows and Cultural Factors: Industrial-Energy Companies The Case of the Philippines and Its Partner Countries R Per diem, directors’ fees and asoine aowance 08 miion directors and officers comined Using the Gravity Model of Trade 0000 er meetin 12 miion directors and officers comined eila . ahnema Chairman: Php1.8 million retainer’s fee per year, 1 miion directors on University of the Philippines, Cesar E.A. Virata School of Business, Diliman, Quezon City 1101, Philippines 200000 er oard meetin and 100000 er committee meetin Abstract This study attempts to eplain the volume and pattern of international trade activities NEDs: Php1.2 million retainer’s fee per year, Php200,000 of the hilippines with its trading partners by looking at economic and noneconomic cultural er oard meetin and 100000 er committee factors using an etended version of the gravity model of trade T). The T reveals the meetin strong effects of gross domestic product ) and distance on trade. The empirical results “Directors and officers combined” means a directors and officers as a rou also show that noneconomic and cultural factors like religion and colonial history are n R and roided indiidua oard memer remuneration in teir 2018 1 reort important in eplaining trade patterns of countries. n general this study suggests that overall ource: 1 reorts of te comanies enumerated in ae 2 trade policy and industrial program should be designed to consider not only the economic aspects but also the noneconomic and cultural factors that can increase international trade activity and encourage a more prominent role of the hilippines in the world economy.

Keywords nternational business macroeconomics bilateral trade gravity model of trade culture

Introduction

n recent years there has been a surge of interest in the gravity model of trade T) and it is now one of the most widely used tools in applied international economics an ergeik rakan Abstract). This is primarily because of the model’s elegance in describing one of the most stable relationships in economics – that interaction between large economic clusters is stronger than that between smaller ones and that nearby clusters attract each other more than the faroff ones. an ergeik and rakan ) eplain how amazing and effective though simple) this concept is from an empirical point of view and how it can show that a gravity euation can empirically eplain several economic phenomena between different locations. This study uses the T framework to eamine the bilateral trade activities of the hilippines with the rest of the world. The study augments the basic T by adding real per capita in each economy cultural variables common language religion colonial ties) and a free trade agreement TA) dummy. pecifically this study asks the following uestions Do trade and traditional factors in GMT promote each other? Likewise, are nontraditional factors, such as cultural factors, important determinants of trade? Do these cultural variables with the potential addition of an FTA between economies stimulate bilateral trade? What policy implications can be drawn? There appears to be a dearth of studies on hilippine international trade activities and this is surprising given the openness of the hilippine economy. igure shows a rising trade to ratio and by the ratio reached . A cursory search of the local literature reveals a limited number of published academic articles beginning with aldepeas and autista ) and several unpublished microeconomic studies and working papers from various local organizations. This study’s importance comes to light when one draws from its results some policy implications on how policymakers can further encourage foreign sector participants to increase trade volume by considering the nontraditional factors that affect trading behavior. Through this opportunities for economic growth are widened given the highly open nature of the hilippines. nowledge of factors other than distance and size can allow appropriate targeting of industries where these factors are most important.

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