JE MONDEJAR COMPUTER COLLEGE

Barangay 71, Naga-naga, Tacloban City

GOOD GOVERNANCE AND SOCIAL RESPONSIBILITY -

MODULE 2
(For Midterm)

Roy B. Kantuna, MPRM, CESE

(Instructor)

OBJECTIVES:

1. Understand the Concept of Corporate Governance

2. Know the Key Players in Corporate Governance
3. Explain the Relation of Legal, Regulatory and Political Issues with
Corporate Governance
4. Discuss the Foundation of Business Ethics

PRESENTATION/DISCUSSION:

A. What is Corporate Governance?

Corporate Governance is defined as a way in which a corporation is

controlled or governed.

Governance is a process that allows internal and external

mechanisms to ensure that the resources of a company are
optimized for the benefit of stakeholders. It intends to increase the
accountability of a company and to avoid disasters before they occur,
therefore, corporate governance is considered a part of risk
management.
 Good governance is a strategic direction for all organizations
because the long term sustainability of organizational activity is
dependent on the proper governance of their structure.

Good governance should apply to all forms of organizations

regardless of their structure, be it private or publicly-owned, profit and
non-profit, cooperatives, institutions, government-owned and
controlled corporations (GOCCs), non-government organizations
(NGOs), or just about any organized entity.

• Governance and Management are two different areas.

Management focuses on the day-to-day operations of an
organization. Executives and managers in management ensure that

the company is run well and ideally, brings profit for its shareholders.
On the other hand, the governance function is carried out by a body
or group of persons (board of directors/trustees) who governs the
organization, making sure that the company or entity is efficiently and
effectively run by management.

B. Key Players in Corporate Governance

There are five (5) key players in corporate governance, namely the
CEO, the Chairman of the Board, the Board of Directors, the
Shareholders and the Stakeholders.

1. Chief Executive Officer (CEO) – is the person responsible for

leading and managing the entire organization in achieving its
organizational goals. It is the duty of the CEO to collaborate
with the board for the overall direction of the company.

2. Chairman of the Board – the chairman of the board should

not only provide leadership of the board, but also play an
important role in the governance practices of the company.
3. Board of Directors – this is the best entity for steering the
company’s strategic direction and evaluating its performance. As
a director, questions must be asked during board meetings to
make sure decisions made by the company will be for the best
interest of the company in the long term.
4. Shareholders – considered owners of the company through
their ownership/holdings of stock shares, and actively seeks to
maximize stock price increase over a period of time.
 5. Stakeholders – any group of people who are affected by how
a corporation operates like: employees, suppliers, customers,
government and society among others.

C. Board of Directors

Membership of the Board - Any number of natural persons not less

than five (5) but not more than fifteen (15).

Director classification comes in many forms but there are 3 main

director types: Independent, Non-executive and Executive.

Independent – individuals who have no connection

with the company.

Non-executive – individuals who are not part of

management but are related to a certain aspect of the
company, such as being a supplier, family
representative, friend, adviser or shareholder.
Executive – hold a particular executive position inside
the organization, such as the CEO or other senior
executive positions such as the Vice-President.

Functions of the Board - There are four main functions of a board:

Accountability, Strategy Formulation, Monitoring and Supervising and
Policy-Making.

Accountability – The board should be accountable not only to

their shareholders but also to all other stakeholders affected by
their actions/behavior.

Monitoring and Supervision – oversee the performance of its

management.

Setting Policy – For strategies to work, a set of policies,

procedures and plans must be prepared for management to
abide by. These may either be set by the board or by
approving the recommendations by management.

Strategy Formulation – This is the most important function of

the board as this will steer the company to achieve its vision
 and mission. A large part of board work is spent on the
formulation and calibration of organizational strategies.

Family Governance

Family corporations are unique in the sense that there is an

emotional component to it. The objective of a good family business
governance is the sustainable development of the economic value
and emotional value of the enterprise.

Higher economic value is manifested through revenues, while

emotional value refers to the emotions that create an attachment to
the company.

D. Regulations

• Defined as a legal system that controls and regulates the business

activities of a certain country.
• Corporate governance deals with external regulation (legal) and
internal control of the corporation through legal means by its board
of directors.
• Apart from public safety and welfare, regulation is important to
protect industries. Without regulation, any individual can enter into
the market and disrupt the business environment by unscrupulous
practices.
• Regulation serve to protect legitimate players with the industry,
who have engaged in the business properly and have coordinated
with regulating bodies to ensure legal and lawful operations.
• Regulation is needed to produce revenues for the government to
support national economic programs and policies.
• Article 2 of the Code defines a Corporation.
• The content of this code includes the incorporation of private
corporations, regulation of the board of directors, and the powers
and capacity of corporations, bylaws and board meetings.
• The Code was revised in 2019, after almost 40 years, to improve
the ease of doing business in the Philippines and thereby fortify
further economic development.
E. Notable Changes of the Code

1. Removal of the minimum number of incorporators.

2. Required minimum P1,000,000.00 capital stock on stock
corporations
3. Removal of the 50 year corporate team. Corporation can now exist
indefinitely.
4. Creation of a one-person corporation (OPC)
5. Use of the internet to attend meeting and filing of reports
6. Power of the SEC to remove disqualified directors or trustees

F. Political Issues and Corporate Governance

• Good governance does not limit itself to addressing business

disruptions and creating a competitive advantage through strategy.
How these political issues are addressed, such as climate change,
healthcare, income taxes, bribery in government and others are
part and parcel of a company’s long-term strategy. These are
issues that concern just about every individual in any society – the
stakeholders.

• Changes in government policy and regulations can affect the

operational viability or even the survival of a corporation. For this
reason alone, the board should be aware of the uncertain and
volatile environment that we live today. Being prepared to manage
these changes will help mitigate risks.

• The COVID-19 global pandemic that reached its peak in 2020 is a

prime example of how healthcare as a political issue can affect a
company. The devastating economic effects of COVID-19 have put
a strain on businesses and financial systems worldwide.
G. Business Ethics

• Ethics binds humans because only we can speak and do things

that are moral, just and fair. In a future geared towards automation
and protecting private space, individuals alone are responsible for
maintaining ethical behavior.

• Given the new norms as a result of the current global pandemic

that force people to keep physical distances and communicate
electronically, ethics may be the only way that will connect us as
humans.

• Ethics – is a branch of philosophy that prescribes and guides

acceptable human conduct. It is the study of morality.

• Business Ethics – is the study of ethics with a particular focus:

business. It looks at the moral standards applied to business
organizations and behavior.

• There are 3 kinds of Ethical Issues:

1. Systemic – refers to issues ( such as the culture of corruption

in government institutions) that need to be addressed through
coordinated actions of different social groups.

2. Corporate – pertains to issues that can and should be solved

within the company. If a company allows its employees to be
tardy all the time, it will take the unified action of its employees
and the company to correct the situation through its policies.

3. Individual – simply means issues that need to be resolved

through individual decision-making and behavioral change.

 Code of Ethics and Code of Discipline

There are 2 documents that an employee goes through when

joining a company. These are standards that everyone in the
organization must adhere to. The board of directors usually issues
these documents. The Code of Ethics focuses on values,
whereas, the Code of Discipline focuses on rules and
compliance.
 H. Ethical Decision Making

• In the course of daily work in the office and doing business

transactions, you are bound, one way or another, to see and
experience situations wherein you will need to make decisions.
Decisions that are sometimes difficult to arrive at but are necessary.
Below are some of the issues to contend with:

1. Conflict of Interest
2. Commercial Bribery and Extortion
3. Gifts
4. The Employee Theft
5. Computer Theft
6. Trade Secrets

 Being an ethical individual requires personal responsibility and

accountability, more so when things go wrong. In research that
spanned for 5 years, honesty and integrity were the key variables
influencing ethical decision making. Ethical behavior and ethical
decisions will define who we are as individuals and the kind of moral
standards we possess. At the end of the day, it will be a matter of
how well you would like to sleep at night and how your conscience
guides you on the decisions you make, decisions that should not
cause harm to your fellow human being.

ACTIVITY: Please answer the following and submit on or before

November 27, 2021.

1. What is Corporate Governance? Differentiate Governance from

Management.
2. Why is there a need to Regulate Business Activities?

3. Who are the Key Players in Corporate Governance?