Group 1
Plenary Synthesis: Global Problems of Corporate Governance
Corporations all over the world have experienced various problems directing
and controlling their business operations. According to the Philippines’ Response by
Rene B. Benitez and Juan Carlos del Rosario, it is important to have good
governance because it can have a great impact on the value of the company, its
sustainability, and its profitability.
Markets serve as the main source of capital, and investors have the largest
influence over business strategy. However, several businesses erred by
misrepresenting their asset holdings and concealing their enormous debt from
creditors and investors. Three major corporations involved in their respective
financial scandals have affirmed the need for corporate governance.
A common strategy used by businesses to improve the functioning of their
own boards of directors is to examine their accounting procedures. They also
increased the number of the board and carried out yearly survey of customer
satisfaction. Some companies, like Erickson, have problems with their corporate
governance and ownership structure. One of their ideas is to outsource the
company's software laboratories, production, and research and development
operations.
In the Philippines, some well-established companies have been facing various
cases of bankruptcy and audit issues. Urban Bank experienced a failure to meet
increase capitalization requirements. Furthermore, the Export and Industry Bank
and Urban Bank merge into Export and Import Bank enabling the company's 25
branches around the nation as well as its Makati headquarters to resume
operations.
Various corporations are making changes, such as in Corporate America
where CEOs are being fired left and right by the boards of directors. In addition, the
Board now has fewer business executives on it, permits outside directors to attend
executive sessions, holds more meetings, and asks for more time and expertise,
particularly from the audit committee. They suggest new rules for corporate
governance that would require the majority of the Board of Directors' members to
be independent and provide shareholders the right to vote on CEO compensation.
The Sarbanes-Oxley Act, which mandates more rapid disclosures and orders the
SEC to develop regulations requiring the disclosure of previously unrequested
information. A code of conduct for independent auditors has been developed by the
European Union (EU), and it calls for a rotation of auditors every five years. In
order to standardize and tighten laws against insider trading, member nations also
supported the Market Abuse Directive.
In the Philippines, various corporations improved corporate governance by
ensuring the skills, knowledge and expertise of the members and stresses the
importance of fairness, transparency and accountability. The Corporate Governance
Reform Program was introduced by the Capital Market Development Council and
includes a number of recommendations, including better protection of the rights of
minority shareholders, adherence to international auditing standards, and increased
transparency and disclosure of public companies. The Philippines makes ways to
improve corporate governance implementation, including raising requirements for
ethics, accountability, and transparency. Shareholder disclosures of both financial
and non-financial information must be done often. Auditing organizations should
continually review their procedures and raise the bar to levels that are recognized
globally.
Overall, the Philippines will continue to be competitive on a global scale, and
its firms will be respected all over the world, as long as both the public and private
sectors contribute to excellence in corporate governance.