SEC CODE OF

CORPORATE
GOVERNANCE
SEC Code of Corporate Governance
The Securities and Exchange Commission (SEC) adopted the
following:

 Code of Corporate Governance for Publicly Listed Companies

(SEC Memorandum Circular No, 19, Series of 2016)
Code of Corporate Governance for Public Companies and
Registered Issuers (SEC Memorandum Circular No, 24, Series of
2019)
SEC Code of Corporate Governance
 Publicly Listed Cover those companies whose equity securities are
Companies listed on the Philippine Stock Exchange.
 Public Company with assets of at least P50 million and
Company having 200 or more shareholders holding at least
100 shares of equity securities.
 Registered Company that (1) issues proprietary and/or non-
Issuer proprietary shares/certificates; (2) issues equity
securities to the public that are not listed in an
Exchange; or (3) issued debt securities to the public
that are required to be registered to the SEC,
whether or not listed in an Exchange.
LISTED
COMPANIES
Purpose
The Codes were adopted to promote the
developments of a strong corporate
governance culture and keep abreast and
with recent developments in corporate
governance best practices.
Content
 Principles Considered as high-level statements of
corporate governance good practices
and are applicable to all companies.
 Recommendations Consistent with the principle of
proportionality. Recommendations
(objective criteria) on how the
Principles are applied vary among
different types of companies such as
publicly listed companies, public
companies and registered issuers.
Principle of Proportionality
It is where SEC addresses specific segments of the corporate
sector, which may be differentiated on the basis of company
type, size, access to the public funds and risk profile, among
others. Smaller companies may decide that the costs of some
of the provisions outweigh the benefits or are less relevant in
their case.
The code is designed to allow companies some flexibility in
establishing their own corporate governance practices.
Comply or Explain
Under the “comply or explain” operative principle, compliance
with the Code is not mandatory. But it is mandatory to
submit to SEC the company’s annual corporate governance
reports and disclose any deviations from the
Recommendations of the SEC.
Voluntary compliance with mandatory disclosure.
Comply or Explain
The Code is principle-based which allows company to
implement alternative corporate governance practices, which
are justified in particular circumstances.
When a Recommendation is not complied with, the company
must disclose and describe this non-compliance, and explain
how the overall Principle is being achieves. The alternative
should be consistent with the overall Principle.
Underlying Principles
The board’s governance  Establishing a competent board
responsibilities  Establishing a clear roles and
responsibilities of the board
 Establishing board committees
 Fostering commitment
 Reinforcing board independence
 Assessing board performance
 Strengthening board ethics
Underlying Principles
Disclosure and  Enhancing a company disclosure
Transparency policies and procedures.
 Strengthening the external auditor’s
independence and improving audit
quality.
 Increasing focus on non-financial and
sustainability reporting
 Promoting a comprehensive and cost-
efficient access to relevant information.
Underlying Principles
Internal control system  Strengthening the internal control
and risk management system and risk management system
frameworks

Cultivating a synergic • Promoting shareholder/member rights.

relationship with
shareholders/members
Underlying Principles
Duties to stakeholders/  Respecting rights of stakeholders and
effective redress for violation of
stakeholder’s rights
 Encouraging employee’s participation
 Encouraging sustainability and social
responsibility
Establishing a Competent Board
The company should be headed by a competent, working
board to foster the long-term success of the corporation,
and to sustain its competitiveness and profitability in a
manner consistent with its corporate objectives and the
long term best interests of its shareholders and other
stakeholders.
Establishing a Competent Board
This can be achieve by implementing the following
Recommendation: The Board should:
 Be composed of directors with a collective working
knowledge, experience or expertise that is relevant to the
company’s industry or sector.
 Be headed by a competent and qualified chairperson.
 Provide a policy on the training of directors.
 Have a policy on board diversity.
 Be assisted by a corporate secretary and a compliance
officer
Competent Directors
It is the shareholders’ duty to elect competent
board of directors and remove those who failed to
maintain their qualifications.
Basis of Qualification
 The Revised Corporation Code prescribed the
legal qualifications of a director.

 The corporation shall also provide grounds for

disqualification of incumbent directors.
Example of Qualification
A director of a company shall have the following
qualifications:
 A college graduate or have at least 5 years of
experience in business.
 Adequate competence and understanding of the
fundamentals of doing business or sufficient
experience and competence in managing business
substitute for such formal education.
Example of Qualification
A director of a company shall have the following
qualifications:
 Integrity, probity and shall be diligent and assiduous in
the performance of his function.
 Attended a seminar on Corporate Governance conducted
by a duly recognized private or government entity or
must have issued an undertaking to attend such
seminar as soon as practicable.
 Membership in good standing in business, professional
organizations or relevant industry.
Chairperson
The Board should be headed by a competent and
qualified Chairperson. The Chairperson shall possess all
the qualifications and none of the disqualifications of a
director.
Function of the Chairperson
The chairman shall preside at all meetings of the Board
and of the stockholders, exercise the powers given to him
in the By-laws and perform the duties enumerated under
the Code of Corporate Governance, as well as such other
responsibilities ad the Board may impose upon him.
Function of the Chairperson
The following are the primary functions of the chairman
of the board.
1. Facilitate the operations and deliberations of the
Board; and

2. Ensure the performance of the Board’s functions

and responsibilities.
Vice-Chairperson
In the absence of the Chairperson, the Vice-
Chairperson shall preside at the meetings of the
Board and stockholders.
Training of Directors
The company should provide a policy on the training
aimed to promote effective board performance and
continuing qualification of the directors in carrying-out
their duties and responsibilities. The training shall
include:
 Orientation program for first-time directors
 Relevant annual continuing training for all directors.
Training of Directors
Director Hours Topic

First–Time 8 Hours Orientation Corporation’s business and corporate

Director Program structure, vision and mission, corporate
strategy, Code of Governance, Articles,
By-laws, Company’s manual of
Corporate Governance, the Charters
Incumbent 4 hours Annual Courses on corporate governance
Directors Continuing matters relevant to the company,
Training including audit, internal control, risk
manangment and sustainability and
strategy.