Principle of transparency of corporate governance: Disclosure of compensation received by directors or trustees


RAWPIXELS.COM/FREEPIK

RRecommendation 8.4 of the Corporate Governance Code (GC) for Listed Companies (PLC) is that appropriate disclosure should be made of policies and procedures in setting Board compensation, as follows: “The company must provide clear disclosure of its policies and procedures for setting compensation for the board of directors and officers, as well as the level and composition thereof in the annual GE report. In addition, companies should disclose compensation on an individual basis, including termination and retirement provisions. “

The explanation for recommendation 8.4 is that the disclosure of compensation policies and procedures enables investors to understand the link between compensation paid to directors and key executives and company performance. He noted that while the revised GE Code of 2014 only required the disclosure of all fixed and variable compensation that may be paid, directly or indirectly, to its directors and the four key executives during the previous fiscal year, it considered that it was a good practice mandated in many countries to disclose the compensation of board members and officers on an individual basis, including termination and retirement provisions .

The Revised Philippine Companies Code (RCCP) is actually fascinated by the principle of disclosure of compensation received by each director or trustee on an annual basis, and provides for this obligation in three distinct sections, as well:

(a) ARTICLE 29: Requires that companies invested in public interests “submit to their shareholders and to the [SEC] an annual report of the total remuneration of each of their directors or trustees; “

(b) ARTICLE 49: Mandates all companies, and not only those with public interest, to present to shareholders or members at the annual meeting, a report on the remuneration of directors or trustees ; and

(c) ARTICLE 177: reiterates the obligation of public interest companies to submit a report on the remuneration of directors or directors to the SEC, and further adds the submission of an “evaluation or performance report of a director or directors and the standards or criteria used to assess each director or trustee ”a requirement to report to the SEC the compensation of directors or trustees.

In addition, Section 177 provides that the SEC may place the company under delinquent status for failure to meet the reporting requirements three times, consecutively or intermittently, within five years.

Finally, article 161 imposes a penal sanction of fine for the “failure or unjustified refusal of the company, or of the persons responsible for the keeping and the keeping of the registers of the company, to comply with” article 177 of the RCCP.

GE PRINCIPLES OF “RESPONSIBILITY” AND “RESPONSIBILITY”: EVALUATION OF THE PERFORMANCE OF DIRECTORS OR TRUSTEES
Principle 6 of the GE Code for DFCs expresses GE’s principles of responsibility and accountability by providing that the best measure of board effectiveness is through an evaluation process, thus: “The best measure of Board effectiveness is done through an evaluation process. The board should conduct regular reviews to assess its performance as a body and to determine whether it has the right mix of experience and skills.

Recommendation 6.1 of the CG Code for DFC recommends that the Board conduct an annual self-assessment of its performance every three years, including the performance of the Chairman, individual members and committees, which should be supported by a facilitator. external.

Recommendation 6.2 states that the board should have a system in place that provides, at a minimum, criteria and processes for determining the performance of the board, individual directors, committees, and that such a system should allow for a feedback mechanism. shareholders.

The RCCP now imposes an individual assessment system for directors or trustees as follows:

(a) ARTICLE 49: provides that at the annual meeting of shareholders or members of all companies, and not only those with public interest, the board of directors shall endeavor to present to shareholders or to members, inter alia, “(h) evaluations and performance reports for the board and the evaluation criteria and procedure; ” and,

(b) ARTICLE 177: provides that companies invested in public interests must also submit annually to the SEC, in addition to the MIS and audited financial statements, “(2) an assessment or performance report of a director or a trustee and the standards or criteria used to assess each director or trustee.

In addition, Section 177 provides that the SEC may place the company under delinquent status for failure to meet the reporting requirements three times, consecutively or intermittently, within five years.

Finally, article 161 of the RCCP imposes a penal sanction of fine for “failure or unjustified refusal of the company, or of the persons responsible for keeping and keeping the registers of the company, to comply with” the article 177.

This article reflects the personal opinion of the author and does not reflect the official position of the Management Association of the Philippines or the MAP.

Lawyer Cesar L. Villanueva is chairman of the corporate governance committee of MAP, trustee of the Institute of Corporate Directors (ICD), was the first chairman of the governance committee for GOCCs (August 2011 to June 2016), was Dean of Ateneo Law School (2004-2011), author of The Law and Practice in Philippine Corporate Governance and the National Book Board Award winning profession, and founding partner of law firms Villanueva Gabionza & Dy.

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http://map.org.ph


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