Recognizing Good Governance

Good governance is the lifeblood of any organization, public or private, that promotes excellent performance enabling the organization to deliver the desired results

About two weeks ago, the Institute of Corporate Directors presented and honored the ASEAN Corporate Governance Scorecard Golden Arrow awardees in the Philippines for 2021.

Good governance is the lifeblood of any organization, public or private, that promotes excellent performance enabling the organization to deliver the desired results for its shareholders and stakeholders and ensuring its longevity. Whereas recognition and public acclamation for a job well done are the blood cells that nurture continuing outstanding governance.

For the readers who may not be familiar with the ACGS Golden Arrow, the award is the ASEAN equivalent of the Oscars for publicly listed corporations in the region that have demonstrated an exalted degree of good governance in their operations. And like the Oscars which selects the winners via the votes of the Academy’s movie industry members, the ACGS awardees are selected by the different Domestic Ranking Bodies of the participating ASEAN countries, namely, the Philippines, Malaysia, Thailand, Indonesia, Vietnam and Singapore.

In the Philippines, the DRB appointed by the SEC is the ICD. The different PLCs are evaluated and graded accordingly based on how they fare relative to various governance benchmarks spelled out in a scorecard developed by the region’s leading corporate governance experts. For the Philippines, we were represented by the undisputed founding father and prime advocate of good governance in our country, the Honorable Dr. Jesus P. Estanislao. These governance benchmarks are based on the OECD’s five governance principles: Rights of Shareholders, Equitable Treatment of Shareholders, Role of Stakeholders, Disclosure and Transparency, and Board Responsibility.

Each benchmark has different items and corresponding weights that total 100. It is important to highlight that Board Responsibility carries the largest weight at 40 out of 100 which underscores how critical the role of a director is in achieving good governance in any organization.

The scorecard, however, allows for bonus points of another 30 for PLCs that exhibit good governance above and beyond the minimum benchmarks. On the flip side, PLCs can be assessed as penalty points for poor governance practices. The maximum score that can be given is 130 points. The Golden Arrows awarded range from one to five arrows depending on the PLC’s score. A minimum of 80 points is needed to win a golden arrow while five arrows are bestowed on PLCs that attain 120 to 130 points.

You may wonder how the PLCs are evaluated and graded. The public disclosures and filings of the PLCs in their annual reports, websites, and regulatory submissions with the PSE and SEC are the only sources of information that serve as the basis for ICD’s evaluation. The ICD also discusses and compares with its counterpart DRBs in the region to ensure a uniform standard is maintained.

In the Philippines, out of 270 PLCs assessed, 32 were recognized regionally for having scored at least 97 points, while 86 PLCs were acclaimed nationally and awarded golden arrows for having scored at least 80 points. Of these PLCs, and for the first time since the awards were instituted, three PLCs that stood out and scored at least 120 received the highest honor of five golden arrows. These are China Bank, Ayala Land and Globe Telecom, the country’s governance cream of the crop. Let’s give all these standouts a big hand for being the nation’s top governance champions!

I can’t end this article without sharing JPE’s closing message during the awarding ceremonies. Allow me to paraphrase my take on his comments. Essentially, he noted that good governance is a long and difficult transformative journey that needs to be sustained and nurtured by no less than the top, the leaders of the institutions. A culture of good governance must permeate the whole organization.

On a personal level, a culture of INTEGRITY has to be embedded in each individual. At the level of teams, a culture of PROFESSIONALISM must be ingrained. And perhaps most important of all, a culture of SOLIDARITY, to be one with the good of society, must be taken to heart to ensure that it is not just the success of any single organization that is the end goal but that of the whole nation.

To my mind, Dr. Estanislao’s words are the clarion call that every Filipino hungers for — GOOD GOVERNANCE FOR ALL, FOR THE GOOD OF ALL! We, each of us, ALL must do our part. It may sound quixotic to the cynics out there, but we must give it our ONE BIG FIGHT for the sake of future generations.

Until next week… OBF!

By Bing Matoto

January 31, 2023

Read more: https://tribune.net.ph/2023/01/31/recognizing-good-governance/