The governance club

published Sept. 19, 2012, page A5, MST

The Philippines is the most recent member of the Association of Southeast Asian Nations to adopt the Asean corporate governance scorecard—a set of 185 questions that serve as an empirical measure of “best practices” employed by companies’ boards of directors in running their establishments. The country joined the ranks of Sinagpore, Malaysia, Indonesia and Thailand.

For the past seven years, the Philippines has been using the National Corporate Governance Scorecard —composed of 110 questions—implemented by the Institute of Corporate Directors. The ICD has been working with its fellows from various corporations in applying the principles of corporate governance in the conduct of their businesses. The more detailed regional scorecard will now supersede the national one.

The integration of corporate governance efforts in the region is one of seven initiatives outlined under the Asean Capital Markets Forum. Representatives from seven Asean countries, including the Philippines’ Jesus Estanislao, ICD chairman, collaborated to come up with the Asean scorecard that was benchmarked on the principles of the Organisation of Economic Cooperation and Development. They then combined these principles with their observations and with the existing work of directors, shareholder associations and universities in the governance initiative.

Level 1 of the Asean scorecard is pertains to the rights of shareholders (26 questions), the equitable treatment of shareholders (17), the role of stakeholders (21), disclosure and transparency (42) as well as the responsibilities of the board of directors (79).

Level 2 provides for bonus and penalty – awarding points for companies that go beyond minimum standards and exacting penalty on companies with poor practices. The idea is to make sure that companies do not comply with prescribed practices merely for compliance’s sake.

According to professor Sidharta Utama of the Indonesian Institute of Corporate Directorship, the support of regulators is key to the implementation of the initiative. He also commends the bonus-and-penalty policy because not all items in the scorecard need to be regulated or checked for compliance. Most often, good practices are there as internal policy, not because somebody from the outside said they must be there.

Estanislao adds that the Securities and Exchange Commission and the Philippine Stock Exchange have been working with the ICD for the ongoing review of the Top 100 corporations using the Asean scorecard. An Asean peer review will follow.

Indeed, the scorecard enables the companies to “race to the top” in employing practices that will not only provide value for their shareholders but to stakeholders—employees, and the general public—as well. 

According to Sani Mohd Ismail, trade and finance specialist from the Asian Development Bank, the regional scorecard is a way to market Asean as an economic force to contend with amid the shifting dynamics of the global economy. Asian businesses are known to be family-established or family-run. Strong family ties, however, are not necessarily a liability in business —as Filipino companies know too well. Still, good governance requires these players to foremost have an open mind.


The corporate governance journey of Philippine businesses is a work in progress. Two years ago, CLSA reported that the Philippines ranked last among 11 Asian countries surveyed in terms of governance practices.

Even the chairman of the Securities and Exchange Commission, lawyer Teresita Herbosa, emphasizes the need for transparency as top companies are evaluated according to the scorecard.

What our leaders do have is commitment. J. Argel Astudillo, vice president for the corporate governance office of the Philippine Stock Exchange, shares an anecdote about a meting among himself, PSE president Hans Sicat, Estanislao and Herbosa that took place on August 7 at the height of the monsoon rains that submerged many parts of Metro Manila.Trading at the stock market was suspended that day and Sicat and Astudillo were the only PSE employees present. Estanislao asked his driver to fetch Herbosa from her home just so the meeting could push through.

At this early stage, people—especially those not in the business sector—may be under the impression that “corporate governance” is just a couple of big words, some kind of white-collar advocacy relevant only to people in tailored suits going to air-conditioned boardrooms.

ICD president Rex Drilon II however says that the ultimate goal of corporate governance is poverty eradication. Indeed, when companies are managed well, they become more stable, they grow, and more jobs are created. People will thus have more opportunities to be productive, improve their situation, create wealth for themselves and help build the nation.