GOVERNANCE Reviewer
organizations in fulfilling their long-term
Governance- a process whereby elements in society
wield power, authority and influence, and enact
policies and decisions concerning public life and
social upliftment
- Process of decision-making and the process
by which decisions are implemented through
the exercise of power or authority by leaders
of the country and organizations
Kinds of Governance
1. Corporate governance
2. International governance
3. National governance
4. Local governance
Characteristics of Good Governance
1. Participation- freedom of association and
expression on one hand and an organized
civil society on the other hand
2. Rule of law- fair legal frameworks that are
enforced impartially
3. Accountability- cannot be enforced without
transparency and the rule of law
4. Transparency- decisions taken and their
enforcement are done in a manner that
follows rules and regulations
5. Responsiveness- institutions and processes
try to serve the needs all stakeholders within
a reasonable timeframe
6. Consensus oriented- mediation of the
different interest in society to reach a broad
consensus on what is in the best interest of
the whole community
7. Equity and inclusiveness- ensures that all its
members feel that they have a stake in it and
do not feel excluded from the mainstream of
society
8. Effectiveness and efficiency- meets the need
of the society
Corporate governance- system of rules, practices, and
processes by which business corporations are
directed and controlled
- All about controlling one’s business and so is
relevant and indeed vital, for all
organizations, whatever size or structure
- Specifies the distribution of rights and
responsibilities among different participants
in the corporation
- System of stewardship and control to guide
economic, moral, legal and social obligations
towards their stakeholders
Purpose of CG: To facilitate effective, entrepreneurial
and prudent management that can deliver long-term
success of the company
- To maximize the organization’s long-term
success, creating sustainable value for its
shareholders, stakeholders, and the nation
Objectives of Corporate Governance
1. Fair and equitable treatment of shareholders-
equity is safeguarded by a good governance
structure in any organization
2. Self-assessment-enables firms to assess their
behavior and actions before they are
scrutinized by regulatory agencies
3. Increase shareholder’s wealth- protect the
long-term interest of the shareholders
4. Transparency and full disclosure- ensuring a
higher degree of transparency in an
organization by encouraging full disclosure of
transactions in the company accounts
Basic Principles of Corporate Governance
1. Transparency and full disclosure
2. Corporate control
3. Accountability
The owners want accountability on:
 Financial performance
 Financial transparency
 Stewardship
 Quality of internal control
 Composition of the board of directors and the
nature of its activities
Parties involved in Corporate Governance
1. Shareholders- provide effective oversight
through election of board members, approval
of major initiatives such as buying or selling
stock, annual reports on management
compensation, from the board
- any individual, organization or society at
large who can affect and/or be affected by the
company’s strategies, policies, business
decisions and operations, in general
2. Board of directors- the major representative
of stockholders to ensure that the
 organization is run according to the
organization’s charter and that there is
proper accountability
- The governing body elected by the
stockholders that exercises corporate powers
of a corporation, conducts all its business and
controls its properties
3. Non-executive or independent directors- the
same as the broad role of the entire board of
directors
4. Management- operations and accountability;
manage the organization effectively; provide
accurate and time reports to shareholders
and other stakeholders
- A group of executives given the authority by
the Board of Directors to implement the
policies it has laid down in the conduct of the
business of the corporation
5. Audit committees of the board of directors-
provide oversight of the internal and external
audit function and the process of preparing
the annul financial statements as well as
public reports on internal control
6. Regulators- they response to society’s wishes
to ensure that organizations, in their pursuit
of returns for their owners, act responsibly
and operate in compliance with relevant laws
 Board of Accountancy- set accounting and
auditing standards dictating underlying
financial reporting and auditing concepts; set
the expectations of audit quality and
accounting quality
 Securities and Exchange Commission- ensure
the accuracy, timeliness, and fairness of
public reporting of financial and other
information for public companies
7. External Auditors- perform audits of
company financial statements to ensure that
the statements are free of material
misstatements including misstatements that
may be due to fraud
8. Internal Auditors- perform audits of
companies for compliance with company
policies and laws, audits to evaluate the
efficiency of operations, and periodic
evaluation and tests of controls
November 10, 2016- SEC approved the Code of
Corporate Governance for publicly-listed companies
The Board of Directors is required to implement the
code and make sure that management and employees
comply with the internal policies set.
Independent director- a person who is independent
of management and the controlling shareholder, and
is free from any business or other relationship which
could, or could reasonably be perceived to,
,materially interfere with his exercise of independent
judgment in carrying out his responsibilities as a
director
Executive director- a director who has executive
responsibility of day-to-day operations of a part or
the whole of the organization
Non-executive director- a director who has no
executive responsibility and does not perform any
work related to the operations of the corporation
Conglomerate- a group of corporations that has
diversified business activities in varied industries,
whereby the operations of such businesses are
controlled and managed by a parent corporate entity
Internal control- a process designed and effected by
the board of directors, senior management, and all
levels of personnel to provide reasonable assurance
on the achievement of objectives through efficient
and effective operations; reliable, complete and
timely financial and management information; and
compliance with applicable laws, regulations, and the
organization’s policies and procedures
Enterprise risk management- a process, effected by
an entity’s Board of Directors, management and other
personnel, applied in strategy setting and across the
enterprise that is designed to identify potential
events that may affect the entity, manage risks to be
within its risk appetite, and provide reasonable
assurance regarding the achievement of entity
objective
Related party- shall cover the company’s subsidiaries
that the company exerts direct or indirect control
over or that exerts direct or indirect control over the
company
Related party transactions- a transfer of resources,
services or obligations between a reporting entity
and a related party, regardless of whether a price is
charged