SEC Code of Corporate Governance

Overview

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)

The above Codes were adopted to promote the development of a strong corporate governance culture and keep abreast with recent developments in corporate governance best practices. The Code is consistent with the G20/OECD Principles of Corporate Governance and other internationally recognized corporate governance principles.

The Principles of the above Codes are applicable to all companies. 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. These differences, if any, are highlighted as the Principles and Recommendations are discussed.

Publicly listed companies shall cover only those companies whose equity securities are listed on the Philippines Stock Exchange.

Public company refers to a company with assets of at least P50 million and having 200 or more shareholders holding at least 100 shares of equity securities.

Registered issuer refers to a company that (1) issues proprietary and/or non-proprietary shares/certificates; (2) issues equity securities to the public that are not listed in an Exchange; or (3) issues debt securities to the public that are required to be registered to the SEC, whether or not listed in an Exchange.

Comply or Explain

The adoption of comply or explain approach is to address the perceived overregulation of SEC.

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. Such reports that shall be available to the public, including the company’s shareholders and other stakeholders.

This approach combines voluntary compliance with mandatory disclosure. It is not a rigid set of rules. Rather, it is principles-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 achieved. The alternative should be consistent with the overall Principle.

The Code is designed to allow companies some flexibility in establishing their own corporate governance practices. This is consistent with the principle of proportionality where the SEC addresses specific segments of the corporate sector, which may be differentiated on the basis of company type, size, access to 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.

Course Objectives

After studying this module, you should be able to

Explore the objectives, content, and limitations of SEC Code of Corporate Governance intended to apply to domestic corporations;
Explain the underlying principles adopted by SEC Code of Corporate Governance towards a more effective corporate governance framework;
Explain and evaluate the roles and responsibilities of those charged with governance, the importance of board committees in corporate governance

Course Materials

The SEC Code of Corporate Governance espouses 16 principles under four broad categories.

The board’s governance responsibilities

Establishing a competent board

Establishing clear roles and responsibilities of the board

Establishing board committees

Fostering commitment

Reinforcing board independence

Assessing board performance

Strengthening board ethics

Disclosure and transparency

Enhancing company disclosure 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

Internal control system and risk management frameworks

Strengthening the internal control system and risk management systems

Cultivating a synergic relationship with shareholders/ members

Promoting shareholder/member rights

Duties to stakeholders

Respecting rights of stakeholders and effective redress for violation of stakeholder’s rights

Encouraging employees’ 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. This can be achieved by implementing the following Recommendations: The Board should –

be composed of directors with a collective working knowledge, experience or expertise that is relevant to the company’s industry/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

It is the shareholders’ duty to elect competent board of directors and remove those who failed to maintain their qualifications. The Revised Corporation Code prescribed the legal qualifications of a director (see p.59). In addition, the corporation may provide in its By-laws additional directors' or trustees' qualifications consistent with the good corporate governance practices.

The Board should be headed by a competent and qualified Chairperson. The Chairman shall possess all the qualifications and none of the disqualifications of a director.

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.

It is suggested that the orientation program for first-time directors, in any company, be for at least eight hours, while the annual continuing training be for at least four hours.

New directors shall undergo at least eight-hour orientation program on the Corporation’s business and corporate structure, vision and mission, corporate strategy, Governance Codes and Policies, Articles, By-Laws, Company’s Manual of Corporate Governances, the Charters, the SEC-mandated topics on governance matters and other matters essential for the effective performance of their duties and responsibilities.

Incumbent directors shall attend a four-hour annual continuing training program involving courses on corporate governance at least once a year. It involves courses on corporate governance matters relevant to the company, including audit, internal controls, risk management, sustainability and strategy.

For the conduct of traying, variety of approaches to training may be appropriate, including lectures, case studies and networking groups.

The Board should have a policy on board diversity. Diversity is the variation of social and cultural identities among people existing together in a defined employment or market setting.

A board diversity policy considers diversity in gender, age, ethnicity, culture, skills, competence and knowledge. On gender diversity policy, a good example is to increase the number of female directors, including female independent directors.

The Board should be assisted in its duties by a Corporate Secretary, who should

be a resident and citizen of the Philippines.
not be a member of the Board of Directors
be a separate individual from the Compliance Officer
annually attend a training on corporate governance
have a working knowledge of the operations of the Company
possess appropriate administrative, interpersonal and legal skills,
be aware of the laws, rules and regulations necessary in the performance of his duties or responsibilities, and
have at least an understanding of basic financial and accounting matters.

The Board should ensure be assisted in its duties by a Compliance Officer. The Compliance Officer should

not be a member of the Board of Directors
should annually attend a training on corporate governance.
have a rank of Senior Vice President or an equivalent position with adequate stature and authority in the corporation

Establishing Clear Roles and Responsibilities of the Board

The fiduciary roles, responsibilities and accountability of the Board as provided under the law, the company’s articles and by-laws, and other legal pronouncements and guidelines should be clearly made known to all directors as well as to stockholders and other stakeholders.

The Board is collectively responsible for the sustainable long-term shareholder value of the institution, sustain its competitiveness, profitability and industry leading position in a manner consistent with its corporate objectives.

The Board members should act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the company and all shareholders.

The elements of fiduciary duty of board members are the duty of care (which includes the duty of obedience and duty of diligence) and the duty of loyalty.

Duty of obedience requires compliance with law, rules, and court orders. The directors or trustees elected shall perform their duties as prescribed by law, rules of good corporate governance, and bylaws of the corporation. Directors, trustees, and officers have the duty to act intra vires and within authority.

Under duty of diligence, directors, trustees, and officers are required to exercise good faith and due care in the performance of their functions, otherwise, they shall be held liable.

The duty of loyalty mandate that directors/trustees should not give preference to their own personal amelioration by taking the opportunity belonging to the corporation.

The Board should oversee the development of and approve the company’s business objectives and strategy, and monitor their implementation, in order to sustain the company’s long-term viability and strength.

The Board should be responsible for ensuring and adopting an effective succession planning program for directors, key officers and management. The smooth and efficient transition of company leadership to highly competent and qualified individuals is the goal of succession planning. This will ensure growth and a continued increase in the shareholders’ value.

Directors shall not receive any compensation, as such, except for reasonable per diem, unless such compensation is provided in the By-Laws or granted by a vote of the stockholders representing at least a majority of the outstanding capital stock of the Company. The Directors shall not decide on their own compensation, other than per diem.

The Board should have a formal and transparent board nomination and election policy. The Committee may use external sources, such as professional search firms, director databases and/or other reputable external sources to further enhance the search for and widen the base of potential nominees. The Committee shall assist the Board in making an assessment of the effectiveness of the processes and procedures in the nomination, election and replacement of a director.

The Board should have the overall responsibility in ensuring that there is a group-wide policy and system governing related party transactions (RPTs) and other unusual or infrequently occurring transactions, particularly those which pass certain thresholds of materiality. The policy should include the appropriate review and approval of material or significant RPTs, which guarantee fairness and transparency of the transactions. The policy should encompass all entities within the group, taking into account their size, structure, risk profile and complexity of operations.

The Management is primarily accountable to the Board for the operations of the Company. In the selection process, fit and proper standard should be applied. In this regard, the following shall be considered: integrity, probity, physical and mental fitness, competence, relevant education or training; possession of competencies relevant to the job, such as technical expertise and experience in the company, skills, diligence and independence of mind, and sufficiency of time to fully carry out responsibilities.

The Board shall appoint the executive officers who are the President or the Chief Executive Officer, the Vice-Presidents (or their equivalent roles in the Company structure), the Treasurer and/or the Chief Finance Officer (CFO), Chief Risk Officer, Chief Compliance Officer, the Corporate Secretary, and Chief Audit Executive.

The Board should establish an effective performance management framework that will ensure that the Management, including the Chief Executive Officer, and personnel’s performance is at par with the standards set by the Board and Senior Management.

The Board should oversee that an appropriate internal control system is in place, including setting up a mechanism for monitoring and managing potential conflicts of interest of Management, board members, and shareholders. The Board should also approve the Internal Audit Charter.

The Board should oversee that a sound enterprise risk management (ERM) framework is in place to effectively identify, monitor, assess and manage key business risks. The risk management framework should guide the Board in identifying units/business lines and enterprise-level risk exposures, as well as the effectiveness of risk management strategies.

The Board should have a Board Charter that formalizes and clearly states its roles, responsibilities and accountability in carrying out its fiduciary duties. The Board Charter should serve as a guide to the directors in the performance of their functions and should be publicly available and posted on the company’s website.

Establishing Board Committees

The Revised Corporation Code allows the Board to create Executive Committee and other special committees, which it can delegate its functions but not its responsibilities. It is a good governance practice to establish board committees that focus on specific board functions to aid in the optimal performance of its roles and responsibilities. The Board may establish the following committees:

Audit Committee
Corporate Governance Committee
Board Risk Oversight Committee
Related Party Transactions Committee
Nomination Committee
Remuneration Committee
Committee of Inspectors of Ballots and Proxies
Finance Committee
Technology Strategy Committee
Technical Support to Committees

If the bylaws so provide, the board may create an executive committee. In the absence of a provision in the by-laws, the board, by itself, cannot create an executive committee. If the executive committee was not validly constituted, the members thereof maybe considered de facto officers.

The Board should establish an Audit Committee to enhance its oversight capability over the company’s financial reporting, internal control system, internal and external audit processes, and compliance with applicable laws and regulations.

The Board should establish a Corporate Governance Committee that should be tasked to assist the Board in the performance of its corporate governance responsibilities, including the functions that were formerly assigned to a Nomination and Remuneration Committee. It should be composed of at least three members, all of whom should be independent directors, including the Chairman.

Subject to a corporation’s size, risk profile and complexity of operations, the Board should establish a separate Board Risk Oversight Committee (BROC) that should be responsible for the oversight of a company’s Enterprise Risk Management system to ensure its functionality and effectiveness.

Subject to a corporation’s size, risk profile and complexity of operations, the Board should establish a Related Party Transaction (RPT) Committee, which should be tasked with reviewing all material related party transactions of the company and should be composed of at least three non-executive directors, two of whom should be independent, including the Chairman.

The Nomination Committee shall be primarily tasked with the duty of implementing a formal and transparent board nomination and election policy that should include how it accepts nominations from the shareholders, including minority and non-controlling, and how it reviews the qualifications of nominated candidates.

The Remuneration Committee is primarily tasked with the establishment and implementation of a formal and transparent procedure and policy for determining the remuneration of directors and officers that is consistent with the Company’s culture and strategy as well as the business environment in which it operates.

The Board shall appoint three (3) persons (who need not be stockholders) to act as the Committee of Inspectors of Ballots and Proxies which shall be empowered to pass on the validity of proxies. The Committee of Inspectors of Ballots and Proxies shall be guided by existing laws, and rules and regulations of the SEC regarding proxies. The term of office of the Committee members shall be fixed by the Board. In the event of vacancy in the Committee membership, the Board may appoint another member to fill such vacancy.

The Finance Committee shall have the principal oversight responsibility with respect to the company’s capital allocation process, financial operation, and its treasury-related activities and policies. The Finance Committee shall define its own charter and fix its own rules of procedures. The Finance Committee shall be responsible for reviewing and evaluating the financial affairs of the Corporation from time to time.

All established committees should be required to have Committee Charters stating in plain terms their respective purposes, memberships, structures, operations, reporting standards for evaluating the performance of the Committees. It should also be fully disclosed on the company’s website. The Committee Charter clearly defines the roles and accountabilities of each committee to avoid any overlapping functions, which aims at having a more effective board for the company. This can also be used as basis for the assessment of committee performance.

Fostering Commitment

The Board shall hold regular meetings on the date and time schedules in the by-laws. Otherwise, the meetings shall be held monthly. The Board shall convene for special meetings when required by business exigencies.

Independent and non-executive directors may concurrently serve in Boards of other companies, provided, at any given time, it will not exceed

Five publicly listed companies,
Ten public companies and/or registered issuers, or
Five public companies and/or registered issuers if the director also sits in at least three publicly listed companies

A company may provide a policy for the directorship limits of executive directors. A company may also consider directorship in related companies such as subsidiaries, affiliates, parent corporation, and affiliates and subsidiaries of the parent corporation as one or exclude those from the limitations in the number of directorships.

Reinforcing Board Independence

The Board should endeavor to exercise objective and independent judgment on all corporate affairs.

Independence of the board rests on the proper mix of executive and non-executive directors, on the separation of the positions of Chairperson and Chief Executive Officers, and on the proper disclosure of adverse interests of directors affecting the corporation.

The right combination of non-executive directors, which include independent directors, and executive directors, ensures that no director or small group of directors can dominate the decision-making process.

Executive director is a director who has executive responsibility of day-to-day operations of a part or the whole of the organization. Non-executive director is a director who has no executive responsibility and does not perform any work related to the operations of the corporation. Independent director is 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.

The position of Chairman of the Board and President/CEO shall be held by separate individuals, who are not related to each other, and each shall have clearly defined responsibilities.

A director with a material or potential interest in any transaction affecting corporation should fully disclose his adverse interest, abstain from taking part in deliberations for the same and recuse from voting on the approval of the transaction.

The contract of the corporation with a self-dealing director/trustee, his spouse, or relative within fourth civil degree of consanguinity or affinity is voidable. However, the contract is perfectly valid if all the following conditions are present.

The presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting;
The vote of such director or trustee was not necessary for the approval of the contract;
The contract is fair and reasonable under the circumstances;
In case of corporations vested with public interest, material contracts are approved by at least a majority of the independent directors voting to approve the material contract; and
In case of an officer, the contract has been previously authorized by the board of directors.
If any of the above conditions are not present, the corporation, through its board of directors/trustees, can annul the contract in a judicial proceeding within the prescriptive period, otherwise, the contract remains in force.

However, even if the corporation decides to annul the contract, the stockholders/members can ratify the contract with self-dealing director/trustee:

By stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the members in a meeting called for the purpose
Full disclosure of the adverse interest of the directors or trustees involved is made at such meeting and
The contract is fair and reasonable under the circumstances.

Fairness typically requires that the transaction reflect terms one would expect in an arm’s length transaction.

For contracts with self-dealing officers, stockholders/members ratification is not required. It is within the power of the board to ratify the subject contracts.

Contracts with interlocking directors are likewise subject to limitations. Interlocking directorship by itself is not prohibited. But the by-laws may prohibit interlocking directorship. There is an interlocking director when one of the directors in one corporation is also a director in another corporation. The contract entered between such corporation is valid but subject to the following rules:

the contract is valid or shall not be invalidated on the sole ground of interlocking directorship; provided that: contract is not fraudulent and the contract is fair and reasonable
if the interest of the interlocking director in one (1) corporation is substantial and the interest in the other corporation or corporations is merely nominal, the rules on self-dealing directors shall apply. Stockholding exceeding twenty percent (20%) of the outstanding capital stock shall be considered substantial for purposes of interlocking directors.

Each director has a duty of loyalty to the corporation. Breach of this loyalty will subject the director to liability. Under the Doctrine of Corporate Opportunity, unless ratified by stockholders, a director shall refund to the corporation all the profits he realizes on a business opportunity which:

The corporation is financially able to undertake;
From its nature, is in line with corporation’s business and is of practical advantage to it; and
The corporation has an interest or a reasonable expectancy.

The rule applies even if the director risked one's own funds in the venture. If the act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock, the director is excused from remitting the profit realized.

The doctrine is not applicable to the following instances:

When a director engages in a distinct enterprise of the same general class of business as that which his corporation is engaged in, so long as he acts in good faith;
The opportunity is one which is not essential to the corporation’s business, or employment of company’s resources, or where the director or officer embracing opportunity personally is not brought into direct competition with the corporation; or
When the property or business opportunity has ceased to be a “corporate opportunity” and has transformed into a “personal opportunity”. In such a case the corporation is definitely no longer able to avail itself of the opportunity, which may “arise from financial insolvency”, or from legal restrictions, or from any other factor which prevents it from acting upon the opportunity for its own advantage.
If the action was made after the resignation of the director.
When two related corporations are involved even if there is interlocking directorship.

Assessing Board Performance

The best measure of the Board’s effectiveness is through an assessment process. The Board should regularly carry out evaluations to appraise its performance as a body and assess whether it possesses the right mix of backgrounds and competencies.

The Board should conduct an annual self-assessment of its performance, including the performance of the Chairman, individual members and committees. For publicly listed companies, the annual self-assessment shall, as practicable, be supported by an external facilitator every three years.

Strengthening Board Ethics

Members of the Board are duty-bound to apply high ethical standards, taking into account the interests of all stakeholders.

The Company shall adopt, implement and monitor compliance with: (A) a Code of Business Conduct and Ethics that provides the general standards for professional and ethical behavior for the Company, its Directors, Officers, Executives and employees in their internal and external dealings, and (B) policies implementing the Code of Business Conduct and Ethics, governing, among others:

Conflict of Interest;
Gift-Giving and Anti-Corruption;
Gifts, Entertainment and Sponsored Travel;
Whistleblowing; and
Supplier/Contractor Relations.

Enhancing Company Disclosure Policies and Procedures

The company should establish corporate disclosure policies and procedures that are practical and in accordance with best practices and regulatory expectations.

All corporations are required to submit to SEC the reportorial requirements required under SEC Memorandum Circular No. 2, series of 2020. In addition to the SEC requirements, publicly listed companies are required to comply with the PSE Disclosure Rules.

Section 23 of the Securities Regulation Code prescribed that a director or an officer of the issuer of the security, shall file, at the time either such requirement is first satisfied or within ten (10) days after he becomes such a beneficial owner, director, or officer, a statement with the SEC and to the PSE and the PDEX (if the security is listed for trading) of the amount of all equity securities of such issuer of which he is the beneficial owner, and within ten (10) days after the close of each calendar month thereafter, if there has been a change in such ownership during such month.

The company’s corporate governance policies, programs and procedures should be contained in its Manual on Corporate Governance, which should be submitted to the regulators and posted on the company’s website.

In addition, publicly listed companies should fully disclose all relevant and material information on individual board members and key executives to evaluate their experience and qualifications and assess any potential conflicts of interest that might affect their judgment.

Strengthening the External Auditor’s Independence and Improving Audit Quality

The company should establish standards for the appropriate selection of an external auditor, and exercise effective oversight of the same to strengthen the external auditor’s independence and enhance audit quality.

It is the responsibility of the Audit Committee to

recommend the appointment, reappointment, removal, and fees of the external auditor
assessing the integrity and independence of external auditors
disclose the nature of non-audit services performed by its external auditor

Financial Statements covered by SRC Rule 68 shall be audited by independent auditors who are duly registered with the Board of Accountancy (BOA) of the Professional Regulation Commission (PRC) in accordance with the rules and regulations of said professional regulatory bodies. A corporation with financial statements audited by an independent auditor who is not registered with the BOA shall be subject to appropriate fines.

Increasing Focus on Non-Financial and Sustainability Reporting

The company should ensure that material and reportable non-financial and sustainability issues are disclosed.

The Board should have a clear and focused policy on the disclosure of non-financial information, with emphasis on the management of economic, environmental, social and governance (EESG) issues of its business, which underpin sustainability. Companies should adopt a globally recognized standard/framework in reporting sustainability and non-financial issues.

On February 15, 2019, SEC issued the Sustainability Reporting Guidelines for Publicly Listed Companies (Memorandum Circular No. 4, series of 2019). The Board shall be instrumental in maintaining the standards espoused in the Corporation’s sustainability framework and the policies thereof.

Promoting a Comprehensive and Cost-Efficient Access to Relevant Information

The company should maintain a comprehensive and cost-efficient communication channel for disseminating relevant information. This channel is crucial for informed decision-making by investors, stakeholders and other interested users.

Companies should have a website, at the very least. A company website should contain, among others, the Manual on Corporate Governance, Annual Corporate Governance Report, Board Charter, Committee Charters, the company’s Code of Business Conduct and Ethics.

Publicly listed companies should include media and analysts’ briefings as channels of communication.

Companies may also utilize participation in investor conferences, adhoc briefings, roadshows, conference calls and one-on-one meetings; and timely official disclosures via PSE EDGE. The Corporation may also use other available media channels to extend communication to stakeholders, as applicable.

Strengthening the Internal Control System and Enterprise Risk Management Framework

To ensure the integrity, transparency and proper governance in the conduct of its affairs, the company should have a strong and effective internal control system and enterprise risk management framework.

The Company should have an adequate and effective internal control system and an enterprise risk management framework in the conduct of its business, taking into account its size, risk profile and complexity of operations.

Promoting Shareholder Rights

The company should treat all shareholders fairly and equitably, and also recognize, protect and facilitate the exercise of their rights.

It is the duty of the Board to promote stockholder rights, remove impediments to the exercise of stockholder rights and provide effective redress for violation of their rights.

The Board should ensure that basic shareholder rights are disclosed in the Manual on Corporate Governance and on the company’s website. It is the responsibility of the Board to adopt a policy informing the shareholders of all their rights.

Shareholders’ rights relate to the following, among others:

A. Right to participate in the management by exercising the right to vote. Corollary, the right to vote carries the following rights of stockholders:

Right to nominate candidates to the Board of Directors;

Right to be informed of the nomination and removal process;
Right to be informed of the voting procedures that would govern the Annual and Special Shareholders’/Members Meeting.
Right to elect directors
Right to remove directors

Right to participate in the approval of certain corporate acts

Right to notice of meetings and right to attend meetings
Right to appoint a proxy
Right to Propose the Holding of Meetings and to Propose Agenda Items

B. Appraisal Rights

C. Right to income and assets of the corporation

Right to Dividend;
Proportionate participation in the distribution of assets in liquidation

D. Right to protect/transfer ownership

Right to issuance of stock certificate for fully paid shares
Right to transfer of stock in corporate books
Pre-emptive rights;
Right of first refusal, if granted

E. Right to information

Right to inspect books and records
Right to be furnished of the most recent financial statement/financial report
Right to be notified of certain corporate acts

F. Remedies for infringement of Shareholder rights such as individual suit, representative suit, derivative suit, or alternative dispute resolution

Respecting Rights of Stakeholders and Effective Redress for Violation of Stakeholder’s Rights

The rights of stakeholders established by law, by contractual relations and through voluntary commitments must be respected. Where stakeholders’ rights and/or interests are at stake, stakeholders should have the opportunity to obtain prompt effective redress for the violation of their rights.

The Board should identify the company’s various stakeholders and promote cooperation between them and the company in creating wealth, growth and sustainability.

Stakeholders in corporate governance include, but are not limited to, customers, employees, suppliers, shareholders, investors, creditors, the community the company operates in, society, the government, regulators, competitors, external auditors, etc. In formulating the company’s strategic and operational decisions affecting its wealth, growth and sustainability, due consideration is given to those who have an interest in the company and are directly affected by its operations.

The Board should adopt a transparent framework and process that allow stakeholders to communicate with the company and to obtain redress for the violation of their rights.

Encouraging Employees’ Participation

A mechanism for employee participation should be developed to create a symbiotic environment, realize the company’s goals and participate in its corporate governance processes.

Encouraging Sustainability and Social Responsibility

The company should be socially responsible in all its dealings with the communities where it operates. It should ensure that its interactions serve its environment and stakeholders in a positive and progressive manner that is fully supportive of its comprehensive and balanced development.

The company should recognize and place an importance on the interdependence between business and society and promote a mutually beneficial relationship that allows the company to grow its business, while contributing to the advancement of the society where it operates.

The company’s value chain consists of inputs to the production process, the production process itself and the resulting output. Sustainable development means that the company not only complies with existing regulations, but also voluntarily employs value chain processes that takes into consideration economic, environmental, social and governance issues and concerns. In considering sustainability concerns, the company plays an indispensable role alongside the government and civil society in contributing solutions to complex global challenges like poverty, inequality, unemployment and climate change.

References

Reading materials you may use in this course are the following: