PhilEXIM's Code of Corporate Governance
(Revised per Board Resolution No. 2317 dated 15 December 2010)
It is the policy of PhilEXIM to actively promote and pursue corporate governance reforms and to continuously observe the principles of fairness, accountability and transparency. The Board of Directors of PhilEXIM hereby adopts this Code of Corporate Governance as a conscious attempt to significantly enhance PhilEXIM’s corporate organization to make it a valuable partner of the government in national development and to make it a corporation that is competitive both locally and globally.
PhilEXIM is committed to institutionalize the principles of good corporate governance in the entire organization.
The Board of Directors, Management and Staff of PhilEXIM hereby commit themselves to the principles and best practices contained in this Code and acknowledge that this will serve as a guide in the attainment of corporate goals and the programs of reform for the government corporate sector as encapsulized in the acronym FIESTA: fair sharing/contribution in the fiscal consolidation efforts of the National Government, integrity and enhanced corporate governance, efficient and effective delivery of public services, sustainability, transparency and accountability.
The Board of Directors, Management and Staff believe that corporate governance is an integral component of sound strategic business management and of transparency and accountability in public corporate governance and will therefore undertake every effort necessary to create awareness within the organization.
II. GOVERNANCE / COMPLIANCE SYSTEM
A. BOARD OF DIRECTORS
The Board of Directors, hereinafter referred to as the “Board,” is primarily responsible for the governance of the Corporation. Compliance with the principles of good corporate governance shall start with the Board. The main responsibility of the Chairman of the Board shall be focused on the proper governance of the Corporation through the Board.
Composition of the Board
Pursuant to Section 10 of Presidential Decree No. 1080 as amended (the PhilEXIM Charter), the powers and functions of PhilEXIM shall be exercised by a Board which shall be composed of nine (9) members, as follows:
1. The Secretary of Finance who shall be the Chairman of the Board. Whenever the Secretary of Finance is unable to attend a meeting of the Board, he shall designate an Undersecretary to attend as his alternate, who shall act as Chairman;
2. The President of the Corporation, who shall be the Vice-Chairman of the Board, shall assist the Chairman and act in his stead in case of absence or incapacity;
3. The Secretary of Trade and Industry. Whenever the Secretary of Trade and Industry is unable to attend a meeting of the Board, he shall designate an Undersecretary to attend as his alternate;
4. The Governor of the Bangko Sentral ng Pilipinas (BSP). Whenever the BSP Governor is unable to attend a meeting of the Board, he shall designate a BSP Deputy Governor to attend as his alternate;
5. The Director-General of the National Economic and Development Authority (NEDA). Whenever the NEDA Director-General is unable to attend a meeting of the Board, he shall designate a NEDA Deputy Director-General as his alternate;
6. The Chairman of the Philippine Overseas Construction Board (POCB). Whenever the POCB Chairman is unable to attend a meeting of the Board, he shall designate the POCB Vice-Chairman to attend as his alternate; and
7. Three (3) representatives from the private sector, at least one of which shall come from the export community, who shall be elected by the ex-officio members of the Board and who shall hold office for a term of not more than two (2) consecutive years; provided, that the representative from the private sector should be of known probity in the sector he represents.
Powers of the Board
Pursuant to Section 11 of Presidential Decree No. 1080 as amended, the Board shall have the authority to:
1. Formulate policies to carry out effectively the provisions of the PhilEXIM Charter;
2. Prepare and issue rules and regulations as it considers necessary for the effective discharge of the responsibilities and exercise of the powers assigned to PhilEXIM under its Charter;
3. Direct the management, operations and administration of PhilEXIM;
4. On recommendation of the President, appoint, fix the remunerations and other emoluments, and remove the personnel of PhilEXIM: Provided, however, that positions considered by the Board to be policy-determining, primarily confidential or highly technical in nature shall not be subject to the Civil Service Law;
5. Authorize such expenditure by the Corporation as are in the interest of the effective administration and operations of PhilEXIM; and
6. Compromise or release, in whole or in part any claim or settled liability to the Corporation regardless of the amount involved, under such terms and conditions it may impose to protect/promote the interest of PhilEXIM. This authority to compromise or release extends to claims against the Corporation.
Meetings of the Board
Pursuant to Section 12 of Presidential Decree No. 1080 as amended, the Board shall convene as frequently as is necessary to discharge its responsibilities properly, but shall meet at least once every two weeks as worded in the Charter, but for the purpose of the Corporate Governance Committee, at least once a month. The Board may be convoked either by the Secretary of Finance or by the President of PhilEXIM.
General Responsibilities of the Board
It shall be the responsibility of the Board to foster the long-term success of PhilEXIM and secure its sustained competitiveness in a manner consistent with its powers set out in the PhilEXIM Charter, which the Board shall exercise in the best interest of the Corporation and its stakeholders. The Board shall decide on all corporate acts as a collegial body. The Board shall conduct itself with utmost honesty and integrity in the discharge of its duties, functions and responsibilities.
Specific Duties and Responsibilities of the Board
To ensure a high standard of best practice for PhilEXIM and its stakeholders, the Board shall:
1. Determine PhilEXIM’s vision, mission and core values to guide the carrying out of its objectives and business strategies;
2. Establish corporate objectives and draw up strategies for achieving them including the formulation of a business plan to direct corporate activities towards ensuring PhilEXIM’s long-term viability and strength;
3. Oversee and monitor Management action and performance to ensure optimum results;
4. Ensure the adoption of sound written policies on all major business activities including the maintenance of adequate risk management policy, provision of technology and strategic guidelines on operating budget and major capital expenditures;
5. Prescribe a clear assignment of responsibilities and decision-making authorities, incorporating a hierarchy of required approvals from individual employees to the Board itself;
6. Keep Board authority within the powers of PhilEXIM as prescribed in its Charter, and in existing laws, rules and regulations;
7. Assess at least annually its performance and effectiveness as a body, as well as its various committees, the Chief Executive Officer and the Corporation itself;
8. Adopt a system of internal checks and balances - Among the Board members, an effective system of checks and balances must exist. The system shall also provide a mechanism for effective check and control by the Board over the Chief Executive Officer and key managers and by the latter over the line officers of the Corporation. Such systems should be regularly reviewed and updated;
9. Properly discharge Board functions by meeting regularly - Independent views during Board meetings shall be given due consideration and all such meetings shall be duly minuted;
10. Ensure that PhilEXIM complies with all relevant laws, rules and regulations, company policies, procedures, and codes of ethics and corporate governance;
11. Oversee the process of disclosure and communications - Identify PhilEXIM’s major and other stakeholders and formulate a clear policy on communicating or relating with them;
- Establish a competitive selection process to ensure that the key executives have the necessary motivation, integrity, competence and professionalism as well as adopt a professional development program for officers and employees, and a succession planning for key executives;
- Ensure the integrity of PhilEXIM’s accounting and financial reporting systems, including independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards;
- Constitute an Audit Committee and such other Board-level committees as may be necessary to assist the Board in discharging its functions; and
15. Assume overall responsibility for ensuring adherence to corporate governance principles and best practices.
General Responsibility of a Director
A Director assumes a position of trust and confidence, and as such, he must act in the best interest of PhilEXIM. He shall act in a manner characterized by transparency, accountability and fairness and shall assume certain responsibilities to different constituencies or stakeholders, e.g., the Corporation itself, the Government, customers, creditors, employees, and the public at large, who have the right to expect that the Corporation is run with integrity, prudence and in a sound manner geared towards sustained progress over the long term.
Specific Duties and Responsibilities of a Director
A Director shall have the following duties and responsibilities:
1. Conduct fair business transactions with PhilEXIM and ensure that personal interest does not compromise Board decisions - A Director shall avoid situations that give rise to a conflict of interest or compromise his impartiality. A Director shall not use his position to make profit or to acquire benefit or advantage for himself and/or his related interests;
2. Act always in good faith with the care which an ordinarily prudent man would exercise under similar circumstances, with loyalty and in the best interest of PhilEXIM and its stakeholders;
3. Devote time and attention necessary to properly discharge his duties and responsibilities - A Director shall familiarize himself with PhilEXIM’s business, be aware of the Corporation’s condition, contribute meaningfully to the Board’s work, attend and actively participate in Board and committee meetings, request and review meeting materials;
4. Act judiciously - Before deciding on any matter, a Director shall thoroughly evaluate the issues, ask questions and seek clarifications when necessary;
5. Exercise independent judgment - A Director shall view each problem or situation objectively. When disagreement with others occurs, he shall carefully evaluate the situation and state his position, he shall not be afraid to take a position even though unpopular, and he shall support plans and ideas that he thinks will be beneficial to PhilEXIM;
6. Have a working knowledge of the statutory and regulatory requirements affecting PhilEXIM, including the contents of its Charter and the requirements of government regulatory agencies - A Director shall also keep himself informed of the industry developments and business trends in order to safeguard PhilEXIM’s competitiveness;
7. Observe confidentiality - A Director shall observe the confidentiality of non-public information acquired by reason of his position as Director, and shall not disclose such information without authority of the Board;
8. Ensure the continuing presence, soundness, effectiveness and adequacy of PhilEXIM’s internal control mechanisms for good governance.
The minimum internal control mechanisms for the Board’s oversight responsibility shall include but not limited to:
- Ensuring the presence of organizational and procedural controls, supported by an effective management information system and risk management reporting system;
- Reviewing proposed senior management appointments and ensuring the selection, appointment and retention of qualified and competent Management; and
c) Reviewing the Corporation’s personnel and human resource policies and guidelines, conflict of interest situations and its appropriate remedial measures, changes to the compensation plan for officers and employees and management succession plan.
Any Director who enters into a transaction or contract grossly disadvantageous to the government, whether he profited from it or not, shall be liable for violation of Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act.
The Corporate Secretary
The Board shall, upon recommendation of the President, appoint a Corporate Secretary to assist the Board in making business judgment in good faith and in the performance of its responsibilities and obligations.
The Corporate Secretary shall be a resident and citizen of the Philippines. He must possess organizational, interpersonal, and legal skills of a Chief Legal Officer.
The Corporate Secretary shall have the following functions:
1. Serve as an adviser to the Board Members on their responsibilities and obligations;
2. Keep the minutes of meetings of the shareholders, the Board, the Executive Committee, and all other committees in a book or books kept for that purpose, and shall furnish copies thereof to the Chairman, the President/CEO and other members of the Board as appropriate;
3. Keep in safe custody the seal of the Corporation and affix it to any instrument requiring the same;
- Attend to the giving and serving of notices of Board and shareholder meetings, if applicable;
- Be fully informed and be part of the scheduling process of other activities of the Board;
- Prepare an annual schedule of Board meetings and the regular agenda meetings, and put the Board on notice of such agenda at every meeting;
- Oversee the adequate flow of information to the Board prior to meetings; and
- Ensure fulfillment of disclosure requirements to regulatory bodies.
B. BOARD COMMITTEES
To aid in complying with the principles of good corporate governance, the Board shall constitute Board-level committees. Such committees shall be provided with the resources necessary to discharge the functions, duties and responsibilities assigned to them, and shall include the following:
i) Corporate Governance Committee (CGC)
The CGC shall be composed of at least five (5) members, including the President and CEO, from among the Board of Directors, who shall be appointed or designated by the Board. The Chairman of the Committee shall be chosen from among the members representing the private sector. The Chairman and the members shall hold office for a period of one (1) year. In case of permanent incapacity, resignation, removal or death, the vacancy shall be filled-up by appointing/designating one from among the members of the Board of Directors, who shall serve for the unexpired portion of the term.
Duties and Responsibilities of the CGC
1. Ensure adherence to the PhilEXIM’s Code of Ethics;
2. Ensure faithful observance of PhilEXIM’s Code of Corporate Governance;
3. Keep abreast of the developments in the corporate governance field that might affect PhilEXIM;
4. Review from time to time the Code of Corporate Governance, the Code of Ethics and the CGC Charter and recommend any changes to the Board;
5. Design and recommend an orientation program for new Directors as well as a continuing education program for existing Directors, particularly relating to corporate governance improvement program;
6. Determine if there is any potential conflict of interest by a Director, and institute a process for handling these situations in accordance with existing law, rules and regulations and in line with global as well as ethical and other regulatory standards;
7. Conduct evaluation and assessment of the performance of the Board as a body and report the same to the Board every end of the year;
8. Review, as the need arises, the organization plans and structure including proposed organizational changes/enhancements as well as manpower plan to ensure adequacy in meeting the growth need of PhilEXIM.
9. Oversee PhilEXIM’s compliance efforts with respect to the Code of Corporate Governance, Code of Ethics, and related laws, rules and regulations as well as company policies and procedure;
10. Meet with compliance and ethics officers to review programs designed to raise the culture of ethics and compliance within the Corporation, and corollary, to install an enforcement mechanism which should sanction non-compliance and unethical behavior while rewarding the deserving ones;
- Review the compensation of the Boards of other government financial institutions and come up with a recommendation of the overall practice;
- Review and establish compensation for Directors and recommend changes to the Board;
- Provide oversight and guidance in the compensation and benefit philosophy for all employees of the Corporation;
- Review and recommend to the Board the Corporation’s base salary, incentive-compensation, equity-based compensation and such other incentives/awards for officers and employees of the Corporation;
- Review annually the Corporation’s goals and objectives relevant to the compensation of the Chief Executive Officer in light of those goals and objectives; and
- Carry out such other duties as may be delegated to it by the Board of Directors from time to time.
PhilEXIM may establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of individual Directors, if any, and other officers. No Director shall be involved in deciding his own remuneration.
The compliance functions of the CGC shall cover non-financial matters while financial audit, including non-financial items which are directly relevant to the financial audit work, is assigned to the Audit Committee. Whenever necessary, the CGC shall jointly work with the Audit Committee to make sure that governance and compliance aspects of a particular issue are thoroughly and adequately addressed.
ii) Risk Oversight Committee (ROC)
The ROC shall assist the Board in directing the affairs of the Corporation particularly in the development and oversight of the Corporation’s risk management plan and program. It shall likewise assist the Board in assessing and providing oversight to management relating to the identification and evaluation of major risks involved in the Corporation’s business operations, finance and accounting, legal compliance, personnel policy, treasury, budgeting or any other areas that could create significant risks to the Corporation’s results, reputation or capacity to fulfill its mandate and reviewing and evaluating the Corporation’s actions to mitigate and manage the risks; and in overseeing and reviewing information regarding the Corporation’s risk management framework, including the significant policies, procedures and practices employed to manage credit risk, market risk and operational risk.
The ROC shall be composed of at least four (4) members of the Board of Directors including the President and Chief Executive Officer. The members of the ROC shall possess a range of expertise as well as adequate knowledge of the Corporation’s risk exposures that will enable them to develop appropriate strategies for preventing losses and minimizing the losses when they occur.
The Committee Chairman and members shall be appointed by the Board provided that the Chairman shall be an ex-officio member of the Board. The Board may replace Committee members, when circumstances warrant. Each member of the Committee shall attend at least once a year a training/seminar on risk management.
The Chairman and members shall hold office for a period of one (1) year. In case of permanent incapacity, resignation, removal or death, the vacancy shall be filled up by appointing/designating one from among the members of the Board of Directors, who shall serve for the unexpired portion of the term.
Duties and Responsibilities of the ROC
1. Review and revise the Risk Management Plan as needed. It shall evaluate the Plan to ensure its continued relevancy, comprehensiveness and effectiveness. It shall revisit strategies, look for emerging or changing exposures, and stay abreast of developments that affect the likelihood of harm or loss;
2. Together with the Audit Committee, review, assess and discuss with the Chief Legal Counsel, the Finance Officer, the Chief Risk and Compliance Officer, and the Commission on Audit any significant risks or exposures; the steps Management has taken to minimize such risks/exposures; and the Corporation’s underlying policies with respect to risk assessment and risk management;
3. Report regularly to the Board of Directors the Corporation’s overall risk exposure, actions taken to reduce the risks, and recommend further action or plans as necessary; and
4. Oversee the system of limits to discretionary authority that the Board delegates to Management, ensure that the system remains effective, that the limits are observed and that immediate corrective actions are taken whenever limits are breached.
The ROC shall meet as often as necessary or as it deems appropriate. It shall periodically meet with the Chief Legal Counsel and other senior officers of the Corporation. The Chairman shall be responsible for scheduling and presiding over the meetings as well as for preparing the agenda. As needed, he may request any officer or employee of the Corporation, resource persons or consultant, if there is any, to attend the meeting of the Committee.
The Office of the Corporate Secretary shall serve as the Secretariat which shall assist the Committee in carrying out its functions effectively and efficiently. All Committee meetings shall be recorded and the minutes of the meeting shall be sent to the members at a reasonable period of time after every meeting.
Powers and Authority of the ROC
For the effective and efficient discharge of its duties, the ROC shall have the following authority and/or prerogatives:
1. Recommend to the Board, upon endorsement of the President, the appointment of a Chief Risk and Compliance Officer (CRCO) who shall have the rank of a Senior Vice President. He shall be administratively under the Office of the President and Chief Executive Officer but shall report functionally to the ROC;
2. Review and approve the qualification standards, job description and responsibilities of the CRCO; and
3. Together with the President and CEO, assess the performance of the CRCO and recommend any appropriate action relative thereto.
In the performance of its duties, the ROC, subject to the approval of the Board, may hire or retain risk management consultants or other experts.
The Chief Risk and Compliance Officer (CRCO)
The Board of PhilEXIM Directors shall, upon recommendation of the ROC and the President, appoint a Chief Risk and Compliance Officer, with the rank of Senior Vice President or as may be determined by the Board, to perform the following general functions:
The CRCO shall oversee the Corporate Compliance Program of PhilEXIM, functioning as an independent and objective officer who, with the assistance of other PhilEXIM personnel, as appropriate, reviews and evaluates compliance issues/concerns within the organization and assists the Board of Directors in ensuring that the rules and regulations of regulatory agencies are complied with, that company policies and procedures are being followed, and that behavior in the organization meets PhilEXIM’s Code of Ethics and other standards of conduct. The CRCO who shall be directly under the administrative supervision of the President and CEO shall report to the Board of Directors, through the CGC, on the implementation and ongoing activities of the Corporate Compliance Program, including any significant non-compliance issues, and through the ROC, on the implementation and ongoing activities of the Risk Management Plan. However, the compliance functions of the CRCO shall exclude financial audit matters (including non-financial items which are directly relevant to the financial audit work) which are within the purview of the Internal Audit Office. Whenever necessary, the Office of the CRCO shall jointly work with the Internal Audit Office to make sure that governance and compliance aspects of a particular issue are thoroughly and adequately addressed.
Duties and Responsibilities of the Chief Risk and Compliance Officer (CRCO)
1. Integrate risk management into the business activities of the Corporation;
2. Ensure that the Corporation manages adequately credit, market, liquidity, legal, operational and other risks:
- Review compliance with existing risk asset management policies, regulations, plans and procedures;
- Provide feedback to Management and/or marketing units on potential losses or gains in risk asset management operations based on periodic financial analysis to gauge the credit health of the Corporation and identify sound credit alternatives;
3. Advise the Board of Directors in areas of risk exposures and risk management activities of the Corporation;
4. Ensure adherence to rules, regulations and issuances relevant to the operations of the Corporation;
5. Manage the implementation and periodic revision of the Corporate Compliance Program;
6. Assist the CGC in ensuring that the Corporation complies with the Code of Corporate Governance, Code of Ethics, and related laws, rules and regulations as well as with company policies and procedures;
7. Coordinate any internal investigation or fact-finding ordered by the Board of Directors and any resulting corrective action to address regulatory compliance issues;
8. Develop and recommend policies and programs to the Board of Directors, through the CGC, which will encourage officers and employees to report suspected fraud and other improprieties without fear of retaliation;
9. Develop, coordinate and participate in educational and training programs that focus on the elements of the Corporate Compliance Program to ensure that all employees are knowledgeable of and comply with the established standards of conduct, related laws, rules and regulations, company policies and procedures, and other specific issues deemed necessary for the effective implementation of the Corporate Compliance Program;
10. Provide the CGC with timely updates on new developments in the field of corporate governance;
11. Prepare the Annual Compliance Report for submission to the Board of Directors, through the CGC, summarizing the activities undertaken pursuant to the Corporate Compliance Program; and
12. Prepare annual budget and work program for compliance-related activities.
The CRCO shall have such other responsibilities as the Board may impose upon him. The CRCO may call on any of PhilEXIM Management and employees to seek assistance or elicit information necessary for the effective implementation of the Corporate Compliance Program. With the permission of the President or the CGC (in case the President is involved), the CRCO shall have access to all documents and information relevant to compliance activities. The CRCO shall seek advice of the Chief Legal Counsel and other lawyers of PhilEXIM whenever necessary. The CRCO may likewise avail of the services of consultants or experts on relevant issues, subject to the approval of the CGC which shall recommend to the Board of Directors for final approval. The CRCO shall be provided with the resources necessary to discharge the duties and responsibilities of the position.
iii) Audit Committee
The objective of the Audit Committee shall be to install and ensure the full operationalization of a proper and adequate control system that guarantees reliability of reporting, safeguarding of assets, compliance with rules and regulations on financial and related matters, effectiveness and efficiency of operations.
The Audit Committee shall be composed of five (5) non-executive Board Members, two (2) of whom shall be ex-officio members and three (3) private sector representatives, who shall have (a) knowledge of the export-import industry; or (b) the ability to read and understand fundamental financial statements, including PhilEXIM’s balance sheet, income statement, statement of cash flow, and key performance indicators; or (c) the ability to understand key business and financial risks and related controls and control processes.
The Chairperson of the Committee shall be appointed by the Board and shall be one who has shown independence, competence, dedication and leadership. He shall be literate in business and financial reporting and control. Such competence shall include knowledge of the regulatory requirements and past employment experience in finance or accounting or other comparable experience or background.
The other members of the Committee, at least one of whom shall have related accounting and audit experience or sufficient training, shall also be independent and financially competent. Independence is measured by the member’s ability to exercise and express objective judgment on any material issue before the Committee, and where he has no close blood or business relation with anyone from the top level of Management of the Corporation. Financial competence entails financial literacy or numeracy which is the ability to read, understand and analyze financial statements.
The Chairman, as well as the other members of the Committee, who shall be appointed by the Board, shall hold office for a period of one (1) year. In case of permanent incapacity, resignation, removal or death, the vacancy shall be filled-up by appointing one from among the other members of the Board of Directors, who shall serve for the unexpired portion of the term.
Duties and Responsibilities of the Audit Committee
1. Act on behalf of the Board of Directors in overseeing all material aspects of PhilEXIM’s reporting, control and audit functions, except those functions and/or responsibilities appertaining to the other standing Committees of the Board;
2. Assist the Board in monitoring the (a) integrity of PhilEXIM’s financial statements; (b) the latter’s compliance with legal and regulatory requirements on financial and related matters, (c) the independence of the Corporation’s Internal Audit Office and, to some extent, the Auditor of the Commission on Audit (COA); and (d) such other matters or works that may require the Committee’s assistance;
3. Focus on the qualitative aspects of financial report to the stakeholders and on PhilEXIM’s processes for the management of the business/financial risk;
4. Coordinate with other Board Committees and maintain strong and positive working relationships with the Management, external and internal auditors, legal counsel, and other Committee advisors;
5. Review and assess the following:
a) All major financial reports (regular management reports, interim statements, annual financial statements, and other disclosure statements to regulatory authorities and other parties) to safeguard the quality and completeness of the said reports and ensure compliance with the disclosure requirements of government regulatory bodies;
b) The significant reports to management prepared by the Internal Audit Office and management responses;
c) The Corporation’s system of internal controls for detecting accounting and reporting financial errors, fraud and defalcations, legal violations, and non-compliance with the corporate code of conduct;
d) The Corporation’s accounting, budgetary and internal control standards and systems, including its risk management policy, and make recommendations to the Board for changes it considers desirable;
e) The external auditor’s independence and the overall scope and focus of the annual/interim audit, including the scope and level of involvement with unaudited quarterly or other interim-period information;
f) The results of examinations of the regulatory authorities in terms of important findings, recommendations and management response;
g) Key financial statement issues and risks, their impact or potential effect on reported financial information, the processes used by management to address such matters, related auditor views, and the basis for audit conclusions, including important conclusions on interim and/or year-end audit work in advance of the public release of financials; and
h) Important internal and COA auditor recommendations on financial reporting, controls, other matters and management’s response.
6. Review, assess and/or approve:
a) Internal Auditor’s Charter and Manual of Operations;
b) Changes in important accounting principles and the application thereof in both interim and annual financial reports;
c) Significant conflicts of interest and related-party transactions;
d) Internal Auditor’s performance and changes in internal audit leadership.
7. Review with Management, Internal Audit Office and, when necessary, the COA Auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on PhilEXIM’s financial statements;
8. Meet periodically with management to review PhilEXIM’s financial risk exposures and the steps management has taken to monitor and control such exposures;
9. Review and approve proposed audit plan developed by the Internal Audit Office inclusive of input from Management and other key Committee chair, responsive to the Committee’s primary responsibilities and, on the basis of which, periodically review the performance of that Office, and recommend to the Board appropriate actions and measures to enhance the audit function of the Internal Audit Office. The annual plan shall be submitted for confirmation/approval by the Board;
10. Oversee compliance audits or reviews on financial and related matters conducted by the Internal Audit Office or by external auditors and consultants as may be necessary;
11. Review with PhilEXIM’s Chief Legal Counsel legal matters that may have a material impact on the financial statements and related compliance policies and any material reports or inquiries received from regulators or government agencies;
12. Report periodically to the Board, through its Chairperson, at least semi-annually, all its activities, monitoring and approvals it has made. It shall also submit highlights of the minutes of meetings conducted specifically identifying monitoring activities and approvals which shall be made available to each Board member at least one week prior to the subsequent Board meeting; and
13. Recommend to the Board appropriate action, in cases where the COA Auditor’s relationship with management has influenced the former’s objectivity and independence in the performance of his/her duties.
Operating Principles of the Audit Committee
In the discharge of its duties, the Audit Committee shall be guided by the following principles:
1. The Committee shall, and to the extent appropriate, get in touch with senior management, other Committee Chairpersons, and other key Committee advisors, internal and COA auditors to strengthen the Committee’s knowledge of relevant current and prospective business issues;
2. The Committee, in tandem with Management, shall develop and participate in a process for review of important financial and operating topics that present potential significant risk to the Corporation. In addition, the individual Committee member shall endeavor to participate in relevant and appropriate self-study or other educational opportunities to assure understanding of the business and environment in which the Corporation operates;
3. Work closely with the Risk Oversight Committee relative to the proper identification and management of risks;
4. Review periodically, at least annually, the Committee Charter to ensure the relevance of the Committee’s function vis-à-vis its operational effectiveness and empowerment;
5. Seek sufficient understanding of significant accounting judgments and always having a keen eye for warning signals and “red flag” that may indicate improper earnings reporting;
6. Ensure that the Corporation’s financial reports give a clear idea of its performance relative to appropriate performance benchmarks; and
7. Watch out for fraudulent reporting due to pressure to beat expectations or meet targets that push up incentive-based compensation plan.
Authority and Prerogatives of the Audit Committee
For the effective and efficient discharge of its duties, the Committee shall have the following authority and/or prerogatives:
1. Review and approve the qualification standards and the job description and responsibilities of the Internal Auditor;
2. Decide on the appointment, performance evaluation, and change or replacement, subject to the final approval or ratification of the Board, of the Internal Auditor, who reports functionally to the Committee and to the President administratively; recommend the hiring of the senior executives of the Internal Audit Office to the Board upon recommendation of the President, and approve the benefits and other emoluments to be given to the COA Auditor;
3. Review the scope and results of internal audit activities;
4. Ensure and evaluate the objectivity of the audit function of the Internal Auditor and, to the extent appropriate, the COA Auditor;
5. Access internal and external resources, as it may deem necessary, to carry out its responsibilities;
6. Obtain from the Internal and COA Auditors, as well as from Management, the list of key control issues and require members of the Management, legal counsel, Internal and COA Auditors, whenever applicable, to participate in Committee meetings;
7. Require a written statement from Management on the integrity of the Corporation’s control and reporting systems and its adherence to government accounting and auditing standards;
8. Review annually, the performance (effectiveness, objectivity and independence) of the internal and, to some extent, COA Auditors;
9. Approve changes in the key officers charged with internal audit; and
- Meet with compliance and ethics officers to review programs designed to raise the culture of ethics and compliance within the corporation. Corollary to the foregoing, to install an enforcement mechanism which would sanction non-compliance and unethical behavior while rewarding the deserving ones.
The Corporate Secretary shall serve as the secretary of the Committee. He shall assist the Committee in carrying out its functions effectively and efficiently.
The Audit Committee shall meet at least once every two (2) months. It may, as the need arises, meet more often. The meetings should be long enough to provide time for full discussion of all issues relevant to the functions of the Committee. At the end of each meeting, the Committee members shall meet in executive session to assess the information they received and to take appropriate action when necessary. All Committee meetings shall be recorded.
The Audit Committee shall meet periodically with the financial management team, and on ‘as needed basis,” with the general counsel and chairman of each of the major operating units of the Corporation.
The Audit Committee shall keep the Chairman of the Board fully informed of its activities, recommendations and issues decided by it for final disposition of the Board, unless it is the Chairman who is the subject of the audit investigation. It shall also work closely with the other Board Committees and maintain harmonious working relationship with the Risk Oversight Committee.
Every effort shall be made to keep a mutually supportive but professionally arms-length relationship with the Chief Executive Officer and other key members of senior management. The Board shall include in its performance evaluation, the relationship of the CEO with the Audit Committee.
The Audit Committee shall regard the Internal Auditor as a key partner who can help ensure its ability to fulfill its functions. The Internal Auditor shall be encouraged to maintain an open, frank and wholly professional relationship with the Committee, with which the Internal Auditor shall meet privately, confidentially and regularly.
To ensure effectiveness in the work of the Audit Committee, it shall maintain a more frequent and open line of communication with the COA Auditor.
In the performance of its duties, the Audit Committee, upon approval of the Board, may hire or retain consultants which shall be paid by PhilEXIM.
PhilEXIM shall have in place an independent Internal Audit Office, through which the Board and Senior Management shall be provided with reasonable assurance that its key organizational and procedural controls are effective, appropriate, and complied with.
The Head of the Internal Audit Office shall report to the Audit Committee.
Functions of the Internal Audit Office
1. Examine and evaluate the adequacy and effectiveness of the internal control systems at various operations and activities of the corporation;
2. Review compliance with legal and regulatory requirements and approved Corporation’s policies and procedures;
3. Examine the quality of credit portfolio and periodically updates Management on the status thereof;
4. Appraise performance and economical and efficient use of corporate resources;
5. Recommend measure to safeguard the assets of the Corporation;
6. Review the accuracy and reliability of the Corporation’s accounting records and financial reports, including that of other entities where the Corporation has financial interest or where it may have review and monitoring authority through contractual agreements or covenants; and
7. Suggest/recommend to Management measures to address the inherent flaws/defects in the systems and operations of the different organizational units of the Corporation.
Pursuant to Section 19 of Presidential Decree No. 1080 as amended, the Chairman of the Commission on Audit shall act as the ex-officio External Auditor of PhilEXIM and, as such, he is empowered and authorized to appoint a representative who shall be the External Auditor.
- Credit Committee (CRECOM)
The CRECOM shall be composed of five (5) members, including the President and CEO who shall act as the Chairman of the Committee, from among the Board of Directors who shall be appointed or designated by the Board.
Duties and Responsibilities of the CRECOM
1. Ensure that the credit policies set by the Board are implemented;
- Promote and market the Corporation’s programs and services;
- Approve/Deny accounts falling under the credit approving authority of the Committee and act in an advisory capacity towards credit decision-making for accounts falling under the approving authority of the Board;
- Whenever the need arises, oversee site/plant visit and inspection; and
- Perform such other related functions as it may deem necessary.
C. CHIEF EXECUTIVE OFFICER (CEO)
The internal control mechanisms for management’s operational responsibility shall center on the CEO, being ultimately accountable for the company’s organizational and procedural controls. The CEO shall be in-charge of management and day-to-day operations.
Pursuant to Section 14 of Presidential Decree No. 1080 as amended, the CEO shall be the President of PhilEXIM who shall be appointed by the President of the Philippines, upon recommendation of the Board, for a term of six (6) years unless removed for cause or by reason of incapacity.
Powers and Duties of the CEO
Pursuant to Section 15 of Presidential Decree No. 1080 as amended, the powers and duties of the President and CEO shall be:
1. To prepare the agenda for meetings of the Board and to submit for the consideration of the Board the policies and measures which he believes to be necessary to carry out the purposes and provisions of the PhilEXIM Charter;
2. To execute and administer the policies and measures approved by the Board;
3. To direct and supervise the operations and internal administration of the Board; and
4. To exercise such other powers as may be vested in him by the Board.
III. SUPPLY OF INFORMATION
In order to fulfill their responsibilities, Board Members shall be provided by the Management with complete, adequate and timely information prior to Board meetings and on an on-going basis. The Board may have separate and independent access to PhilEXIM’s Senior Management thru the President.
The Board Members may require additional information to fulfill their duties properly. Such information may include the background or explanatory information relating to matters to be brought before the Board, copies of disclosure documents, budgets, forecasts and monthly internal financial statements. With respect to the budget, any variance between the projections and actual results shall be disclosed and explained.
The Board shall provide the National Government, through the Department of Finance, with a balanced and understandable assessment of PhilEXIM’s performance, position and prospects on a semestral basis and the Management shall be primarily accountable to the Board in providing a balanced and understandable assessment of PhilEXIM’s performance, position and prospects on a monthly basis.
V. DISCLOSURE AND TRANSPARENCY
All material information shall be fully and accurately disclosed in PhilEXIM’s Annual Report and corporate website, subject to PhilEXIM’s policies and relevant laws, rules and regulations. Such information shall include, among others, financial operating performance, Board changes and information about Board Members, remuneration policy for members of the Board and key executives, organizational structure, changes in capitalization and amendments to the PhilEXIM Charter.
The financial reports shall disclose material compliance or non-compliance with international and Philippine accounting standards.
VI. COMMUNICATION PROCESS
All Directors, Officers and Supervisors of PhilEXIM shall ensure the thorough dissemination of this Code to all employees and related third parties, and to likewise enjoin compliance in the process.
An adequate number of printed copies of this Code must be reproduced and distributed with a minimum of at least one (1) hard copy of this Code per department.
VII. TRAINING PROCESS
Funds shall be allocated for the conduct of an orientation program or workshop to operationalize this Code, and for the continued education and training of all employees to ensure compliance with this Code.
Each Director is enjoined to attend a seminar on corporate governance which shall be conducted by a duly recognized private or government institute.
VIII. MONITORING AND ASSESSMENT
Each Committee shall report regularly to the Board.
The CGC with the assistance of the CRCO shall establish an evaluation system to determine and measure compliance with this Code. The adoption of such performance evaluation system shall be approved by the Board.
This Code shall be subject to periodic review as determined by the Board.
IX. PENALTIES FOR NON-COMPLIANCE WITH THE CODE
Any violation of this Code shall be dealt with accordingly.
The CGC shall, upon recommendation of the CRCO, be responsible for determining violations and recommend the probable imposable penalty for violations or non-compliance to the Board. The Board shall make the final decision on the imposable penalty for all violations.