Beyond compliance with best practices from corporate governance to corporate transformation

Jesus P. Estanislao, Ph.D.

Chair Emeritus, ICD

University Professor Emeritus, UA&P

Introduction

1. For more than two and a half decades, ICD has been promoting good governance practices.

In the early years, our focus was on compliance with corporate governance principles and best practices. This was necessary. First, we had to help ensure that, in our economy, corporate governance principles were understood and observed.

We then took a further step. We referred to global and regional best practices to guide Philippine corporations toward the standards expected by financial markets.

2. We used the OECD and the International Corporate Governance Network as our major sources for well-articulated corporate governance principles.

These institutions provided guidance on corporate governance as practiced in the global economy and in specific regional financial markets. In Asia, similar guidance came through regional initiatives such as the Asian Corporate Governance Forum.

We went even further. Together with a few other ASEAN economies, we helped establish the ASEAN Corporate Governance Scorecard. This was undertaken as a concrete initiative under the ASEAN Finance Ministers process. It enabled participating countries to rate publicly listed companies according to their compliance with recommended corporate governance practices in ASEAN.

3. We still have much work to do with the ASEAN Corporate Governance Scorecard.

More than twenty Philippine publicly listed companies now obtain scores of 100 or higher, due partly to bonus points. This is encouraging. But the average score for all Philippine publicly listed companies still needs to be raised.

Every Philippine publicly listed company should eventually embrace the value of obtaining a high ACGS score. Such a score sends an important signal. It tells investors, regulators, and the wider market that the company is serious about good corporate governance.

ICD remains committed to helping Philippine publicly listed companies take the necessary steps to improve their ACGS scores. The aim is to bring the Philippine average to a high and respectable level, especially in relation to our ASEAN neighbors.

Beyond Conformance, Delivery of Performance

4. ICD’s corporate governance advocacy, however, has never been pursued merely to obtain high governance scores.

It has never been only about compliance with principles and best practices. From the beginning, the deeper aim has been performance.

Good governance should help corporations deliver higher levels of performance. It should strengthen their ability to attract capital and long-term funding. It should help finance investments. It should make corporations more competitive. It should enable them to grow faster, earn stronger profit margins, and sustain more than reasonable financial returns over the long term.

In short, conformance is important. But it should lead to performance.

5. An IESE study of ACGS scores across the six participating ASEAN economies has shown that highly conforming publicly listed companies enjoy premiums in the price of their shares.

They also show a greater ability to attract new investments. Over time, these investments can translate into higher business volume, better profit margins, and stronger competitive position.

Thus, conformance brings real economic benefits. Companies with high ACGS ratings do not merely look better on paper. They can also become stronger in the market.

6. This leads us to the next question.

If good corporate governance already brings benefits through conformance, how much more can it deliver when corporations use governance to drive higher performance?

This is the next peak ICD wishes to help Philippine publicly listed companies climb. The way forward is the adoption, on a purely voluntary basis, of a Performance Governance System, or PGS.

The PGS moves corporate governance beyond compliance. It uses governance as a discipline for corporate transformation.

7. What does the PGS entail?

It entails the delivery of corporate breakthrough outcomes through a system shaped by good governance and responsible citizenship.

It has three distinctive features.

First, the PGS is sustained.

It goes beyond meeting quarterly earnings targets. It goes beyond beating the short-term expectations of financial analysts. These expectations usually cover one quarter, or at most one year.

The PGS takes a longer view. It considers the full length of corporate life. In the past, corporate life was generally limited to fifty years, although extensions were possible. Today, the law allows corporations to exist across generations.

A corporation is not co-terminus with the life of its founder or founding fathers. It can live on and on. Its perspective must therefore be much longer than a quarter or a year.

Second, the PGS is systemic.

It demands a way of running a corporation that considers all the key facets of corporate operations. It does not look only at profit. It looks at the whole system by which a corporation creates value.

This includes the people who work within the corporation. It includes the internal value chain, where different teams work together. It includes efficiency, productivity, cleanliness, order, cohesion, and the reduction of waste.

It also includes the corporation’s ability to serve markets and other constituencies. These stakeholders must see enough value to give the corporation their custom, loyalty, financial support, and other forms of support.

Third, the PGS is socially responsible.

It does not close the corporation in on itself. It does not allow the corporation to become self-referential, concerned only with internal affairs and profit maximization.

Instead, the PGS opens the corporation outward, like a fan, to the wider environment. It asks the corporation to look carefully at risks and external challenges that may affect its operations. It also asks the corporation to see opportunities that can bring it to higher ground.

This wider outlook is realistic. It recognizes that problems in the external environment can affect corporate performance for good or ill. But it also points to opportunities for solidarity networks.

Through such networks, corporations can work with other institutions, civic organizations, and government entities. Together, they can strengthen the external value chain and help corporations do well while doing good.

8. The big question, then, is how a corporation sets up a PGS that will help it transform and deliver higher performance.

The answer is best left to each corporation. Every corporation has its own preferences, culture, history, and way of getting things done. It should feel free to retain practices that work well for it.

At the same time, corporations may refer to practices that other institutions in the Philippines have found effective and transformative. These practices are also broadly aligned with the original balanced scorecard first proposed at Harvard Business School, and later developed further by business and governance thinkers.

Three practices are especially important.

First, the corporation needs a clear vision.

This vision states what the corporation aims to become within a foreseeable future, usually within the next five to seven years. This time horizon is longer than the usual focus on a quarter or a year. It gives the corporation enough time to pursue big and meaningful goals.

At the same time, five to seven years is still short enough to inspire urgency. It pushes everyone to look beyond daily operational concerns and work toward an overarching goal.

The vision should be something people can understand and support. It should be a destination they can see. It should be clear enough for them to put their mind, heart, and hands behind it.

In framing this vision, the corporation must connect it with its core purpose. Its mission should not be pushed into the background. It must remain up front.

The vision must also stand on a strong foundation of corporate core values. These values should support the four core national values: maka-Diyos, maka-Tao, maka-Kalikasan, and maka-Bansa.

In this way, the corporation sends a clear signal. As it pursues its own vision, it also seeks to become a cornerstone of the national transformation our country urgently needs.

Second, the corporation must choose a few big and bold strategic initiatives.

These initiatives must be pursued with discipline and deep commitment. They should deliver transformative outcomes. They should give flesh and substance to the corporate vision.

Mechanisms must then be put in place so that people inside the corporation can work in solidarity. They must be equipped and properly motivated. They must be oriented towards taking on the corporate vision as an ideal they must be committed to bring to reality.

Then, the internal value chain must be made more efficient. It must become less tolerant of waste, dirt, disorder, and inefficiency.

Working teams must be encouraged and supported to attain higher levels of product and service quality. As they do so, the corporation wins stronger market support, financial support, and stakeholder loyalty over the long term.

Third, the corporation should establish a small and highly professional Office for Strategy Management.

This office should be placed under the chairman or chief executive officer. Its task is to ensure that strategic initiatives are actively pursued and effectively managed.

Day-to-day operations must then be aligned with the strategic roadmap. Operational outcomes should move the corporation closer to its transformation goals.

Without such discipline, the vision may remain words. With such discipline, the vision can be translated into action, performance, and transformation.

9. These suggested governance practices are not “pie in the sky.”

They have been tested for more than two and a half decades. They have proven their effectiveness in delivering transformative outcomes.

In Philippine conditions, several institutions in both the public and private sectors have shown that the PGS works when properly adopted and adapted. The key is to apply the system according to the specific circumstances of each institution.

Guidelines and toolkits have already been prepared. They can be accessed and used with relative ease.

Any Philippine corporation can therefore use the PGS as a helpful reference. It can guide a corporate governance program that seeks not only to strengthen the corporation, but also to transform it.

In doing so, the PGS helps corporations and other institutions become strong cornerstones for building Dream PH.

Beyond Corporate Performance and Strengthening

10. The governance framework behind the PGS broadens the focus of corporate governance beyond mere profit maximization.

It does not reject profit. It does not remove the importance of financial performance. In fact, it properly emphasizes corporate performance in financial and capital markets, where profits and returns remain important.

But corporate governance asks for a broader mindset. It asks corporations to see that profit is necessary, but not sufficient.

A corporation must also ask what kind of value it creates, for whom, and at what cost to people, institutions, communities, and the environment.

11. This broader mindset includes social responsibility.

Social responsibility arises from fairness, accountability, transparency, and civic duty. It deserves serious attention because corporations do not operate in a vacuum.

They carry out their operations within a socio-economic context. They depend on workers, families, communities, public infrastructure, markets, natural resources, financial systems, and social trust.

This wider context asks corporations to consider three important guidelines: personal dignity, the common good, and social justice.

The first guideline is personal dignity.

Every corporate governance program should enhance the dignity of the people affected by the corporation. This begins with those who work inside it.

Personal dignity is strengthened through the transformative value of work. Work should be done well. It should be carried out with competence, integrity, professionalism, and spirit of service. It should also be guided by the core national values at home, at work, and in social relations.

For this reason, everyone in the corporation should be given wide opportunities for lifelong learning. People need relevant skills for a changing work environment. They need proper work orientation. They need personal governance rooted in values.

In this way, every individual can contribute to the family, the workplace, the community, and the nation.

The second guideline is the common good.

The common good refers to the conditions that help people progress toward higher levels of dignity and development. It is supported by two complementary principles: subsidiarity and solidarity.

Subsidiarity brings decision-making down to the lowest appropriate level. It gives individuals and teams the freedom and responsibility to make important decisions close to where work is actually done.

Solidarity asks all individuals and teams to push the cart in the same direction. They must work together toward the corporate vision and the institution’s mission.

When subsidiarity and solidarity are observed, people are trusted and empowered. At the same time, their freedom is directed toward shared goals.

The third guideline is social justice.

Social justice requires greater equity. It asks that wider opportunities be opened to the poor, the marginalized, and all those who live and work below the poverty line.

Everyone should be given a ladder by which they can climb out of poverty. They should be able to rise as high as their talent, discipline, and enterprise allow.

At the same time, those with limited ability to help themselves must not be forgotten. The elderly, the sick, the disabled, and the destitute should receive care and assistance. They too must be able to go through life with their dignity intact and respected.

12. These three guidelines are not abstract ideas imposed from above.

    
    

They help corporations and institutions choose the strategic priorities to include in their transformation roadmap.

Personal dignity points to people as the first strategic area. Every corporation can choose big and bold initiatives that develop its people. These initiatives may include skills formation, lifelong learning, values formation, leadership development, health and wellness, and personal governance.

The common good points to the internal value chain. Through subsidiarity and solidarity, corporations can strengthen teamwork, improve productivity, reduce waste, eliminate corrupt practices, and make operations more efficient.

Social justice points to the wider social impact of the corporation. It challenges corporations to open opportunities for those left behind. It pushes them to reject a culture of dependence and support a culture of independence, freedom, and responsibility.

This is especially important in the Philippines, where vote-buying and populist measures have made many people dependent on corrupt politicians.

Corporations and institutions can help counter this culture. They can create opportunities that enable individuals to climb the economic and social ladder. They can also care for those who are too poor or too vulnerable to climb on their own.

13. As corporations and institutions pursue their chosen strategic initiatives, they soon realize that they are not alone.

Other corporations and institutions are also trying to enhance personal dignity, advance the common good, and promote social justice.

It is therefore beneficial for them to listen to one another and learn from one another. They can share mistakes to avoid. They can share successes to replicate. They can share approaches that inspire deeper commitment.

This mutual learning can lead naturally to solidarity networks.

Through these networks, corporations and institutions can support one another. They can reinforce one another’s efforts. They can seize opportunities for broader social impact.

Such networks can also help address some of the endemic ills that continue to weaken the Philippine economy and society. These include widespread poverty, widespread corruption, and widespread lack of civic mindedness.

Poverty robs many families and individuals of the dignity they are entitled to enjoy.

Corruption keeps internal and external value chains inefficient, slow, unprofessional, and unaccountable.

Lack of civic mindedness arises from the failure to observe the four core national values: maka-Diyos, maka-Tao, maka-Kalikasan, and maka-Bansa.

These problems are too large for any single institution to solve. But institutions working together can begin to make a serious difference.

14. Solidarity networks can enable corporations and institutions to work with other agencies and organizations within a sector, industry, area, or region.

Together, they can give traction and continuity to programs that reduce poverty, reduce corruption, and strengthen civic mindedness.

Such programs can be more specific and concrete than many initiatives launched by government alone. They can also be more focused and outcome-oriented.

By connecting the many dots involved in economy-wide and nation-wide programs, solidarity networks can deliver outcomes faster, more efficiently, and on a more sustained basis.

They make collaboration practical. They make shared responsibility concrete. They allow institutions to move from isolated effort to collective impact.

15. Once solidarity networks prove their effectiveness, they can be deployed to address even bigger challenges facing the economy and the country.

These networks can help strengthen the platforms on which corporations and institutions carry out their initiatives. They can support outreach to families, schools, local government units, and barangays.

A solidarity network can assist barangays, the lowest public governance units of the country, in formulating and executing their own barangay transformation programs.

A solidarity network of corporations and institutions in the same sector or industry can formulate and execute a transformation program for that sector or industry. A similar initiative can be undertaken for a region or economic area.

Various solidarity networks can also come together to strengthen the country’s human, natural, and financial resource bases.

They can support the smart, strategic, socially responsible, and developmental use of our human and natural resources. They can also help strengthen and rapidly develop our financial and capital markets through a catch-up and leapfrogging strategy.

Normally, these macro-level topics are left to the national government. But given our present situation, a broader multi-sector approach is needed.

We need the equivalent of a “Davos” type of multi-sector effort. Leaders from business, government, civil society, academe, and professional groups must think together and design long-term transformation programs for our economic resources.

Solidarity networks can take up this challenge. But they can do so only if enough corporations and institutions first pursue their own transformation programs through the PGS.

16. We do have a way out of crisis.

It goes beyond thinking mainly about elections and the presidential possibilities that voters may consider in 2028.

This way out may be longer. But it offers hope because it has already been made to work. It starts at the bottom, one corporation and one institution at a time, one barangay and municipality at a time.

It focuses on corporate and institutional transformation. It enables corporations and institutions to become cornerstones for building Dream PH.

It also requires the cascading of the national core values to all Filipinos. From there, it helps individuals pursue their own personal transformation. They become the bricks for sustained and solid nation-building.

This is how we build Dream PH: strong institutions as cornerstones, and responsible citizens as bricks.

Manila, July 2026