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by: Micaela Segui, CSSWB Corporate Governance Analyst Institute of Corporate Directors The 3rd Corporate Governance Roundtable Discussion for Publicly Listed Companies, titled "Elevating the Philippines Corporate Governance Standard," was a collaborative effort between the Securities and Exchange Commission (SEC), Good Governance Advocates and Practitioners of the Philippines (GGAPP), and the Institute of Corporate Directors Philippines (ICD). Held from 1:00 PM to 5:00 PM last Wednesday, March 6, 2024, via Zoom, the event drew over 160 participants and aimed to significantly enhance the corporate governance standards of publicly listed companies in the Philippines. The event brought together Philippine Publicly Listed Companies' Compliance Officers, Corporate Governance Advocates, and Board members, signaling a proactive stance and synergy in boosting the nation's corporate governance standards. Mr. Reginald Tiu, President of GGAPP and Chairman of CG Standards Committee of ICD, moderated the event, playing a crucial role in its organization. To enrich the discussion, top-performing and most improved companies over the last years of the ACGS Assessment were invited as panelists. These included Atty. Jocelyn Villar-Altamira (Vice President and Head of Manila Electric Company's Corporate Governance and Compliance Office), Ms. Maria Virginia Tolentino-Uy (SAVP, GRC of SM Investments Corporation), and Atty. Jon Edmarc Castillo (Chief Compliance Officer of Monde Nissin Corporation). The panelists shared insights into their corporate governance journeys, highlighting the role of corporate governance champions, stringent policy-making efforts, and collaborative regulatory interactions. They emphasized that there is no one-size-fits-all approach to corporate governance and that it requires a concerted effort across all levels of an organization. Additionally, they stressed the importance of adopting sustainable development policies and practices, aligning with the UN Sustainable Development Goals and Global Reporting Index (GRI), and other sustainability reporting frameworks. During the 3rd Corporate Governance Roundtable Discussion for Publicly Listed Companies, Mr. Roberto Bascon, Jr., (Director of Research and Development of Institute of Corporate Directors), highlighted a slight decrease in the 2023 ACGS Assessment industry average, mainly due to the lack of ASM-related documentation. He emphasized the need for PLCs to increase efforts in disclosure, transparency, and board responsibility. Mr. Bascon also discussed the role of website optimization in advancing corporate governance, noting its potential to increase stakeholder engagement and accountability. He underscored the importance of continuous improvement in corporate governance practices, suggesting that addressing ACGS Assessment findings and optimizing websites can enhance PLCs' standards and drive positive change in the industry. Attendees praised the discussion for its insightful content and its potential to drive positive change in corporate governance practices. Many highlighted how the event provided valuable insights into improving disclosures and raising the bar for good corporate governance in the country. The discussion concluded with a challenge to all corporate governance practitioners and companies to adopt more stringent and holistic policies and strategies to improve corporate governance across the board. This call to action underscored the importance of continuous improvement and innovation in corporate governance practices to ensure the long-term success and sustainability of Philippine businesses.

by: Ma. Aurora D. Geotina-Garcia, FICD Fellow Institute of Corporate Directors Micro, small and medium enterprises, commonly referred to as MSMEs, contribute significantly to the economy and job creation and are thus critical to economic development. These enterprises accounted for 99% of business establishments and 65% of employment in the country in 2022. Further, MSMEs generate 40% of the country’s gross domestic product. Given such significant contributions to national outputs and employment, the MSME sector has been regarded as “the backbone of the Philippine economy.” EMERGING TRENDS AND CHALLENGES As we are aware, MSMEs were among the sectors that were severely affected by the lockdowns imposed during the COVID-19 pandemic. As the country is slowly recovering from the impact of the pandemic, the operating environment for MSMEs remains challenging. To cite some of the key trends and challenges which affect them: Restructuring of the global supply chain due to geo-political issues which suggest a change to a multiple supply sourcing model; Digitalization which needs to be accelerated to enable MSMEs to compete with the larger enterprises; Growth of e-commerce platforms for marketing, trading, payment, and delivery of services; Changing consumer behaviors and demand, including sustainability consciousness, focus on basic needs, online purchases; Rise of responsible and conscious businesses, being more environment-friendly and sustainable; and, Limited financing and accessibility to affordable and reasonable sources of funds. While business trends have a significant impact on MSMEs, they also provide opportunities for those who are more flexible, innovative, and responsible. This requires policy support and reforms to enable them to adapt quickly to such changes and become sustainable businesses. POLICY SUPPORT FOR MSMES In terms of policy support and based on information from the website of the Department of Trade and Industry (DTI), the key legislation and initiatives that have been passed to support MSMEs include the following: Republic Act (RA) No. 10644: Go Negosyo Act, “an act promoting the development of MSMEs through the establishment of Negosyo centers nationwide, establishment of a startup fund for MSMEs, technology transfer, production and management training, and marketing assistance.” RA No. 10644 also provided for the recomposition of the membership and functions of the MSME Development Council. RA 9178: BMBEs Act of 2022 which provides incentives and certain exemptions, such as from income taxes and the Minimum Wage Law, to encourage the establishment of barangay micro business enterprises (BMBEs) with an asset size of not more than P3 million. RA 9501: Magna Carta for Micro, Small, and Medium Enterprises that defines the national policy to promote, support, and encourage the growth and development of MSMEs. Further, it seeks to promote the entrepreneurial spirit by providing a business environment conducive for MSMEs to thrive and grow. RA 11976 or the Ease of Paying Taxes Act (EOPT), passed in January this year, introduced reforms to modernize tax administration and improve efficiency to encourage easy compliance by taxpayers, particularly MSMEs. These mechanisms include “file and pay anywhere,” simplified withholding tax rules, and changes in VAT rules and documentation. Related to the ease of doing business initiative, a tool kit has been developed to address the challenges of business registration at the local government levels to encourage local government units (LGUs) to simplify their processes to benefit local businesses. Other programs implemented by the DTI include: “Go Lokal” for MSMEs wishing to sell their regional and traditional products; Shared Services Facilities which provide access to machinery, equipment and tools, skills and knowledge under a shared services system; Pondo sa Pagbabago at Pagasenso (P3) providing micro businesses with assistance in loan processing; and, the Kapatid Mentor Me program providing training on product development, accounting, and taxation, among others. ARE WE THERE YET? In our younger days when families went on trips, it was not uncommon for the children to ask their parents this question: “Are we there yet?” I ask this same question of the journey of MSMEs to sustain and grow their important role in our economy. I participated recently as a mentor in an event organized by Go Negosyo and had the opportunity to speak with six MSME owners in various stages of their businesses. Our discussions made me realize that challenges persist despite the plethora of policies and programs, suggesting that further improvements may be considered and implemented. Following are some insights/suggestions I gathered from our conversations: Could the LGUs create a special desk for BMBEs and implement MSME-friendly fees, processes, and requirements for registration, etc.? Could government agencies be more transparent in evaluating and processing applications for permits, licenses, etc., and streamline these to allow for timely and speedy processing? Perhaps, government agencies concerned could compile their processes in a “Citizen’s Handbook,” certified by the Anti-Red Tape Authority (ARTA) as a reference for business owners? Could government agencies who deal with MSMEs and other businesses operate on a 24/7 basis by going online through digitalization, and, should going online be a challenge, could they run at least two shifts and provide wider time coverage, say 8 a.m. to 10 p.m., with shifts to minimize queues? Could government regulations relevant to MSMEs be aligned and synchronized for clarity and avoid confusion in the implementing rules and regulations? Could the government be more proactive and consciously implement the provisions of the Magna Carta for MSMEs which entitles these businesses to supply the government with at least 10% of total procurement value of goods and services? Similarly, could government not provide incentives to bigger private enterprises to intentionally allocate a percentage of their purchases for MSMEs to enable them to participate in their supply chains? Could the government also strictly require banks to comply with the requirement to allocate 10% of their credit portfolio to MSMEs as provided in the Magna Carta for MSMEs? I am citing the above for consideration by policy makers and if indeed these have been addressed or proposed to be addressed through policy reforms, it would be a great boost to our MSMEs. Strong MSMEs fill the gaps that big businesses find difficult to reach and they can participate in national and international supply chains and keep healthy market competition alive. They have a pivotal role to play in employment generation and economic growth. Thus, the need to provide a conducive business environment and timely policy support. We in the public and private sectors have the responsibility to empower our MSMEs to navigate the entrepreneurial ecosystem to inclusive prosperity. We must ensure that the journey of every small business follows a well-lit or paved path, or, at the very least, have the minimum roadblocks. Only then can we confidently say that “Yes, we should get there soon enough. I hope everyone enjoyed the journey.” Disclaimer: On March 5, 2024, “The journey of MSMEs: Are we there yet?” was published. It was authored by Ma. Aurora Geotina-Garcia, Fellow of the Institute of Corporate Directors. You can read more about this article through this link: https://www.bworldonline.com/opinion/2024/03/05/579340/the-journey-of-msmes -are-we-there-yet/#google_vignette

On March 7, 2024, the Institute of Corporate Directors conducted a courtesy visit to the Insurance Commission which included a comprehensive presentation of the 2023 Assessment of Corporate Governance Performance of the Philippine Insurance Industry. The presence of the ICD Board of Trustees led by ICD Chairman, Atty. Pedro H. Maniego, Jr. and Executive Director, Engr. Valentin A. Reyes further enriched the conversation as both parties recognized the need to strengthen initiatives on corporate governance advocacy in the industry. As concluded from the presentation of results and discussion, both parties were committed to fostering a collaborative movement in empowering insurance companies nationwide to elevate the governance standards of the Philippines.

By: Monette Iturralde-Hamlin, FICD Chair ICD Board Diversity and Inclusion Committee Do you want to improve the performance of your business?  Then ensure your Board of Directors is diverse and inclusive, as this fosters better decision-making, oversight, and governance, particularly during challenging times. The Institute of Corporate Directors (ICD), in its groundbreaking study which covered all active publicly listed companies (PLCs) registered with the Securities and Exchange Commission from 2019 to 2021, determined a clear and positive correlation between a company’s Return on Equity (ROE) and the attributes of these PLC boards, specifically diversity in gender, expertise, and age. Key findings of the study prepared by the Board Diversity and Inclusion (BDI) Committee include: 1. Companies with female directors outperformed companies without female directors in terms of ROE in 2020 and 2021.  This suggests that companies with women on board (WOB) were more responsive to the challenges of the COVID-19 pandemic. 2. Companies that have directors with expertise in specific areas, such as business management and finance, performed better than companies without such experts on the board. 3. Board directors’ seniority in age positively influenced ROE, suggesting that having a few older members in the board could provide experienced perspectives in emerging categories, helping improve overall company performance. While age in years is a significant predictor of ROE, tenure or length of service in the company is not. As markets trends and business demands continuously evolve over time, newer board directors might have just as much expertise to offer, as well as relatively fresh and dynamic beliefs and principles, as their longer-serving counterparts.  There is a need, however, to balance board composition in terms of age to allow for succession, a well-established tenet of good corporate governance. Overall, the ICD study suggests that board diversity is good for business as it can lead to better decision-making, oversight, and governance.  The BDI Committee will continue to track the effects of board diversity on company performance in the Philippines for 2022 and 2023.   Click on this link to access the full study. In parallel, the BDI Committee is working on getting grants for testing a Board Diversity Index Tool jointly developed by Mr. Ricardo Nicanor N. Jacinto, FICD and University of the Philippines Professor Debbie Chua.  Offering a holistic perspective, this innovative framework will review four clusters of diversity components: Identity (age, gender, citizenship), Experience (industry, government/civil society, international experience), Expertise (educational attainment, foreign training, licenses/certifications, functional expertise), and Network (family connection, board connection, social/professional connection, tenure).  The BDI Tool is expected to provide richer data on the important role that diversity plays in an organization’s success. Celebrating its 25th anniversary in 2024, ICD is a national association of corporate directors and other stakeholders engaged in corporate governance.  The only institution in the Philippines accredited as a corporate governance training body by the Securities and Exchange Commission (SEC), the Insurance Commission (IC), Bangko Sentral ng Pilipinas (BSP), the Governance Commission for Government-Owned or-Controlled Corporations (GCG) and the Career Executive Service Board (CESB), ICD helps professionalize the practice of corporate directorship through its training programs. #ICDSupportsBoardDiversity

On February 12 and 15, the Institute of Corporate Directors Philippines (ICDPh) paid a courtesy visit to the Securities and Exchange Commission (SEC) Philippines and the Philippine Stock Exchange (PSE), respectively. Both courtesy visits were led by Chairman, Atty. Pedro H. Maniego Jr., FICD, and Executive Director, Engr. Valentin A. Reyes, to introduce ICD’s esteemed trustees as well as report the results of the most recent assessment of the publicly listed companies using the ASEAN Corporate Governance Scorecard (ACGS). In line with its advocacy, the discussion highlighted possible collaborations, digitalization, compliance challenges among Publicly Listed Companies (PLCs), and updates on regulatory framework and initiatives, to name a few. The courtesy visit to regulators was a resounding success, showcasing the commitment of both, our regulators and the ICDPh, to enhancing the corporate governance in the Philippines. Moving forward, all are excited about the possibilities for collaboration and partnership that have emerged from this fruitful engagement. Courtesy Visit to SEC: This was attended by the following: From SEC: Chairman Emilio B. Aquino, Commissioner Bryant Fernandez, Director Rachel J. Gumtang-Remalante, Atty. Jaqueline Liu, and other CGFD staff From ICD:  Chairman Atty. Pedro H. Maniego Jr., Treasurer Ma. Victoria C. Españo, Trustees Senen "Bing" L. Matoto, Ms. Maria Celeste "Maricelle" S. Narciso, Atty. Bendicta Du-Baladad, Executive Director Engr. Valentin A. Reyes, and CG Advocacy’s Asst. Manager Racxine Ramintas. Courtesy visit to PSE: From PSE: President Ramon Monzon and Chief Operating Officer Atty. Roel Refran From ICD:  Chairman Atty. Pedro H. Maniego Jr., Vice Chairperson Ida Ceniza-Tiongson, Trustees Tomasa “Tammy” H. Lipana,  Senen "Bing" L. Matoto, Ms. Maria Celeste "Maricelle" S. Narciso, Atty. Jose Tomas C. Syquia, Executive Director Engr. Valentin A. Reyes, Director of Research and Development Roberto T. Bascon, Jr. and CG Advocacy’s Asst. Manager Racxine Ramintas.

Dear ICD Members: Greetings! The ICD Board of Trustees, in its special meeting on 31 January 2024, has unanimously approved the appointment of Ms. Maria Celeste "Maricelle" S. Narciso to fill the vacancy created by the resignation of former Chairman and Trustee Cesar L. Villanueva. Ms. Narciso will serve the remaining term until 31 December 2024, effective immediately. Attached is the formal letter of the appointment of Ms. Narciso for everyone's reference. Please join us in extending the warmest congratulations to Ms. Narciso on her appointment and expressing confidence in her ability to contribute significantly to ICD's vision and mission. As a seasoned professional with a proven track record in marketing and management, we are certain that her expertise will be instrumental in steering the organization toward greater success. We kindly ask for your warm support for Ms. Maricelle as she takes on this role. We look forward to her valuable contributions and leadership in continuously raising the bar of good corporate governance and building a sustainable future for our people. Sincerely, ICD Team

by:  Mr. Rex Drilon, FICD Teaching Faculty Institute of Corporate Directors In January 2022, former Finance Secretary Jesus Estanislao, together with a few colleagues, convened a group of almost 100 volunteers to share the idea of Dream Philippines. These included friends, colleagues, associates, senior citizens, retired senior government officials, young students and young professionals from different sectors of society. The convocation and subsequent working sessions were organized and led by the Center for Excellence in Governance (CEG) in cooperation with the Institute for Solidarity in Asia (ISA), which focuses on public governance advocacy, and the Institute of Corporate Directors (ICD), which focuses on corporate governance advocacy. They met at least once a month for five months. By June of 2022, the first phase of Dream Philippines 2046 project (country road map) was finished. Work on crafting the Country Performance Scorecard is currently ongoing. The Balanced Scorecard Framework for Strategy Design and Execution, invented by Dr. Robert Kaplan and Dr. David Norton of Harvard—which ICD and ISA use extensively in their respective advocacies—was used in developing the country road map and its performance scorecard. The core purpose of the Dream Philippines 2046 project as adopted in the convocation is the “transformation of the Philippines and the comprehensive development of the Filipino, by the Filipino and for the Filipino.” The hope is that, with effective execution of the road map, the country can achieve higher productivity and competitiveness (top 20 in the world), higher and sustainable economic growth (8 to 10 percent economic growth) and greater equity and inclusiveness (Gini coefficient of 0.3). The whole of society will need to share in building Dream Philippines. ISA will do its share in the government sector while ICD will do the same in the business sector. Civil society also needs to step up to complete the lineup of the major sectors for nation-building: government, business and civil society. Common to these three major pillars or sectors is the Filipino, the individual citizens who make up this country. Can we achieve our Dream Philippines even if the Filipino remains uninvolved in nation-building, continues the merry and undisciplined ways, and is callous and indifferent to the needs of the community and the environment? Definitely not! If we want to transform this country and achieve our Dream Philippines, we need Filipinos who are prepared to invest and commit their time, talents and resources to help build the nation. And it starts with the Filipino governing himself better. Hence, the need for personal governance for nation-building. Where should we start? Transformation begins with each one of us crafting a personal plan of life. The same balanced scorecard methodology for a transformation program, like Dream Philippines, can be applied as well to a transformation program of a government agency or a publicly-listed company. ISA and ICD have adopted this for their clients and partners in the last 25 years with resounding successes. The same framework can be used in developing the personal strategy map and balanced scorecard of the Filipino. It begins with the Filipino adopting a personal governance charter composed of personal statements of values, mission and vision. Values are what a person truly and strongly believes in. Mission is the core purpose in life. Vision is what one seeks to be, with a deadline. An example of personal values may include: love of God, country and community; love of family and friends, integrity and excellence. It’s normally limited to five to seven values. An example of personal mission statement is … “To know, love and serve God, my fellow men and God’s other creations.” A vision statement that includes a deadline can be … “When I die, I will go to heaven and be united with my Father God, in the company of Jesus Christ and Mother Mary.” The next step in crafting the personal road map is to ask the difficult but key questions in the various key aspects of life. We suggest these five: career, financial, physical/mental, family/social and spiritual aspects. For career, the question can be: How do I conduct myself at work and what skills set should I continually develop and improve? For financial aspect: How do I ensure financial stability and provide for a safety net for family emergencies? For physical and mental, the question is: How do I ensure physical well-being and continuing intellectual development and mental health? For family and social aspect: How do I ensure that members of my family are developed to their full potential? How do I contribute to the betterment of my friends, relatives, community and country? And the spiritual questions can be: How should I practice my faith? How do I bring my family, relatives, friends and colleagues closer to God? The answers become the key objectives and goals of the person doing the personal road map, as summarized in the following examples: Career plan I will deliver consistent results that are within or better than budgets and commitments. I will establish a healthy working relationship with my team and other teams to ensure achievement of our goals and objectives. Financial plan I will establish a family savings plan and budgeting system that ensures financial stability of the family. I will embark on a balanced investment plan covering real estate, stocks, bonds and other instruments that will provide my family adequate protection. Physical/mental plan I will adopt a healthy lifestyle that includes regular exercise, eating balanced diets, sports and hobbies and regular medical checkups. I will form and maintain the habit of continually challenging the mind and equipping myself with tools, techniques and training for continuous improvement while regularly consulting my therapist regarding my mental and psychological health. Family and social plan I will create an environment where family members have fun and are developed to their full potential, including physical, mental and spiritual development. I will establish and follow a schedule for regular and wholesome interaction with relatives, friends and colleagues with the goal of forging mutually supportive relations, while at the same time getting involved with local community and national issues as a good Filipino should be and do. Spiritual plan With the help of a spiritual director, I will adopt a system of practicing my faith with regular observance of norms of piety, such as the Holy Mass, Holy Rosary, confessions, communion, recollections, retreats, etc. I will reach out to relatives, friends and colleagues and help them grow in their faith and encourage them to likewise observe and practice norms of piety regularly. Such personal governance charter (vision, mission and values) and the set of key objectives and goals in five key aspects of one’s life make up the personal strategy map. It is, in reality, a plan of life that covers all the major aspects of existence as a human being. But this is only the first phase. My next article will cover the crafting of the personal balanced scorecard, which will be the primary tool to execute a person’s plan of life. The author is governor of Management Association of the Philippines (MAP) and governor-in-charge of MAP ESG and Shared Prosperity Committee. He is vice chair of Center for Excellence in Governance. He is also FICD and Faculty of the Institute of Corporate Directors Philippines.

by: Micaela Segui, CSSWB Corporate Governance Analyst Institute of Corporate Directors Good corporate governance practices can help government-owned and controlled corporations (GOCCs) operate more efficiently, improve access to capital, mitigate risk, and safeguard against mismanagement. It makes GOCCs more accountable and transparent and gives them the tools to respond to stakeholder concerns. Corporate governance also contributes to development by encouraging new investments, boosting economic growth, and providing employment opportunities. In addition, the Governance Commission for GOCCs (GCG) has initiated a thorough reevaluation of its Code of Corporate Governance in collaboration with the Institute of Corporate Directors (ICD) to ensure that GOCCs are governed in a transparent, accountable, and fair manner as commenced by a Memorandum of Agreement (MOA) signing ceremony held on 15 January 2024 at the GCG Office. The strategic partnership between the two parties involves conducting a comprehensive review of the existing CG Code and CG Scorecard for GOCCs, recommending enhancements to align practices and policies with contemporary governance standards, and facilitating capacity-building sessions and training programs for GOCCs based on the revised CG Code and CG Scorecard. This remarkable collaboration will serve as key towards a more economically-viable, responsive, and accountable GOCCs. With the expertise of ICD, the GCG will further be assisted towards improving their governance system, especially with the promotion of gender diversity and sustainability. In a similar fashion, ICD will be able to fulfill its mission to achieve a nation grounded in good governance across all sectors and industries. Attendees of the said MOU signing ceremony were (seated from L-R): ICD Trustee, Atty. Jose Tomas Syquia; ICD Chairman, Atty. Pedro Maniego Jr.; GCG Chairperson, Atty. Marius Corpus; GCG Commissioner, Atty. Geraldine Marie B. Berberabe-Martinez; (standing from L to R):  and ICD’s Director for Research & Development, Roberto Bascon Jr.; GCG Commissioner, Atty. Brian Keith Hosaka; GCG Executive Director, Atty. Johann Carlos Barcenas. Both parties have expressed their gratitude on how their engagements have flourished since 2015 during the creation of the GOCC scorecard and CG Code. To a great degree, the collaboration between ICD and GCG is a step closer to building better boards as aligned with internationally - recognized corporate governance standards and practices. With optimism, may this memorable event boost synergy for ICD and its regulatory partners.

by: Ma. Aurora D. Geotina-Garcia, FICD Vice-Chair and President Institute of Corporate Directors On Nov. 5, 2020, at the height of the COVID-19 pandemic, the Management Association of the Philippines (MAP), as lead organization, launched the Covenant for Shared Prosperity as the response of the business community to the poverty and inequality which continues to plague Philippine society even before and after the pandemic. To quote the Covenant “We support the vision of the government articulated in ‘Ambisyon Natin 2040’ which states that the Philippines shall be a country where all citizens are free from hunger, have equal opportunities, enabled by a fair and just society that is governed with order and unity. A nation where families live together, thriving in vibrant, culturally diverse, and resilient communities.” EDUCATE, EMPOWER, EQUIP, ENGAGE The Shareholder’s Association of the Philippines (SharePHIL) was one of 26 organizations, together with MAP, which pledged and committed to six action points. As an organization whose mission is to protect and promote the interest of minority shareholders and retail investors, SharePHIL envisions a nation where every Filipino enjoys a quality life and financial security supported by a fair, accessible, and sustainable capital market system. Indeed, this vision is aligned with the 6th action point in the Covenant: “deliver reasonable and just returns to and fair treatment of our controlling and non-controlling shareholders.” SharePHIL’s contribution in this respect is to provide investors with financial literacy and investor education programs, and be a steadfast advocate of investor rights through its four pillars namely: Educate, Equip, Empower, and Engage. To implement these pillars, SharePHIL organizes seminars and conferences, publishes research and advocacy papers, participates in policy dialogues and consultations, and establishes partnerships and collaborations. Two key projects in the process of implementation are Project RISE: “Retail Investor and Shareholder Empowerment” which seeks to educate and empower the Filipino investor to develop the confidence and make well-informed decisions to take control of their future, and “Investor Relations Circle,” which seeks to professionalize the Investor Relations profession, given its significant role in bridging the communication between the investors, particularly the retail investors and the Publicly Listed Companies or PLCs. MAP SUMMIT ON SHARED PROSPERITY Fast forward to Nov. 28, 2023, three years since the launch of the Covenant, when MAP convened the Summit on Shared Prosperity to craft a Blueprint for Shared Prosperity which will contain a roadmap of how the commitments can be realized and implemented. SharePHIL, which I represented, provided the background for the discussion on shareholders with a suggested metric of a percentage dividend rate in compliance with regulations. While current Securities and Exchange Commission (SEC) and Philippine Stock Exchange (PSE) regulations do not prescribe a dividend rate which PLCs should follow, the SEC monitors compliance with the regulatory requirements for dividend declarations in the Securities Regulation Code, ensuring that dividends are declared out of unrestricted retained earnings, and that this must not impair the corporation’s ability to meet its financial obligations. On the other hand, the PSE monitors PLCs’ compliance with the Consolidated Listing Disclosure Rules which prescribe, among others, the disclosure of dividend policy by listed companies. For Government-Owned and -Controlled Corporations (GOCCs), under RA 7656 or the Dividend Law, such corporations are required to declare and remit at least 50% of their annual earnings as cash, stock, or property dividends to the National Government. ROADMAP TO STOCKHOLDER PROSPERITY How can we encourage companies to declare dividends that will deliver fair and reasonable returns to stockholders? Some suggestions that emerged from the discussions are the following: Enhance public participation by encouraging consultation, advocacy and sharing of views and opinions; Educate and empower shareholders to influence dividend policies, demand transparency and file complaints of irregularities; Develop strong mechanisms for investor relations to provide accurate and timely information that will increase and sustain stockholder confidence; Promote good governance by having more independent-minded boards who can steer companies to establish clear and transparent dividend policies; Benchmark dividend policies with industry averages and best practices, and incentivize companies with notable dividend policies through proper recognition, such as awards and citations; Review and reform tax laws on dividends to align with public interest, as appropriate. The payment of dividends reflects positively on a company’s image and reputation, and helps maintain investor trust. Thus, a high dividend rate, for example, indicates that the company is performing well and has generated good profits. Paying dividends sends a powerful message about a company’s future prospects, and its willingness and ability to pay steady dividends over time provides a solid demonstration of financial strength. Companies may not realize that such payouts are a means to thank investors and incentivize them to continue holding their stocks. Importantly, for the small stockholders, dividends matter as such distributions directly translates to income and return on their investments. Investments in stocks, which pay dividends, is a way to build wealth as part of a long-term investment strategy. Dividends contribute to overall portfolio risk and volatility, by mitigating the risk resulting from a price decline. In addition, dividends help preserve the purchasing power of capital due to the effect of inflation on investment returns. Businesses that share their prosperity with their stockholders will help the Filipino investing communities build their wealth, and thus is a powerful tool to reduce the persistent inequality in society. We need not wait for 20 years to make this happen. Disclaimer: On December 12, 2023, “Sharing prosperity with stockholders” was published. It was authored by Ma. Aurora Geotina-Garcia, the Vice-Chair and President of the Institute of Corporate Directors’ Board of Trustees. You can read more about this article through this link: https://www.bworldonline.com/opinion/2023/12/12/562834/sharing-prosperity-with-stockholders/

by: Gil Genio, FICD ICD Fellow Institute of Corporate Directors Board directors and executive management are focusing more time on cybersecurity threats and how to mitigate such risks. Cybersecurity governance is a trending topic given that there are almost daily headlines on cybersecurity breaches, fines being levied related to unauthorized customer data leakage, financial losses, and even ransomware events. Information security, cybersecurity and data privacy are complex and ever evolving topics, requiring organizations to constantly assess and update their defenses and incident response procedures. Bad actors try to find you (known as an organization’s “attack surface”), compromise your users and their devices, and once inside, try to find other vulnerable users and devices or servers. They even attack you through your supply chain. But what exactly does “cybersecurity governance” mean for board directors? And how can an organization make sure that they have the right elements to mitigate cybersecurity risks? I can offer some advice given my experience as a telecom executive that included overseeing the information security and data privacy team. And as a board director, I can suggest some important questions the board needs to ask and suggest what organizations must implement: Has the organization adopted a globally accepted cybersecurity framework? Frameworks such as that of US-NIST are helpful in ensuring the completeness and robustness of risk mitigation. And with the rise of hybrid work, has the organization adopted the concept of “zero trust”? Has the organization evaluated or determined what are its most important proprietary commercial or customer assets? Manufacturing, retail, telecom, energy, healthcare, financial services organizations will have different assets critical to their operations, compliance and reputation. Continuing cybersecurity investments need to be directed towards protecting the most critical assets. Does the organization perform regular vulnerability assessments? These assessments often involve engaging third parties to assess weaknesses from outside the organization (mainly through the internet), but also to assess vulnerabilities created internally (such as poor software development practices, IT infrastructure configuration, or employee behavior). And when starting out on this cybersecurity journey, has the organization performed a compromise assessment? This involves a deep scan of technology assets, including links with partners, to determine if there are indications that bad actors have already penetrated the organization. Does the organization prioritize its cybersecurity investments in software, platforms, procedures, and talent upskilling, by matching its vulnerability assessment with its view of the most critical assets to protect? Many organizations soon realize that investments will never be enough, and therefore must ensure that they meet minimum safeguards, that they are prioritized, and that such investments have to be made over several years. Priorities may also be adjusted regularly as new threats and vulnerabilities arise. “Dwell time”, which measures the time from discovery going back to when an issue started, needs to continually decrease. (In Mandiant’s M-Trends Report 2023, Asia Pacific median dwell time worsened to 33 days.) Does the organization track investments, action plans, procedure changes and talent regularly, to ensure continued progress in mitigating cybersecurity risks? Often, risk mitigation happens over several years, and is constantly re-evaluated as new threats arise, or new capabilities are acquired. Of particular concern is the global war for talent in cybersecurity, and organizations need to make difficult choices about talent hiring, upskilling, and complementing with third parties and modern technologies such as AI-driven security software. Does the organization have access to early warnings if there are newly discovered vulnerabilities, or if its defenses have been breached, or if its supply chain has been compromised? Usually provided by third parties, such “threat intelligence” is an important part of an organization’s toolkit. Does the organization have a “push button ready” response team and procedures involving internal or external parties, in case cybersecurity breaches do occur? Are these tested regularly to ensure rapid response? “Contain time”, which measures the time from discovery to remedy, should constantly decrease. In cybersecurity, they say that an organization needs to be lucky all the time, while an attacker needs to be lucky just once. There is no technology, software, platform, vendor, framework or response team that can guarantee that no breaches occur. But board directors and executive management can limit the impact to an organization, which is the essence of sound risk management. Or as they say, hope for the best but prepare for the worst. Gil Genio is a retired Ayala and Globe executive.  His last role was Globe’s Chief Technology and Information Officer (CTIO) from 2015 to 2021, which included the Enterprise Data Office, and Information Security and Data Privacy.  He is currently an Independent Director at publicly listed companies GT Capital Holdings (GTCAP) and Puregold Price Club (PGOLD).  He is a member of the Management Association of the Philippines and a Fellow Member of the Institute of Corporate Directors.

by: Gil Genio, FICD ICD Fellow Institute of Corporate Directors Today's news, advertising, and daily conversations often include AI (artificial intelligence), generative AI, deepfake photos and videos, and the mad scramble among technology companies jockeying for position with these disruptive developments.  Almost every software vendor now proclaims that they embed AI in their offerings.  As business leaders, we must remember that “… maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud, in the service of transforming how their businesses work.” (MIT Sloan Management Review, Summer 2015, “Strategy, not Technology, Drives Digital Transformation”) For all the talk and fascination about AI, an organization’s board of directors and executive management must reflect on whether their organization is making the best commercial use of the data they already have and constantly get.  How would an organization begin to use analytics that results in commercial benefits? Don't get me wrong: I believe that AI is just beginning to disrupt the nature of work.  AI is accelerating information dissemination, quickening judgments, creating new forms of entertainment, and even providing science with new tools for discovery.  We may not be aware of it, but we encounter AI daily (for example, to discern interests when you use social media or detect fraud when you use your credit card). Whether for better or worse, only the future can tell. That aside, let's go back to the basics.  In their groundbreaking 2007 book “Competing on Analytics”, authors Davenport and Harris lay down the foundations: "By analytics we mean the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions.  The analytics may be input for human decisions or may drive fully automated decisions." There is continuing tension between the voices and opinions of those higher up in the corporate hierarchy versus the facts on the ground revealed by analytics.  And evidence from analytics competitors show that the best decisions come from letting the data speak for itself. From my experience as a telecom executive whose role included the creation of an enterprise data office, starting an analytics journey that benefits the business, and constantly evolving our capabilities, I can offer some starting point questions. What data do we have?  Organizations need to realize they already have massive amounts of data and collect more of it daily: customer information, details of transactions, visits to stores, POS data, customer support information, supply chain data such as POs, invoices, and payments.  You would also include internal process documents, regulatory filings, and employee and partner data.  They even have phone numbers and addresses of customers, employees, and suppliers.  And in this era, you can include people using your website or mobile app and posting feedback or reviews on social media. Is our data clean and up-to-date, and how do we get, record, and process those data?  An organization would set up “data governance”, which relates to the roles, responsibilities and processes for data accuracy, integrity, completeness, security, and compliance with regulations. Have we started with a few projects demonstrating the commercial value of data and analytics?  You do not have to wait for clean data and data governance to kick in.  You can solicit ideas from various parts of the organization and different roles.  All they need to do is to ask, "What if I could have x so that I could do y?" Examples might be, "What if I could segment my customer base to target the top customers with an offer that increases their spend?” “What if I can understand the reasons for customers leaving so that I can improve retention?” “What if I can watch payments in near real-time to better prevent fraud with abnormal behavior?" “What if I can improve my B2B leads generation and closing success rate?” "What if I can predict how many other customers are unhappy based on current hotline calls?” “What if potential fraud or cybersecurity events that are humanly impossible to filter can be prioritized for review or immediate action?” Analytics is an excellent tool for examining the revenue and cost sides of an organization and finding answers to such questions will show its business value. What are our next steps after being more adept with analytics?  Do you now go “big bang” and create an enterprise-wide team armed with various platforms?  Or do you move forward based on use cases? Do we have the tools to begin an analytics journey?  Don’t just shop for consultants or software platforms.  Organizations can start with simple processes: find ways to extract the data and find analytical software to begin answering questions.  You can even start with spreadsheet software that already has decent analytics tools.  As the organization progresses, you might move to “canned” data management and analytics software, evolving to even more powerful tools that demonstrate the power of analytics.  With greater sophistication or scale, you might develop your data architecture to consider batch and real-time data, machine learning, and automated decisions and actions.  Advanced organizations use open-source software and cloud-based platforms for speed, scale, flexibility, and cost advantages. Do we have the people with the skills for this analytics journey?  You can start with a working team from the technical and commercial units.  For best results, set up a cross-functional team composed of IT, data engineers, analytics experts, and customer-facing or revenue people to begin answering questions.  As the journey continues, you may have to complement your people with outside experts and even data scientists, albeit these are highly sought (expensive) skills. Have we decided on the organizational model?  Will we have decentralized analytics teams embedded in various groups or departments, or will we have a centralized team serving everyone, or will we adopt a hub-and-spoke model with analytics teams in various areas supported by a center of excellence? The business value of an organization's analytical journey arises from its nature as a never-ending and constantly evolving journey.  Strategies, capabilities, technology, and customer and transaction data change with time.  Making the best use of data is an iterative process, one where we are constantly learning about our customers, supply chain, and internal processes, asking questions about our data, and finding out if there is any commercial value to answering our questions. Remember, starting small, demonstrating business value early, and progressively advancing your analytics capabilities are essential.  Regularly reassess your analytics strategy to align with evolving business objectives and technological advancements. And what about AI?  Being better at analytics in business decisions will result in a better understanding of AI and what it promises (or does not). Gil Genio is a retired Ayala and Globe executive.  His last role was Globe’s Chief Technology and Information Officer (CTIO) from 2015 to 2021, which included the Enterprise Data Office, and Information Security and Data Privacy.  He is currently an Independent Director at publicly listed companies GT Capital Holdings (GTCAP) and Puregold Price Club (PGOLD).  He is a member of the Management Association of the Philippines and a Fellow Member of the Institute of Corporate Directors.

by: Senen L. Matoto, FICD ICD Trustee Institute of Corporate Directors Unless you have been living under a rock or been marooned on an island with no internet since November 2022, when we woke up to the realities of the new world of artificial general intelligence, then surely Chat GPT, which stands for Generative Pretrained Transformer, must by now be as familiar to you as Netflix. Chat GPT is, of course, that pioneering technological wonder created by Open AI that answers all questions or requests you may ask of it, and a lot more in the future. Dubbed as a testament to man’s creative genius and a potential boon to the myriad concerns of humanity, in the same breath, it is also branded as a bane and a precursor of an existential threat to humankind that man should fear. Why is this so? Chat GPT started in November 2022 as text-only that could only respond to questions based on preprogrammed (i.e., pre-trained) data input as of September 2021. In other words, responses would not be able to capture more current data, much less respond to a future event. Worse, not having the appropriate data could make up facts or “hallucinate,” throwing off the inquirer. Notwithstanding this limitation in the software, thousands of subscribers signed up within five days of launch. Current GPT versions, however, only taking less than a year to develop, now have pre-trained data as of April 2023; are able to search photos, scan documents on the web for more recent developments in a particular field, and respond in spoken word. Chat GPT has proven to be a big hit and now has over 100 million weekly active users, as announced by Open AI in its recent DevDay event a few weeks ago. The ultimate objective of AI proponents is to create machines with human-like intellect that can make decisions, solve problems, hear, speak, even feel and have sentiments. With AI’s superhuman capabilities and man’s likely dependency on it, visions of a dangerous world of machines becoming the overlords of man have prompted a clamor from non-profit-oriented sociologists and philanthropists for restraint. And, logically, it should be the same creators best positioned to rein in the rapid advancement of the curiously structured hybrid of not-for-profit and capped-profit organization led by Open AI’s computer head geek and founder Sam Altman. Frankly, in my years of involvement with corporate governance for both profit and non-profit organizations, Open AI’s hybrid structure is a first for me. It is usually either one or the other, not both combined. Founded initially solely as a non-profit in 2018 with a $1-billion contribution from tech entrepreneurs and geeks primarily for the research, development, and advancement of artificial intelligence for all of humanity to benefit from and not just for any single enterprise, after two years, the realities of the need for massive capital to sustain the dash to advance AI set in on the founders. A for-profit subsidiary, Open AI Global LLC, was created to accommodate investors looking for returns, albeit with a limitation or a cap on their share of the profits to not more than 100 times any investor’s investment. This new entity enabled various profit-oriented investors, such as Microsoft, to provide funding of $10 billion for Open AI’s research. The unusual twist, though, is that these investors would not be entitled to vote or have any say in the board’s composition, which meant they would not have representation on the board nor a say in its strategic directions. Thus, Open AI shall continue to be guided by its altruistic mission and remain under the control of the non-profit-oriented directors. This brings us to the recent brouhaha at Open AI. Altman was fired by the board for supposedly misrepresenting or inaccurately communicating critical information that the board should have been aware of. The details have not been publicly disclosed, but it is safe to assume that Altman was proceeding a lot more quickly on enhancing the Chat GPT software to the board’s discomfort, which presumably preferred a more studied and deliberate progress ensuring that the existential risks are properly controlled and managed. The subsequent clamor, however, of the employees and investors for Altman’s reinstatement, fueled undoubtedly by the immediate offer of Microsoft to hire Altman and his colleagues, resulted in the highly unusual upending of the board’s composition as demanded by Altman as a condition for his return. All I can say is — wow! This will be a great case study for the governance students to ponder and discuss as it throws into disarray the conventional norms of good corporate governance that adhere to the board’s ultimate authority and oversight over management. If you were a director of this company, what would you have done? Until next week… OBF! Disclaimer: On December 5, 2023, “Open AI: Curious case of governance structure was published at the Daily Tribune. It was authored by Senen “Bing” L. Matoto, a Trustee of the Institute of Corporate Directors’. You can read more about this article through this https://tribune.net.ph/2023/12/open-ai-curious-case-of-governance-structure/