The Securities and Exchange Commission on Wednesday issued a new corporate governance code for publicly listed companies to strengthen the country’s regulatory framework and corporate governance practices.
The SEC said the new code which it prepared together with International Finance Corp., a member of the World Bank Group, would improve the functioning of boards, strengthen shareholder protection and promote full disclosure in financial and non-financial reporting. The code took effect on Jan. 1, 2017.
It provides guidance for publicly listed companies to adopt best governance practices which would improve competitiveness and ability to attract foreign investments.
The corporate regulator said to increase the responsibilities of the board and ensure the competence and commitment of its directors, the new code adopted a “comply or explain” approach that combined voluntary compliance with mandatory disclosure.
The SEC said companies should state in their annual corporate governance reports whether they complied with the code provisions, identify any area of non-compliance and explain the reasons for non-compliance.
“The new code is intended to raise the corporate governance standards of Philippine publicly listed corporations to a level on par with its regional and global counterparts,” said SEC chairperson Teresita Herbosa.
“The adoption of the ‘comply or explain’ approach is also expected to address the perceived overregulation of the SEC,” she said.
Under the new code, all publicly listed companies are required to submit a new manual on corporate governance to the SEC on or before May 31, 2017.
The SEC and IFC signed a memorandum of understanding in May 2016 to revise the country’s Corporate Governance Code and set best practices for Philippine companies to follow.
SEC said numerous studies showed that investors had greater confidence in companies with good governance and in markets that were backed by sound legal and regulatory regimes.
“Our global experience has shown that corporate governance codes set a benchmark and encourage companies to adopt effective governance practices,” said IFC Philippines country manager Jane Yuan Xu.
“Improved corporate governance will make Philippine companies more competitive and enhance their ability to attract foreign capital, leading to the development of a vibrant and sustainable private sector,” she said.
