ABS-CBN BOARD OF DIRECTORS
ABS-CBN CORPORATE GOVERNANCE
ANNUAL CORPORATE GOVERNANCE REPORTS
COMPANY PSE DISCLOSURES
ARTICLES OF INCORPORATION (Original)
GENERAL INFORMATION SHEET
CORPORATE GOVERNANCE AT ABS-CBN
ABS-CBN recognizes the importance of corporate governance in enhancing the stakeholders’ interests in the Company. Its Board of Directors commits itself to the principles of good corporate governance.
The Company’s principles of corporate governance are contained in its Articles of Incorporation, By-Laws, Manual of Corporate Governance, and Annual Corporate Governance Report.
As an organization, ABS-CBN reaffirms its mission of being in the service of the Filipino people, and espouses that there is no dichotomy between doing good business and practicing the right values.
Through values cascading throughout the organization, the Company has identified the core values necessary to guide its leaders and employees in formulating and making business decisions, which in the end must always remain consistent with this mission and goal of service.
In 2013, the Institute of Corporate Directors (ICD), in partnership with the Securities and Exchange Commission (SEC), the Institute of Internal Auditors of the Philippines (IIA-P), and the Chartered Financial Analysts Society (CFA) recognized ABS-CBN among the Top 50 Philippine Publicly-Listed Companies in terms of corporate governance efforts. The Top 50 Publicly-Listed Companies were selected based on their policies, procedures, and practices in relation to the Association of Southeast Asian (ASEAN) Corporate Governance Scorecard (ACGS) standards on the rights and equitable treatment of shareholders, the role of stakeholders, disclosure and transparency, and the responsibilities of the board.
The Mission of ABS-CBN Board of Directors
The ABS-CBN Board of Directors (the “Board”) represents the stakeholders’ interest in pursuing a successful business, including the optimization of financial returns. The Board’s mission is to determine that the Corporation is managed in such a way as to ensure this result while adhering to the laws and rules of the jurisdictions in which it operates, observing the highest standards of corporate governance, and observing high ethical norms. The Board establishes the overall goals, strategies, and policies of the Company. It strives to regularly monitor the effectiveness of management’s decisions and the execution of strategies. In addition to fulfilling its obligations for increased stockholder value, the Board has responsibility to the Company’s customers, employees, suppliers, and the community.
The Board of Directors
The Board consists of 11 members, elected by shareholders during the Annual Stockholders’ Meeting. For the year 2015, these directors are Eugenio L. Lopez III, Chairman; Augusto Almeda-Lopez; Maria Rosario Santos-Concio; Oscar M. Lopez; Presentacion L. Psinakis; Federico R. Lopez; Federico M. Garcia, Salvador G. Tirona, Manuel M. Lopez, Antonio Jose U. Periquet, and Emmanuel S. De Dios. In compliance with the SEC requirement – that at least 20% of the Board should be independent directors with no material relationship with the Company, two independent directors – Mr. Periquet and Mr. de Dios — were elected. These directors are independent of management, and are free of any relationship that may interfere with their judgment.
Selection of Directors
The Board itself is responsible for screening its own members and recommending them for election by the stockholders. The Chairman and Chief Executive Officer have direct input into the screening process. The final approval of nominees to the director position is determined by the full Board. In case of vacancies in the Board between annual stockholder meetings, the Board may elect directors to serve until the next annual meeting.
Mix of Directors
There is a mix of executive, non-executive, and independent directors on the Board. Senior management executives other than the Chief Executive Officer attend Board meetings on a regular basis even if they are not members of the Board. On matters of corporate governance, while the Board assumes that decisions will be made by the impartial (previous word used is “independent”) directors, inputs to any policy formulation and discussions from directors who are employees of the company are welcome and expected, unless the issue involves an actual conflict of interest with such directors.
Criteria for Independence for Independent Directors
The Board assesses the independence of each director and individual nominated for election to the Board as an independent director. As part of this analysis, the Board must review and conclude whether each nominee for independent director satisfies the requirements of the rules of the SEC, the by-laws, and the Manual of Corporate Governance. Under the Manual of Corporate Governance, independent directors (i) are not directors or officers or substantial stockholders of the Company or its related companies, or any of its substantial shareholders (other than as independent directors of any of the foregoing); (ii) are not relatives of any director, officer or substantial shareholder of the Company, or any of its related companies, or any of its substantial shareholders; (iii) are not acting as nominees or representatives of a substantial shareholder of the Company, or any of its related companies or any of its substantial shareholders; (iv) have not been employed in any executive capacity by the Company, or any of its related companies or by any of its substantial shareholders within the last two years; (v) are not retained as professional advisers by the Company, any of its related companies, or any of its substantial shareholders within the last two years, either personally or through their firms; (vi) have not engaged and do not engage in any transaction with the Company, or with any of its related companies, or with any of its substantial shareholders, whether by themselves or with other persons, or through a firm of which they are partners, or companies of which they are directors or substantial shareholders, other than transactions which are conducted at arms-length and are immaterial; and (vii) do not own more than 2% of the shares of the Company and/or its related companies, or any of its substantial shareholders. Mr. Periquet and Mr. de Dios do not possess any of the disqualifications enumerated under Section II (5) of the Code of Corporate Governance and Section II (D) of SEC Memorandum Circular No. 16, Series of 2002.
The Board has regular monthly meetings, as much as possible, to review the performance of the Company and its subsidiaries, approve any pertinent plans, budgets, and financial statements, set guidelines for management, and discuss any various matters requiring Board attention and approval. Any member of the Board may ask management to give special reports on and analysis of certain issues.
From January 1, 2015 to December 31, 2015, the Board had 13 meetings.
Board Attendance to Meetings in 2015
|Total No. of Board Meetings||No. of Board Meetings Attended||Percentage of Attendance||Attended ASM? (Y/N)|
|Eugenio L. Lopez III||13||11||85%||Y|
|Ma. Rosario Santos-Concio||13||11||85%||Y|
|Oscar M. Lopez||13||9||69%||Y|
|Augusto Almeda Lopez||13||11||85%||Y|
|Presentacion L. Psinakis||13||7||54%||Y|
|Manuel M. Lopez||13||12||92%||Y|
|Federico R. Lopez||13||9||69%||N|
|Federico M. Garcia||13||11||85%||Y|
Compensation of Directors
Each board director receives a set amount of PhP20,000 per board meeting and PhP10,000 per committee meeting attended. In terms of profit sharing and bonuses, the total yearly compensation of directors shall not exceed 10 percent of the net income before income tax of the Company during the preceding year.
Board of Advisors
The Board of Advisors was created to provide guidance to the Board of Directors. The Board of Advisors sits in all the Board Meetings and its members are also members of the Board Committees. Randolf S. David, Mario L. Bautista, Carlo L. Katigbak, Honorio G. Poblador IV and Martin L. Lopez are the members of the Board of Advisors.
There are seven Board committees that have been established to address any issues requiring the directors’ attention. The Programming Committee deliberates on the programming issues and strategies of the network, and is primarily a business strategy committee. It is composed of Federico Garcia, Ma. Rosario Santos-Concio, and Emmanuel De Dios. Randolf David is an advisor.
The Compensation Committee reviews any recommendations on incentive schemes and the issuance of stock options to employees. It is composed of Augusto Almeda-Lopez, Federico Lopez and Antonio Jose Periquet. Mario Bautista and Randolf David are advisors.
The Succession Planning Committee ensures that there is a pipeline to key positions in the organization, and that there are ready replacements for any key positions that are suddenly vacated. It oversees the replacement planning table of the organization, and identifies successors and gaps in succession, as well as any measures needed to ill such gaps. It is composed of Salvador Tirona, Augusto Almeda-Lopez, and Emmanuel De Dios. Randolf David and Carlo Katigbak are advisors.
The Compensation Committee for the Chairman and the Chief Executive Officer reviews and approves the recommended changes concerning the salaries and benefits provided to the Company’s CEO. The committee is composed of Augusto Almeda-Lopez, Federico Garcia, and Antonio Jose U. Periquet. Mario Bautista is an advisor.
The Audit and Compliance Committee reviews the financial reports and risks, examines internal control systems, oversees the audit process as well as the company’s compliance with laws, and evaluates the company’s business conduct. It is composed of Antonio Jose Periquet, Salvador Tirona, and Emmanuel De Dios. Carlo Katigbak, Honorio G. Poblador IV and Martin L. Lopez are advisors.
The Risk Management Committee oversees the formulation and establishment of an enterprise wide risk management system, including the review, analysis, and recommendation of policies, frameworks, strategies, and systems to be used by the Company to manage risks, threats, and liabilities. It is composed of Salvador Tirona, Federico Garcia, and Emmanuel De Dios. Honorio G. Poblador IV and Martin L. Lopez are advisors.
The Nomination and Election Committee reviews and evaluates the qualifications of all persons nominated to the Board and other appointments that require Board approval, and assesses the effectiveness of the Board’s processes and procedures in the election or replacement of directors. It is composed of Eugenio Lopez III, Ma. Rosario Santos-Concio, Antonio Jose Periquet and Emmanuel de Dios. Randolf David is an advisor.
The Company has appointed a Compliance Officer who is tasked to ensure the Company’s observance of corporate governance best practices and provide recommendations to the Board for the continuous improvement of its policies and practices toward full compliance and the adoption of global best practices. The Compliance Officer also submits to the Securities and Exchange Commission (SEC), the Philippine Stock Exchange (PSE), and the Philippine Dealing and Exchange Corporation (PDEX), the Company’s Annual Corporate Governance Report, periodic reports, and other material disclosures.
Code of Conduct and Conflict of Interest Policy
The Company’s Code of Conduct denies the behaviors that are acceptable or not acceptable within the organization. It details the offenses versus the company’s or the person’s property, the schedule of penalties for each offense according to its gravity, and the grievance process, and denies the roles of the different people involved in disciplinary action. The Code covers all directors, employees, consultants, product and service providers, and anyone who acts in the name of ABS-CBN.
The Code of Conduct includes the Company’s Conflict of Interest Policy. Directors are disallowed from engaging in any business which competes with or is antagonistic to that of the Company or any of its subsidiaries and affiliates. On the other hand, employees are expected not to have any direct or indirect financial or pecuniary interest in any business, contract, or transaction in connection with which they intervene or take part in their official capacity. In addition, employees are expected not to render services to another employer without the knowledge of higher management. They are also expected to disclose other businesses or jobs undertaken which may be in conflict with any existing or future undertaking of the Company.
Assisting in the dissemination and implementation of this Code of Conduct is the Ethics Committee, which focuses on conflict-of-interest situations. The Committee helps make decisions and clarify stands in cases of personal or professional conflict, or in which the employee or the company stands to gain unfairly from an arrangement, relationship, or procedure. Essential to the idea of good and ethical conduct is the upholding of common corporate and individual values, which are disseminated through a process of values cascading.
Whistle Blowing Policy
In November 2013, the Company implemented the Whistle Blowing Policy. This policy provides for and encourages employees and others to report, in good faith, any covered wrongful conduct committed by employees of which they have personal knowledge. The policy assures the employees of protection against harassment, threats, and any other form of retaliation from the persons reported.
The Whistle Blowing Policy is a clear statement that if any covered wrongdoing by any of its employees is identified and reported accordingly, it will be dealt with, through a thorough investigation and the proper imposition of accountability. The Company endeavors to take steps to ensure that such wrongdoing is prevented in the future.
The Internal Audit Division is responsible for providing independent and objective assurance and consulting services to the Company’s Board of Directors through its Audit Committee. Its main function is to evaluate the adequacy, effectiveness, and efficiency of the Company’s internal control system and to recommend necessary control measures for its improvement. It likewise establishes an effective follow-up system to monitor the implementation of recommended controls.
The Group is composed of people with varied specializations, majority of which are certified public accountants. It also has certified internal auditors, certified information systems auditor, certified fraud examiners, certified forensic accountants, and accredited quality assurance validators. The Division has an Information Technology (IT) Audit and a Technical Audit Teams, which are composed of engineers and IT professionals.
The Group conducts regular audits of the Company and its Subsidiaries based on an annual audit plan in a 3-year audit cycle that is approved by the Audit Committee. Special audit projects are also undertaken as the need arises.
In 2015, the Internal Audit Division presented to the Audit Committee its audit plan, updates on the status of audit projects, highlights of significant findings, implementation status of audit recommendations, and other significant audit activities.
Beginning 2012, the Group also worked closely with the Company’s Risk Management Officer.
Audit Committee Report for 2015
The Audit Committee, in fulfillment of its oversight responsibilities, represents and assists the Board by evaluating the:
• Reasonableness of the Company’s financial statements and efficiency of the financial reporting process;
• Management of business risks and reliability of the internal control environment;
• Objectivity, independence, and effectiveness of internal audit functions and processes;
• Qualifications, independence, and fees of the Company’s external auditors with regard to the annual review of the Company’s financial statements; and
• Company’s compliance with legal and regulatory requirements.
The roles and responsibilities of the Audit Committee are embodied in an Audit Committee Charter that is approved by the Board of Directors.
To comply with the Audit Committee Charter, the Audit Committee confirms that:
• Majority of the Audit Committee members are independent directors, including the Chairman;
• Quarterly meetings were held and attended by the Chairman and members of the Committee;
• The Committee reviewed and approved the internal audit scope and plans, as well as the manpower resources and competencies necessary to carry out the audit plan;
• The Committee reviewed and discussed the reports of the internal auditors, including the necessary corrective actions, with concerned management;
• The Committee reviewed and assessed that a sound internal audit, control, and compliance is in place based on the reports of management and internal and external auditors;
• The Committee reviewed and discussed the audited annual financial statements of the Company and its Subsidiaries with the management, internal auditors, and external auditors taking into consideration that:
o Management is responsible for the Company’s financial statements and the related statements of financial condition and results of operations, and;
o SGV & Co., the external auditor, is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with the Philippine Financial Reporting Standards and International Financial Reporting Standards as appropriate.
ABS-CBN’s Board of Directors and management are mindful of the potential impact of various risks to the Company’s ability to deliver quality content across multiple platforms and consequently, as a result of its operations, value to shareholders. In 2009, the Audit Committee of the Board of Directors provided oversight on Enterprise Risk Management. In 2010 this responsibility was assumed by the newly created Risk Management Committee. At the same time the Board of Directors of the Company approved the appointment of a Chief Risk Management Officer, reporting directly to the Board of Directors. In November 2012, the Board of Directors approved the appointment of Mr. Raymund Martin T. Miranda as Chief Risk Management Officer concurrent with his role as Chief Strategy Officer of ABS-CBN. As Chief Risk Management Officer, he will continue to provide the overall leadership, vision and direction for enterprise risk management by continuing to establish and implement an integrated risk management framework that covers all aspects of risk across the Company’s organization, and improve the Company’s risk management readiness. The Company’s corporate strategy formulation and business decision-making processes always take into account potential risks and the steps and costs necessary to minimize, if not eliminate, such risks. As part of its stewardship responsibility and commitment to deliver optimum value to its stakeholders, ABS-CBN ensures that it has the proper control systems in place, and to the extent possible, adopted global best practices, to identify and assess, analyze and mitigate market, operating, financial, regulatory, community, reputational, and other risks. The formal identification of the control systems is currently being undertaken. The Company contracted SGV (a member firm of Ernst and Young) to assist in the development of an ERM Framework and Program.
Disclosures and Financial Reporting
ABS-CBN’s financial statements comply with Philippine Accounting Standards and Philippine Financial Reporting Standards that in turn conform with International Accounting Standards.
The annual consolidated financial statements provide information on the financial condition and results of operations of the businesses of ABS-CBN and its subsidiaries. These financial statements include detailed information on the total assets, total liabilities and shareholders’ equity, revenues, costs and expenses, operating income and income before tax, net income attributable to shareholders of ABS-CBN and minority interest, earnings per share, and EBITDA.
Business segment information is likewise provided for major business categories and includes information such as revenues, operating and net income, assets and liabilities, capital expenditures and depreciation and amortization expenses.
Dealings in Securities
ABS-CBN requires all members of the Board of Directors and principal officers to report any purchase, sale or change in their shareholdings of the Company’s common shares or Philippine Depositary Receipts within five trading days, in compliance with the PSE’s requirement for such disclosure.
Shareholder and Investor Relations
ABS-CBN fully respects shareholder rights and complies with regulatory and legal requirements that enforce and ensure that such rights are respected. These requirements include due and proper notification for general meetings and provision of adequate, transparent and timely information due shareholders.
As a publicly listed corporation, ABS-CBN is subject to reporting requirements prescribed by regulatory authorities, including the SEC and the PSE, among others. ABS-CBN is compliant in submitting timely structured and non-structured reports and disclosure filing required by the SEC and the PSE.
To complement these disclosures, ABS-CBN’s Investor Relations group also holds regular analyst and press briefings coincident with its quarterly and annual report submissions that further explain, elaborate on and contextualize the Company’s operating performance and financial condition and results. ABS-CBN’s Chief Finance Officer, the Head of Treasury, and the Head of Investor Relations are always present at these investor, analyst and press briefings to address any questions that may be raised concerning the Company’s operating and financial results.
In addition, ABS-CBN’s Chief Finance Officer, Head of Treasury, and its Head of Investor Relations, meet with representatives of institutional investors and investment funds upon request and at various investor conferences throughout the year for more intimate and detailed discussions about the Company’s businesses, operating and financial results, business prospects and long-term plans. Inquiries from institutional and individual investors received by regular or electronic mail are also duly acknowledged and addressed in a timely and transparent manner.
ABS-CBN maintains an investor relations website that contains information on the history and businesses of the company, its Board of Directors and senior management executives, financial information and reports and disclosures filed with the SEC and the PSE, share price performance and dividend history, and investor relations contact information.
ABS-CBN’s Investor Relations website may be found on http://ir.abs-cbn.com.