The code adopts a “comply or explain” approach that combines voluntary compliance with mandatory disclosure. As is common in other countries companies do not have to fully comply with the code, but they must state in their annual corporate governance reports whether they comply with the code provisions, identify any area of non-compliance, and explain the reasons for non-compliance.
It is hoped that the revised code will improve the functioning of boards, strengthen shareholder protection and promote full disclosure in financial and non-financial reporting. The new code increases the responsibilities of the board and aims to ensure the competence and commitment of its directors.
Chairperson Teresita Herbosa of the SEC said: “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. “The adoption of the ‘comply or explain’ approach is also expected to address the perceived overregulation of the SEC.”
The IFC said that the code revision is part of its partnership with the SEC to enhance the regulatory framework and investment climate. Numerous studies, the IFC said, report that investors have greater confidence in companies with good governance and in markets that are backed by sound legal and regulatory regimes. More foreign investment will create jobs, strengthen the business environment, and improve private sector efficacy, the SEC and IFC believe.
Jane Yuan Xu, IFC Philippines country manager, said: “Our global experience has shown that corporate governance codes set a benchmark and encourage companies to adopt effective governance practices. 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.”
The code took effect at the beginning of the year and all publicly listed companies are required to submit a new manual on corporate Ggovernance to the SEC by 31st May 2017. The IFC said that it had now contributed to the adoption of 95 corporate governance codes, laws, and regulations in more than 30 countries worldwide.