Code of Corporate Governance Securities and Exchange Commission Insurance Commission Reported by: Alvin B. Cabrera.

Code of Corporate Code of Corporate GovernanceGovernance

Securities and Exchange CommissionSecurities and Exchange CommissionInsurance CommissionInsurance Commission

Reported by: Alvin B. CabreraReported by: Alvin B. Cabrera

CORPORATE GOVERNANCE PRINCIPLES AND LEADINGPRACTICES

Defined by SEC code as a system “whereby shareholders, creditors and other stakeholders of a corporation ensure that the management enhances the value of the corporation as it competes in an increasingly global market”

sec. 1 (B) – SEC Code of Corporate Governance

Corporate Governance

SEC Memorandum Circular no. 6 series of 2009, revising the previously issued code of corporate governance issued in 2002.

SEC Code of Corporate Governance

Objective: In accordance with state policy to actively promote governance reforms aimed to raise investor confidence, develop capital market and help achieve high sustained growth for corporate sector and the economy. (Code of Corporate governance 2002)

Scope: The revised code of corporate governance (2009) shall apply to registered corporations and to branches or subsidiaries of foreign corporations operating in the Philippines that:

a. Sell equity and/or debt securities to the public that are required to be registered with the commission.

b. Have assets in excess of fifty million pesos and at least two hundred stockholders who own at least one hundred shares each of equity securities.

c. Whose equity securities are listed on an exchanged. Are grantees of secondary licenses from the commission.

Insurance Commission Circular no. 31-2005

Objective: To enhance the corporate accountability of insurers and intermediaries, promote the interests of their

stakeholders specifically those of the policyholders, claimants and creditors.


Key features: •Role of the board, the chairman and the non-executive directors•Procedures for the appointment of directors•Formal evaluation of the performance of the board and individual directors.

Board of Directors

Refers to the collegial body that exercises the corporate powers of all corporations formed under the Corporation code. It conducts all business and controls or holds all properties of such corporations.

The governing body elected by the stockholders that exercises the corporate powers of a corporation, conducts all its Business and controls its properties

SEC Definition

IC definition

Principles:Every Company should be headed by an effective Board to lead and control the company to ensure its success.

•Provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enable risks to be assessed and managed•Set the companies’ strategic aims•Ensure that the necessary financial and human resources are in place for the company to meet its objectives and review management performance•Set the companies values and standards•Ensure that its obligations to shareholders and others are understood and met.

Board of Directors

General Responsibility Board’s responsibility to foster the long-term success of the corporation, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the best interest of its stockholders.

SEC laid down Gen.

resp.

IC laid down Principles

Directors sitting on the board in any insurance entity shall be possessed of the necessary skills, competence and experience, in terms of management capabilities preferably in the field of insurance or insurance related disciplines.

(IC Circular Letter 31-2005 letter E (A) (1) Qualification of Directors)

Board of Directors

Insurance Code posted additional qualification for a Board of Director


As custodian of public funds, insurance corporations and insurance intermediaries shall ensure that their dealings with the public are always conducted in a fair, hones and equitable manner.

(sec. V – Insurance Code)

Public Accountability (Insurance Code)

The diligence required of insurance companies, intermediaries and their directors and officers is not merely due diligence of a good father of a family, but one of a much higher order, perhaps even equivalent to the highest diligence required in banking industry.

code of corporate governance (2009)– Villanueva

Board of DirectorsEssential Standards

Meeting Regularly -Discharge of duties efficiently

Non-executive directors (led by

independent directors)

-Meet annually without the chairman’s presence to appraise the chairman’s performance and on other such occasions deemed appropriate

All concerns of the directors about running the company shall be recorded in the minutes of the Board

Annual Report• Statement of how the Board operates, types of decisions to be followed and those that are delegated to management • Identification of chairman, vice chairman, independent director and the chairmen and members of the nomination, audit and remuneration committees.• Number of meetings and its attendance

Constitution of an effective Board

Composition At least 5 but not more than 15 members elected by shareholders

2 independent directors in the Board

Balance of executives and non executives

No individual or small group of individuals can dominate the Board’s decision making.

Chairman and CEOMust be separate in principle to ensure balance of power, accountability and independent decision making

Chairman shall be non-executive director Check and balance

SEC CODE: at least 2 or 20% of the member of the Board, whichever is lesser

SEC CODE: If the position of Chair and CEO are unified, the proper checks and balances should be laid down independent views.

Appointment to the Board – Insurance Code of Corporate Governance

Essential Standards

1. There shall be a formal, rigorous and transparent procedures for the selection and appointments to the Board.

2. Appointments to the Board shall be made on merit and against subjective criteria

3. Careful deliberation and consideration shall be done to ensure appointees have enough time for the job.

4. Plans shall be in place for orderly succession to the Board and that of the senior management level in order to maintain a balance of appropriate skills and experiences within the company.

Audit Committee

Nomination CommitteeCommittees

Remuneration Committee

Formation of Committees in the SEC Code

Article 3 (K) (i) has provided that the Board should constitute an Audit Committee which shall consist of at least three (3) directors who shall preferably have accounting and finance backgrounds.

Article 3 (K) (ii) provided that the board “may” also organize the following committees

1. Nomination Committee

2. Compensation or Remuneration Committee

Nomination Committee

Composition At least 3 members of the BOD, one of whom must be independent

Role:Shall review and evaluate the qualifications of all persons nominated to the Board as well as those nominated to other positions requiring appointment by the BOD. It should prepare a descriptions of the roles and capabilities of a particular appointment.

Audit Committee

Composition Shall be comprised of independent board members, preferably with accounting and finance experiences

Role:Provides oversight of the institutions internal and external auditors.

It shall monitor and evaluate the adequacy and effectiveness of the internal control system of the company.

Remuneration Committee

Composition At least 3 members, one of whom is an independent director

Role:It shall judge or make plans where to position the company relative to other companies. But such comparisons shall be used with caution in view of the risk of an upward ratchet of the level of remuneration with no corresponding improvement in performance.

It shall delegate responsibilities for setting up remunerations for all executive directors and chairman, including pension rights or any compensation payments.

SEC vs IC

SEC CodeSEC Code IC CodeIC CodeDuties and FunctionsDuties and Functions

General Responsibility:General Responsibility:

- Responsibility to foster long-term - Responsibility to foster long-term success of the corporation and success of the corporation and to sustain its competitiveness to sustain its competitiveness and profitability in a manner and profitability in a manner consistent with its corporate consistent with its corporate objectives and best interest of objectives and best interest of stockholders.stockholders.

• Implement a process for the Implement a process for the selection of directors who can selection of directors who can add value and contribute add value and contribute independent judgment and independent judgment and policies. policies.

• Appoint competent, Appoint competent, professional, honest and professional, honest and highly motivated management highly motivated management officers. officers.

Essential Standards:Essential Standards:

1.1. Board must meet regularly to Board must meet regularly to discharge its duties efficiently, discharge its duties efficiently, and all concerns of Directors and all concerns of Directors shall be recorded in the shall be recorded in the minutes of the Board.minutes of the Board.

Responsibilities of BoardResponsibilities of Board

Essential StandardsEssential Standards• Adopt the company’s strategic Adopt the company’s strategic

plan.plan.

• Oversee conduct of company’s Oversee conduct of company’s business to ensure business business to ensure business properly managed, and properly managed, and dealings with policy-holders, dealings with policy-holders, claimants and creditors are claimants and creditors are fair and equitablefair and equitable

SEC CodeSEC Code IC CodeIC Code• Adopt an effective succession Adopt an effective succession

planning program for planning program for management.management.

• Provide sound strategic Provide sound strategic policies and guidelines to the policies and guidelines to the corporation on major capital corporation on major capital expendituresexpenditures

• Establish programs that can Establish programs that can sustain its long-term viability sustain its long-term viability and strength. Periodically and strength. Periodically evaluate and monitor the evaluate and monitor the implementation of such implementation of such policies and strategies, policies and strategies, including the business plans, including the business plans, operating budgets and operating budgets and Management’s overall Management’s overall performance.performance.

• Identify principal business Identify principal business risks and ensure risks and ensure implementation of implementation of appropriate risk management appropriate risk management system.system.

• Approve corporate policies Approve corporate policies and core areas of operations and core areas of operations of under-writing, investments, of under-writing, investments, reinsurance and claims reinsurance and claims management.management.

• Plan succession, appointing, Plan succession, appointing, training, fixing the training, fixing the compensation of replacing compensation of replacing senior management.senior management.

• Develop and implement an Develop and implement an investor relations programinvestor relations program

SEC CodeSEC Code IC CodeIC Code• Ensure the corporation’s Ensure the corporation’s

faithful compliance with all faithful compliance with all applicable laws regulations applicable laws regulations and best business practicesand best business practices

• Establish and maintain an Establish and maintain an investor relations program investor relations program that will keep stockholders that will keep stockholders informed of important informed of important developments in the developments in the corporation.corporation.

• Identify the sectors in the Identify the sectors in the community in which the community in which the corporation operates or are corporation operates or are directly affected by its directly affected by its operations, and formulate a operations, and formulate a clear policy and accurate, clear policy and accurate, timely and effective timely and effective communication with them.communication with them.

• Review adequacy and Review adequacy and integrity of internal control integrity of internal control systems and management systems and management information systems, information systems, including systems of including systems of compliance with the laws, compliance with the laws, rules, regulations, directives rules, regulations, directives and guidelines.and guidelines.

• Select/appoint officers who Select/appoint officers who are qualified to administer are qualified to administer insurance affairs soundly and insurance affairs soundly and effectively, and establish effectively, and establish adequate selection process adequate selection process for all personnel.for all personnel.

• Apply fit and proper Apply fit and proper standards on personnel.standards on personnel.

SEC CodeSEC Code IC CodeIC Code• Adopt a system of check and Adopt a system of check and

balance within the Board. A balance within the Board. A regular review of the regular review of the effectiveness of such system effectiveness of such system should be conducted to ensure should be conducted to ensure the integrity of the decision the integrity of the decision making and reporting making and reporting processes at all times.processes at all times.

• Identify key risk areas and Identify key risk areas and performance indicators and performance indicators and monitor these factors with due monitor these factors with due diligence to enable the diligence to enable the corporation to anticipate and corporation to anticipate and prepare for possible threats to prepare for possible threats to its operational and financial its operational and financial viability.viability.

• Establish compensation Establish compensation package for all personnel package for all personnel consistent with interest of all consistent with interest of all stakeholders.stakeholders.

• Review/approve material Review/approve material transaction not in the ordinary transaction not in the ordinary course of business.course of business.

• Establish system of check and Establish system of check and balance for the board.balance for the board.

• Have appropriate reporting Have appropriate reporting system so Board can monitor, system so Board can monitor, assess and control assess and control management’s performance.management’s performance.

SEC CodeSEC Code IC CodeIC Code• Formulate and implement Formulate and implement

policies and procedures that policies and procedures that would ensure the integrity and would ensure the integrity and transparency of related party transparency of related party transactions between and transactions between and among the corporation and among the corporation and stakeholders.stakeholders.

• Constitute an Audit Committee Constitute an Audit Committee and such other committees it and such other committees it deems necessary to assist the deems necessary to assist the Board in the performance of its Board in the performance of its duties and responsibilities.duties and responsibilities.

• Establish and maintain an Establish and maintain an alternative dispute resolution alternative dispute resolution system in the corporation that system in the corporation that can amicably settle conflicts or can amicably settle conflicts or differences between the differences between the corporation and its corporation and its stockholders, and the stockholders, and the corporation and third parties, corporation and third parties, including regulatory including regulatory authoritiesauthorities

• Present to Board members and Present to Board members and shareholders balance and shareholders balance and understandable assessment of understandable assessment of company’s performance and company’s performance and financial condition.financial condition.

• Appoint Compliance Officer to Appoint Compliance Officer to be responsible for be responsible for coordinating, monitoring and coordinating, monitoring and facilitating compliance with facilitating compliance with laws, rules and regulations.laws, rules and regulations.

• Entitled to Corporate Secretary Entitled to Corporate Secretary who shall ensure: all who shall ensure: all appointments are proper, all appointments are proper, all necessary information necessary information obtained from directors, both obtained from directors, both for the company’s own record for the company’s own record and in meeting statutory and and in meeting statutory and agency obligations.agency obligations.

SEC CodeSEC Code IC CodeIC Code• Meet at such times or Meet at such times or

frequencies as may be frequencies as may be needed. The minutes of such needed. The minutes of such meetings should be duly meetings should be duly recorded. Independent views recorded. Independent views during Board meetings during Board meetings should be encouraged and should be encouraged and given due consideration.given due consideration.

• Keep the activities and Keep the activities and decision of the Board within decision of the Board within its authority under the its authority under the articles of incorporation and articles of incorporation and by-laws, and in accordance by-laws, and in accordance with existing laws, rules and with existing laws, rules and regulations.regulations.

• Appoint a Compliance officer Appoint a Compliance officer who shall have the rank of at who shall have the rank of at least Vice President. In the least Vice President. In the absence of such absence of such appointment, the corporate appointment, the corporate secretary, preferably a secretary, preferably a lawyer, shall act as lawyer, shall act as compliance officer.compliance officer.

Duties and Responsibilities of Individual Directors

SEC CodeSEC Code IC CodeIC Code

• Conduct fair business Conduct fair business transactions transactions with the corporation with the corporation and ensure that his personal and ensure that his personal interest does not conflict with interest does not conflict with the interest of the corporation.the interest of the corporation.

• Devote the time and attentionDevote the time and attention necessary to properly and necessary to properly and effectively perform his duties effectively perform his duties and responsibilities.and responsibilities.

• Act judiciously Act judiciously

• Exercise Independent JudgmentExercise Independent Judgment

• Have a working knowledge Have a working knowledge of the of the statutory and regulatory statutory and regulatory requirements that affect the requirements that affect the corporation, including its articles corporation, including its articles of incorporation and by-laws, the of incorporation and by-laws, the rules and regulations of therules and regulations of the

• Conduct fair business transactionConduct fair business transaction with the company to ensure that with the company to ensure that personal interest does not bias personal interest does not bias board decisions.board decisions.

• Act honestly, Act honestly, in good faith, and in good faith, and with loyalty to the best interest with loyalty to the best interest of the company, stockholders of the company, stockholders and other stakeholders such as and other stakeholders such as policy-holders, investors, policy-holders, investors, borrowers, other clients and borrowers, other clients and general public.general public.

• Devote time and attention Devote time and attention necessary to properly discharge necessary to properly discharge their duties and responsibilities, their duties and responsibilities, familiarize himself w/ the familiarize himself w/ the company’s business, must be company’s business, must be constantly aware of the constantly aware of the company’s condition and be company’s condition and be knowledgeable to contribute knowledgeable to contribute meaningfully to Board’s work.meaningfully to Board’s work.



• To act judiciously – To act judiciously – Before Before deciding on any matter brought deciding on any matter brought before the Board of Directors, he before the Board of Directors, he should thoroughly evaluate the should thoroughly evaluate the issues, ask questions and seek issues, ask questions and seek clarifications.clarifications.

• Exercise independent judgmentExercise independent judgment: : He should view each He should view each problem/situation objectively.problem/situation objectively.

• Have a working knowledge Have a working knowledge of the of the statutory and regulatory statutory and regulatory requirements affecting the requirements affecting the corporation, including contents corporation, including contents of its articles of incorporation of its articles of incorporation and by-laws, SEC requirements and by-laws, SEC requirements and of other regulatory and of other regulatory angencies.angencies.

• Act judiciously: Act judiciously: Before deciding Before deciding on any matter brought before on any matter brought before the Board, he should thoroughly the Board, he should thoroughly evaluate the issues, ask evaluate the issues, ask questions and seek clarification.questions and seek clarification.

• Exercise independent judgment:Exercise independent judgment: He shall view each He shall view each problem/situation objectively.problem/situation objectively.

• He shall have working knowledgeHe shall have working knowledge of the statutory and regulatory of the statutory and regulatory requirements of the company, requirements of the company, including contents of articles of including contents of articles of incorporation and by-laws, IC incorporation and by-laws, IC requirements and of other requirements and of other government agencies.government agencies.



Commission and, where Commission and, where applicable, the requirements of applicable, the requirements of relevant regulatory agencies.relevant regulatory agencies.

• Observe Confidentiality.Observe Confidentiality.

• Observe confidentiality Observe confidentiality of non-of non-public information acquired by public information acquired by reason of his position, and not reason of his position, and not disclose said information to any disclose said information to any other person without board other person without board authority.authority.

• Every director shall make Every director shall make decisions objectively in the decisions objectively in the company’s interests. Non-company’s interests. Non-executive director shall:executive director shall:

* Scrutinize performance of * Scrutinize performance of Management in meeting agreed Management in meeting agreed goals and objectives; monitor goals and objectives; monitor performance report.performance report.

* Constructively challenge and help * Constructively challenge and help develop strategic proposals for develop strategic proposals for the company.the company.

Accountability and Audit

The Board is primarily accountable to the stockholders. It should provide them with a balanced, position and prospects on quarterly basis, including interim and other reports that could adversely affect its business, as well as reports to regulators that are required by law.

Preparation of Financial Statements

Effective system of internal control

Insurance Commission Circular no. 21-2009

The scorecard requires full disclosure of company practices on corporate governance in accordance with the Principles and Leading Practices on Good Corporate Governance.

Corporate Governance Scorecard

OBJECTIVE: The scorecard has been developed to further measure levels of compliance with corporate governance rules and regulations.

Developed by the IC and during the Annual working session of the Institute of Corporate Directors (ICD) (a non-government organization that has been in the forefront of promoting corporate governance reforms in the Philippines)

Employs the “person-on-the-street” test serving as a reasonable approximation of the quality and quantity of public disclosure.

Corporate Governance Scorecard

It takes the side of an ordinary investor with no special access to any privileged information. The easier for the ordinary investor to get information, the higher is the score.

IssuesIssues WeightsWeights

I. Rights of ShareholdersI. Rights of Shareholders 15%15%

II. Equitable Treatment of II. Equitable Treatment of ShareholdersShareholders

15%15%

III. Role of StakeholdersIII. Role of Stakeholders 10%10%

IV. Disclosure and IV. Disclosure and TransparencyTransparency

30%30%

V. Board ResponsibilitiesV. Board Responsibilities 30%30%

TotalTotal 100%100%

Manulife Financial Corporation

Business Profile

Manulife Financial Corporation (MFC) provides financial protection and wealth management products and services to both individual and group customers in the United States, Canada, and Asia. These products and services include individual life insurance, group life and health insurance, long-term care insurance, pension products, annuities and mutual funds.

Risk Governance

Audit and Risk Management

Committee (ARMC)

Assisted the Board in its oversight with respect to the effectiveness of Manulife’s risk management and compliance practices

The Board of Directors oversees the implementation by management of appropriate systems to identify and manage principal risks of the company’s business and periodically reviews and approves our enterprise risk policy, risk taking philosophy and overall risk appetite.

Strategy:

Our corporate governance practices, corporate values, and integrated, enterprise-wide approach to management risk set the foundation for mitigating risks. We strengthen this base by establishing appropriate internal controls and systems and by seeking to retain trained and competent people throughout the organization.

Code of Corporate Governance Securities and Exchange Commission Insurance Commission Reported by: Alvin B. Cabrera.

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