Saturday, November 25, 2006 Firms must implement corporate governance to attract investors
THE government needs to strictly implement the laws on corporate governance if it wants to attract more foreign direct investments to the country.
Lawyer Francis Lim, president and chief executive officer of the Philippine Stock Exchange (PSE), said a country’s adherence to corporate governance is very important to investors.
He said many investors are interested in the stocks of companies that implement corporate governance.
During the second day of the three-day working session of the Institute of Corporate Directors (ICD) at Shangri-La’s Mactan Island Resort last Thursday, Behdad Nowroozi, World Bank (WB) coordinator for corporate governance in East Asia and Pacific Region, said the WB has rated the Philippines’ compliance to corporate governance at 81 percent.
“The Philippines is making good progress and has laid down the foundations on (corporate governance). The challenge lies in the implementation of these rules,” he said live via phone patch from Washington, D.C.
Lim supported Nowroozi’s statement saying another challenge is how to make corporate governance work in the country to assure investors that their investments are well protected.
Global standard
Conchita Manabat, co-chair of Capital Market Development Council, said other countries are taking corporate governance very seriously.
“For our country to become a global player in the corporate market, we must observe the global standard of (corporate governance),” she said.
Meanwhile, lawyer Cesar Villanueva, dean of the Ateneo University law school, said the Philippines must exert more effort to increase the country’s standing, as far as corporate governance implementation is concerned.
He said the 81 percent rating is still low.
He said transferring the burden of proof of practicing “extraordinary diligence” in the exercise of duties and obligations to the board of directors or management of a public company could help improve the adherence to corporate governance in the country.
Villanueva defined corporate governance as ensuring that management of a public corporation is accountable to its stockholders.
Instead of the current practice of passing on the burden of proof to stockholders to prove a wrongdoing by management or by a member of the board, these sectors must prove that they are performing their duties and obligations with extraordinary diligence.
Extra careful
“This would warn the board to be extra and doubly careful in carrying out their jobs,” Villanueva said.
ICD is the professional organization of individual corporate directors committed to the professional practice of corporate directorship in the Philippines along global principles of modern corporate governance.
The organization has undertaken various initiatives after the explosion of corporate scandals worldwide, to promote consciousness on corporate governance in the Philippine economy.
The recent working sessions at Shangri-La were aimed to review scorecards on corporate governance, which were issued in the past two years.
The move is meant to make corporate governance a stronger instrument that will prod actual improvements in corporate board room practices.
Special focus will also be made on family owned and controlled corporations that belong to the non-listed category but which characterize the Philippine business landscape.
To date, ICD and its sister institute, the Institute for Solidarity in Asia, are working with 10 pilot cities in the documentation of best governance practices and the development of public governance improvement programs (PGIP) in concerned local government units (LGUs).
The project aims to institutionalize good local governance practices and share these with as many LGUs as possible. (JBN)
