Corporate Governance and RCBC Case Study

Comprehensive vocabulary flashcards covering basic concepts of corporate governance, organizational theories, board structures, and the RCBC money laundering case study.

Corporate Governance

The system of rules, practices, and processes that direct and control a corporation to ensure accountability, transparency, and ethical management.

Tricker (2019) Definition

The way a corporation is controlled, ensuring resources are optimized for stakeholders while preventing disasters through accountability and transparency.

Philippine Corporate Governance Family Ownership

A structure where $46\%$ of corporations are under family control, often resulting in cross-shareholdings and related-party lending.

Ownership Concentration

A scenario where high concentration leads to conflict between majority and minority shareholders, while low concentration leads to conflict between managers and shareholders.

PhilHealth Scandal (2020–2021)

A governance failure in a Philippine GOCC involving alleged corruption and fund mismanagement with billions lost, eroding public trust.

Governance Function

Carried out by the board of directors or trustees who set direction, make key decisions, and oversee the organization.

Management Function

Focuses on day-to-day operations and ensures that plans and policies set by the board are implemented.

CEO

The individual who leads and manages the entire organization to achieve its specific goals.

Chairman of the Board

The individual who provides leadership to the board and plays a critical role in the company's governance practices.

Board of Directors

An entity that steers strategic direction and evaluates performance, asking questions to ensure long-term company interest.

Shareholders

The owners of the company through stock shares who seek to maximize stock price increase over time.

Stakeholders

Any group affected by the company's operations, including management, employees, customers, and society.

Agency Theory

A theory suggesting managers may act in their own self-interest rather than the owners' interests due to differing goals.

Stewardship Theory

A theory positing that managers naturally act in the best interest of owners and take good care of the company.

Resource Dependency Theory

A theory examining how organizations use resources like materials, people, and connections to survive and gain advantage.

Stakeholder Theory

A theory stating companies are responsible to everyone affected by their actions, aiming to satisfy every group connected to the business.

Saving Face

A Chinese social value that influences decision-making and communication in many Asian countries, including the Philippines.

Rules-Based Approach

A governance style focusing on strict compliance with laws and government regulations, such as the U.S. Sarbanes-Oxley Act.

Principles-Based Approach

A "Comply or Explain" approach focusing on following governance principles rather than strict legal requirements.

Accountability (Board Function)

The board's responsibility for overall performance and answering to shareholders for decisions and actions.

Monitoring and Supervision

Overseeing management performance, reviewing financial reports, and ensuring managers achieve company goals.

SWOT Analysis

A tool used for strategy formulation identifying Strengths, Weaknesses, Opportunities, and Threats.

Independent Directors

Board members with no relationship to the company that could affect judgment, providing objective decisions.

Non-Executive Directors

Board members who are not part of daily management and offer advice, guidance, and oversight.

Executive Directors

Board members who hold management positions within the company, such as the CEO and Vice President.

Audit Committee

A committee that oversees accounting and financial reporting to protect the company from fraud.

Remuneration Committee

A committee that determines fair, performance-based salaries, bonuses, and benefits for directors and executives.

Nomination Committee

A committee that selects qualified and independent candidates to maintain a balanced board.

ASEAN Corporate Governance Scorecard (ACGS)

A standard framework used to assess governance setup, board structure, and operational processes in the ASEAN region.

Economic Value vs. Emotional Value

The two values in family business governance representing business performance and the family's attachment to the enterprise.

Family Constitution

A document that formally sets out a family's business strategy and governance structures to manage challenges like nepotism.

Ethical Stewardship

A practice upholding honesty, fairness, and dignity, which prevents harm and damaging crises for the organization.

Anti-Money Laundering Council (AMLC)

The body that filed complaints in $2016$ against RCBC branch manager Maia Santos-Deguito for fund withdrawal violations.

Philrem Service Corporation

The forex broker used as an intermediary to consolidate and send the stolen Bangladesh Bank funds to casinos.

Bank Secrecy Law

A law used by RCBC executives to avoid revealing case details, which was challenged because the stolen money belonged to a foreign government.

Bangko Sentral ng Pilipinas (BSP) Fine

A penalty of $₱1 \text{ billion}$ issued to RCBC on August $5$, $2016$, in connection to the $US\$81 \text{ million}$ heist.

Maia Santos-Deguito Conviction

The result of a $2019$ trial finding the former RCBC manager guilty on eight counts of money laundering, sentenced to $4$ to $7$ years per count.

OECD Principles

Global framework used to guide the audit and improvement of corporate governance practices in listed companies.