Good Governance, Business Ethics, Risk Management and Internal Control — Flashcards

A comprehensive set of practice-focused questions (Question and Answer style) drawn from the lecture notes on governance concepts, models, ASEAN/Philippine frameworks, and board responsibilities to aid exam preparation.

What is the essence of good governance as defined in the notes?

Good governance is the process of decision-making and implementing the best possible process for making decisions, with accountability as an essential characteristic.

Who are the primary players in good governance according to the notes?

The State (Public Sector), the Private (Business) Sector, and Civil Society (CSOs such as schools, NGOs, and voluntary groups).

What are the roles of the State in governance as enumerated by the Asian Development Bank (ADB)?

Create a conducive economic environment (laws, decentralization, price stability), protect the vulnerable (pension, unemployment benefits, private health/social insurance), improve government efficiency (merit-based civil service, professional staff), empower people and democratize, decentralize administration, reduce gaps between rich and poor, encourage cultural diversity and social integration, and protect the environment.

What role does the Private (Business) Sector play in governance?

Acts as the engine of the economy, creates jobs, provides expertise and resources for planning and implementing public projects, and promotes efficiency and competition.

What is the Civil Society’s role in governance?

CSOs mobilize participation, facilitate planning and decision-making, provide voice to the inarticulate, act as checks and balances, and deliver frontline services in areas where government is absent or private actors are uninterested.

List the eight characteristics of good governance as per UNDP.

Participatory, Consensus oriented, Accountability, Transparent, Responsive, Effective and efficient, Equitable and inclusive, and Rule of law.

Define 'Participation' in the context of good governance.

Participation means all men and women should have a voice in decision-making, directly or through legitimate intermediate institutions, with informed and organized participation.

What does 'Consensus oriented' mean in good governance?

Mediating differing interests to reach a broad consensus on what is in the best interest of the whole community and for sustainable development.

What does 'Accountability' entail in good governance?

Decision-makers are accountable to the public and institutional stakeholders; accountability requires transparency and the rule of law.

What does 'Transparency' involve in governance?

Decisions and enforcement follow rules; information is freely available and accessible to those affected, enabling them to understand how and why decisions were made.

Explain 'Responsiveness' in the WB dimensions of governance.

Institutions and processes serve all stakeholders within a reasonable timeframe and involve the public in decision-making and evaluation.

What is meant by 'Effectiveness and efficiency' in governance?

Institutions produce results that meet community needs while using resources (people, time, money) efficiently and sustainably.

What does 'Equity and inclusiveness' mean in good governance?

All groups, especially the most vulnerable, have opportunities to participate and benefit from governance processes.

What is the 'Rule of Law' principle in governance?

Fair legal frameworks are enforced impartially, and human rights are protected, particularly for minorities.

Name the four dimensions of governance as identified by the World Bank (WB).

Public sector management, Accountability, Legal framework for development, and Transparency and information.

What does 'Public sector management' focus on according to WB?

Aims to improve efficiency of public institutions, including public expenditure management, civil service reform, and public enterprises reform.

What are 'horizontal' and 'vertical' accountability?

Horizontal accountability refers to internal financial/accounting controls; vertical accountability involves the population and external stakeholders.

List the four basic elements of good governance identified by the Asian Development Bank (ADB).

Accountability, Participation, Predictability, and Transparency.

What is meant by 'Predictability' in ADB’s elements of governance?

Existence and stable application of laws, regulations, and policies to regulate society and reduce uncertainty for investors.

Describe the five principles of good governance according to the Institute on Governance (IOG).

Legitimacy and Voice; Consensus orientation; Direction (Strategic Vision); Performance (Responsiveness and Efficiency); Accountability; Transparency; Equity; Rule of Law.

What are 'Rights of shareholders' in the ASEAN Corporate Governance Scorecard (weight)?

Rights of shareholders carry a weight of 10% in the Scorecard.

What are the five areas covered by the ASEAN CG Scorecard and their weights?

Rights of shareholders (10%), Equitable treatment of shareholders (15%), Role of stakeholders (10%), Disclosure and transparency (25%), Responsibilities of the board (40%).

Name the three corporate governance models discussed in Topic 2.

Anglo-US model, Japanese model, German model.

Who are the key players in the Anglo-US model, and what is the 'corporate governance triangle'?

Management, directors, and shareholders are the key players; government agencies, stock exchanges, self-regulatory organizations, and advisory firms also play roles in the governance triangle.

What is 'agency costs' in the Anglo-US model?

The costs arising from the separation of ownership and control, where owners (shareholders) and managers may have diverging interests.

How are boards typically composed in the Anglo-US model?

A mix of insiders (executive directors) and outsiders (non-executive/independent directors); sometimes the CEO and chair are separate.

What are the typical US disclosure requirements under the Anglo-US model?

Quarterly corporate financial data, breakdown of capital structure, background information on board nominees, total and top executive compensation, major shareholders, mergers/restructurings, articles amendments, and auditors.

Describe the Japanese model’s key players.

Main bank, keiretsu (affiliates), management, and government.

How is the Japanese board typically composed?

Mostly insiders; few truly independent directors; high influence of banks and cross-shareholding; annual meetings are often pro forma.

What regulatory bodies monitor Japan’s corporate governance disclosures?

Securities Bureau of the Ministry of Finance and the Securities Exchange Surveillance Committee.

Name three routine corporate actions requiring shareholder approval in the Japanese model.

Payment of dividends, election of directors, and appointment of auditors.

What is the German model’s distinctive board structure?

A two-tier board: a Management Board (inside executives) and a Supervisory Board (outsiders and employee representatives).

What is a key feature of German corporate governance regarding labor on boards?

Labor/employee representatives are mandatory on the Supervisory Board.

Who are typically the major shareholders and institutions in the German model?

Banks and large shareholders; banks may vote shares on deposition; bearers shares are common.

What are routine shareholder actions in the German model?

Allocation of net income (dividends), ratification of management and supervisory boards' acts, election of the supervisory board, appointment of auditors.

What types of shareholder proposals exist in Germany?

Shareholder counterproposals and shareholder proposals to add new items to the agenda.

When did the Philippines adopt its CG framework, and what codes exist?

Philippines adopted governance in 2002 with the SEC Code; CG Code for PLCs (2016) and CG Code for Public Companies and Registered Issuers (2019).

What is the purpose of SEC’s Code of Corporate Governance for PLCs and PC/ RIs in the Philippines?

To promote a strong corporate governance culture, align Philippine standards with G20/OECD principles, and provide framework for boards, risk management, and disclosures.

What is the ASEAN Corporate Governance Scorecard’s objective?

To raise governance standards among ASEAN publicly listed companies, provide international visibility, and promote ASEAN PLCs as investable.

Which five areas are covered by the ASEAN Scorecard and which has the highest weight?

Rights of shareholders, Equitable treatment, Role of stakeholders, Disclosure and transparency, Responsibilities of the board; highest weight is for Responsibilities of the board (40%).

What is the role of the Corporate Secretary in the Philippines’ CG framework?

Assist the board in meetings, maintain minutes and records, keep directors informed, ensure regulatory compliance, and attend governance training.

What qualifications are required for a Corporate Secretary?

Natural person, legal age, Filipino citizen, resident of the Philippines, not a board member, and not the compliance officer; must undergo governance training.

What is the role of the Compliance Officer in the CG Code?

Oversee CG compliance, onboarding of directors, monitor adherence to CG Code and laws, report violations, ensure regulatory submissions integrity, and coordinate trainings.

What is a 'lead director' and when is it used?

A lead director is an independent director who acts as intermediary between the Chair and other directors when the Chair is not independent, helping ensure independent views.

What are the main duties of a Chief Executive Officer (CEO) as described in Topic 3?

Implement strategic plan, communicate vision, oversee operations, manage resources, direct key officers, provide timely information to the Board, and foster culture.

What constitutes an Independent Director (ID) under the notes?

An ID is free from management influence and relationships with the company; meets strict criteria such as not being a past senior officer, not a substantial shareholder, and not having material conflicting relationships.

What is the maximum cumulative term for an Independent Director, and what happens after it?

Nine years; after nine years, the ID should be reevaluated and may be re-elected as a non-independent director with meritorious justification and shareholder approval.

What is the Board’s minimum composition requirement regarding independent directors?

At least two independent directors or at least one-third of the board, whichever is higher.

What are the main duties of the Corporate Treasurer in Topic 3?

Prepare and manage the annual budget, implement and review financial policies, oversee investments, audit coordination, and chair the finance committee.

What is the difference between the Board and Management per Topic 3?

The Board governs and sets policy; Management executes the policies and runs day-to-day operations.

What is the purpose of annual self-assessments of the board’s performance?

To evaluate the board’s effectiveness, ensuring appropriate mix of backgrounds and competencies; external facilitation every three years.

Why is it important to have a Board Charter?

It formalizes and states the Board’s roles, responsibilities, and accountabilities, guiding governance practices.

What is a Related Party Transaction (RPT) in governance terms?

A transaction between the company and related parties that requires monitoring and controls due to potential conflicts of interest.

What is Enterprise Risk Management (ERM) in governance terms?

A framework to identify, monitor, assess, and manage key business risks across the organization.