Recognizing good governance

Last week, the Institute of Corporate Directors, jointly with the Securities and Exchange Commission, recognized the 2022 Golden Arrow awardees based on their ranking in the ASEAN Corporate Governance Scorecard or ACGS.

The scorecard is a tool used by six participating ASEAN countries, namely, the Philippines, Indonesia, Malaysia, Singapore, Thailand and Vietnam, to assess the adherence, and beyond, of publicly listed corporations or PLCs to the benchmark standards for good governance of the Organization for Economic Cooperation and Development — a forum of 37 democratic governments with market-based economies that develop policy standards to promote sustainable economic growth.

The ACGS, in turn, is a spin-off that ASEAN developed in collaboration with the Asian Development Bank to promote ASEAN PLCs as an internationally accepted investment asset class by raising the governance standards of ASEAN PLCs.

The ACGS Golden Arrow awards are bestowed on all PLCs with a score of at least 80 out of a maximum of 130 points. The number of arrows, ranging from 1 to 5, is based on the number of points scored by the PLC. Note that the additional 30 points are given to PLCs that have exceeded the minimum regulatory requirements. Correspondingly, there are also penalty points, a maximum of 67, for poor practices observed.

For 2022, out of 272 PLCs evaluated, the average score was 76.64, lower than the 80 cut-offs to be awarded at least 1 Golden Arrow, but on the bright side, better than 2021’s average of 75.91.

A total of 4 PLCs were bestowed 5 Golden Arrows, which meant that their governance standards were rated anywhere from 120 to 130 points, way above the minimum required by the regulators and certainly ideal investment targets for investors. These are Ayala Land, China Banking Corporation, Globe Telecom, and SM Prime. Kudos to these outstanding PLCs and those that garnered at least 1 Golden Arrow.

For most, the concept of good governance is simply a philosophy typically associated with managing an organized activity to achieve the organization’s reason for being. For business enterprises, good governance means profits for the proprietor, period, regardless of how the objective is achieved. But now that we have entered a globalized age of an ever-growing, highly interconnected, digitalized, and yet smaller world where any event, any act of anyone, or any organization, or any community, or any nation can have ramifications that could resonate, encompass and affect all, is the conventional notion of good governance really as simple as making money?

Clearly, this should not be so particularly for PLCs, even for public corporations, i.e., unlisted, but with at least P50 million in assets and 200 shareholders, which should strive to adhere to international standards of good governance. The OECD defines corporate governance as “a set of relationships between a company’s management, board shareholders and stakeholders… provides the systems and structures through which the company is directed and its objectives are set, and the means of attaining those objectives and monitoring performance are determined.”

But why should organizations pay attention to these suggested modalities of good governance? Well, unless one is living on an island all by himself, or is an organization that believes it is 100 percent self-sufficient, or a hermit nation that is so insular and couldn’t care less what other countries are up to, then that’s fine. But that is not the reality for 99.9 percent of the global community. The reality is we are all interconnected and need each other to prosper and achieve a win-win outcome for all. And for corporations, in particular, good governance translates to better market valuations, easier access to capital, and a happy stakeholder community.

However, the principles of good governance and its rationale need not just be for corporations but can very much apply to governments as well, wherein the President is the CEO of the country, working hand-in-hand with the board (the Cabinet secretaries) after being given a mandate by the shareholders (the electorate in honest and stain-free elections) to achieve the objectives of its shareholders (presumably the holistic well-being of the country) and greater community of stakeholders (harmonious cooperation and coexistence with the rest of the world).

It would be interesting to see how our country will fare and score using these good governance standards. What’s your view?

Until next week… OBF!


For comments, email

Leave a Reply

Your email address will not be published. Required fields are marked *