About CG

Compliance Officer’s Report on EDC’s Corporate Governance Performance for 2009

The importance EDC places on good corporate governance, and the very significant role of the board in sustaining, and even elevating it to a higher notch, has always been recognized as a major strength of EDC. Good corporate governance is the paramount responsibility of the Board of Directors and Management, as well as everyone else in the corporation.

As stated in the company’s 2008 Annual Report, “what keeps EDC viable all this time is the fortitude and moral courage of our Board. The EDC board, since its origins from the meritocratic era of founder Geronimo Velasco, has always been the bulwark of strong leadership that steered the company to what it is today – resilient, edifying, and a very much relevant vision – setting institution.”

The current EDC board not only continues the good legacy in the olden times, but also brings to the company a fresh set of values, innovative ideas, competencies, and goals. It is structured in such a manner that this collegial body truly represents a good mix of business, finance, technology, and other multidisciplinary background. The powerful tandem of our Chairman Oscar M. Lopez and Vice Chairman/CEO Paul A. Aquino is the driving force behind the board’s effort to continuously look for ways in further improving the company’s corporate governance practices; and Management, led by President/COO Richard B. Tantoco, ensures that everyone in the organization must toe the line.

EDC Vice Chairman/CEO Paul A. Aquino, indeed, shares Chairman Oscar M. Lopez’s passion and commitment to the tenets of good corporate governance. Mr. Aquino, in fact, spearheaded a move last year to look for ways in bringing the level of corporate governance practices of EDC one notch higher, directing the Compliance Office to make consultations with recognized institutions such as the Asian Institute of Management (AIM) and the Institute of Corporate Directors (ICD), benchmarking to the extent possible with top-rated companies on matters involving good corporate governance.  For EDC, the effort to raise the level of corporate governance one notch higher is given the strong support from the Chairman, the Board of Directors, Management and Key Officers, as well as the full acceptance by all employees.

We would like to highlight the following good practices of corporate governance observed by EDC:

• Independent Directors and Meaning of Independence- EDC’s board of Directors has 11 members, three (3) of them are independent directors. Each of EDC’s independent directors is highly qualified: Mr. Vicente S. Perez, Jr., former Philippine Energy Secretary, is currently a top resource in the area of renewable energy and is abreast of the legislative and regulatory developments in the area; Mr. Cesar V. Purisima, former Philippine Finance Secretary for 2000-2005, and concurrent Trade and Industry Secretary in 2004-2005, is an expert in finance and accounting, management and trade; and Mr. Francis G. Estrada, past president of the Asian Institute of Management (AIM), is an international investment banker with extensive experience in international banking and finance. These 3 independent directors are recognized as having a wealth of experience in the financial arena. Having them as EDC’s  independent directors has served the company well, with their active, engaged, and diligent performance of their duties with respect to both board meetings and respective committees which each one leads. Their insights and independent judgment are invaluable to the board, and augur well with the investing public. Their presence in the EDC Board of Directors assures the minority shareholders that their interests are being safeguarded. The Chairs of the Audit and Governance Committee and the Nomination and Compensation Committee are Independent Directors.

EDC defines an independent director as “providing independent judgment and experience and objectivity, not subordinated to operational considerations on all issues which come before the Board”. EDC has gone over and beyond the SEC’s definition of “independent directors” and “independence”, which shows the company’s firm commitment to corporate governance.

• Board Meetings -   EDC’s By-Laws require the Board of Directors to meet once a month, and its Corporate Governance Manual further provides that in addition to the regular meetings, the board shall convene for special meetings when required by business exigencies. In actual practice, the EDC board religiously follows the said provision in its by-laws and manual. Meetings are well organized, with a set agenda, well-prepared presentations, and lot of pre-work done at the board committee level. EDC board meetings have an excellent attendance record, averaging over 90%.
• Protection of Minority Shareholders – EDC’s Corporate Governance Manual provides that the company shall respect the voting right, right to information, right to dividends, and appraisal rights of the stockholders. The Board, moreso its Independent Directors, are responsible for ensuring that the interests of minority shareholders of the company are protected. The most significant development in this area is the role of the independent director, which has been significantly strengthened by a provision in EDC’s by-laws whereby the attendance of at least one independent director is necessary to acquire a quorum, and that “every decision of a majority of the quorum shall require the concurrence of at least one (1) Independent Director for the validity of decisions of the Board”.
• Investor Relations – Investors have a direct channel to the company through an active Investor Relations Office, which conducts periodic briefings and updates to the investment community.
• Community Relations – This is definitely a major strength of EDC. The strong partnership relationship with local government units and residents in the communities are exemplary. Each of the sites has a predetermined list of Corporate Social Responsibility (CSR) projects being implemented for the past several years. The company’s strategic directions, as well as its vision-mission-core values statements, reflect a very strong commitment to the community. The company’s CSR Program focuses on HELEn – Health, Education, Livelihood and Environment for 43 barangays in five geothermal project areas. In fact, EDC’s CSR activities have merited several awards and recognition from institutions, local and national government, and the affected communities as well.
• Management and Organization – The company prides itself with an excellent leadership and culture, strong work ethic, and high ethical standards for everyone in the organization. Desired organizational values are well demonstrated, and employees are regarded as generally rule-abiding.
• Independent Audit Function Separate From Management – The company is strictly guided by the provisions of the Corporate Governance Manual which established an independent internal audit function performed by the Internal Audit Department. This structure fully assures the Board, management, shareholders, and other stakeholders of the company that key organizational and procedural controls are appropriate, adequate, effective, and complied with. The Chief Audit Executive who is appointed by the Board, is responsible for the internal audit activities. He reports directly to the Board through the Audit and Governance Committee, and renders an Annual Report on the internal audit department’s activities, regular audit reports, including audit plans and strategies approved by the Audit and Governance Committee.

The board of Directors and Officers truly recognize the need to be kept current on changes in the external business environment, as well as latest developments in board practices and corporate governance. Proof of this is their attendance to corporate governance training program sponsored by recognized training institutions like the Institute of Corporate Directors (ICD). Two members of the board and the Compliance Officer are ICD Fellows. All members of the board have completed the requisite Corporate Governance Orientation Program.

EDC does not wish to rest on its laurels, even after it has been recognized by the Institute of Corporate Directors as being among the top 20 corporations in the Philippines on corporate governance in 2007, and further moving up to top 15 in 2008. More efforts will be exerted in pursuing further improvements, i.e. pushing the board to be more progressive, enhancing risk management, instilling principles of corporate governance from and across all levels of the organization, improving structures of the organization, investing in human capital, improving communications and management system, and strengthening further the company’s corporate social responsibility.

Looking forward, EDC is now moving toward a Performance Governance System (PGS), ICD’s framework for moving from compliance into performance. This comprises the four steps towards the governance improvement pathway, namely; initiation, compliance, proficiency, and institutionalization. This framework will serve as a guide for efficiently and methodically institutionalizing corporate governance with the end goal of fully embedding and integrating governance culture within EDC.