Corporate Governance in the Philippines and Switzerland―A Comparison of the Institutional Environment and Practices

Abstract

P a g e 1 o f 16 C o r p o r a t e G o v e r n a n c e i n t h e P h i l i p p i n e s a n d S w i t z e r l a n d -A C o m p a r i s o n o f E n v i r o n m e n t a n d P r a c t i c e s

Ownership concentration and board structure: Alignment and entrenchment effects in an emerging market

“…First, their boards have a mean ( M ) = 2.534 for IDs ( SD = 0.928, range = 1 to 9), less than the three recommended by the CG Code for PLC (SEC, 2016), and a M = 0.275 for the proportion of IDs on the board ( SD = 0.083, range = 0.083 to 0.818), again less than the one‐third recommended by the CG Code for PLC (SEC, 2016). dela Rama et al (2014, p. 367) have indicated that Asian (and Philippine) firms are strongly reluctant to have IDs on their board. Second, their boards have a M = 4.239 for NEDs ( SD = 2.139, range = 0 to 11) and a M = 0.436 for the proportion of NEDs on the board ( SD = 0.162, range = 0.000 to 0.800).…”

“…The Philippines is a developing country that has weak regulatory enforcement; concentrated corporate ownership, often within a family; and weak minority investor protection (dela Rama et al, 2014). Like other emerging countries, the Philippines must deal with institutional voids—weak institutions to support product, capital, and labor markets; misguided regulations; and inefficient judicial systems (Khanna & Palepu, 1997).…”

“…Like other emerging countries, the Philippines must deal with institutional voids—weak institutions to support product, capital, and labor markets; misguided regulations; and inefficient judicial systems (Khanna & Palepu, 1997). Furthermore, “government institutions and regulators are frequently politicized” (dela Rama et al, 2014, p. 355).…”

“…Philippine corporate boards are unitary and composed of 5–15 members, the limits set by Philippine corporate law. The Code of CG for PLCs (SEC, 2016) recommends that the board (1) consist of a large majority of nonexecutive directors (Recommendation 1.2); (2) have at least three IDs or at least one‐third of the board members, whichever is higher (Recommendation 5.1) (note this is the only additional distinction for a nonexecutive director); and (3) have the roles of the chairman and the CEO held by separate individuals (Recommendation 5.4), albeit, if they are separate, they tend to come from the same ownership interest according to dela Rama et al (2014).…”

“…Hence, the domestic private sector, and even foreign entities, needs to take a significant role in investments. But they must do so in an environment of concentrated corporate ownership, often within a family, and weak minority investor protection (dela Rama et al, 2014).…”