BOARD OF DIRECTORS
Manila Water prides itself in its Board of Directors (the "Board"), composed of highly competent individuals who are well recognized in their respective fields and in the business community. The Board provides a clear vision towards the formulation of sound corporate strategies, and oversees the systemization, improvement and upholding of transparency in governance. The Board provides guidance in achieving fairness and accountability in all major dealings of the Company, with the objective of protecting the interests of its stakeholders.
In this connection, the Board fulfills certain key functions, including: reviewing and guiding corporate strategy, major plans of action, risk policy, annual budgets and business plans; setting performance objectives; monitoring implementation and corporate performance; and overseeing/approving major capital expenditures, acquisitions and divestitures; monitoring the effectiveness of our governance practices and making changes as needed; selecting, compensating, monitoring and, when necessary, replacing key executives and overseeing succession planning; aligning key executive and board remuneration with the longer term interests of the Company and its stakeholders; ensuring a formal and transparent board nomination and election process; and monitoring and managing potential conflicts of interest of management, board members, shareholders and stakeholders, including misuse of corporate assets and abuse in related party transactions.
The Board has eleven (11) members who are elected by the stockholders during the annual stockholders’ meeting (ASM). All nominations to the Board are undertaken in accordance with the Manual of Corporate Governance (the “Manual”), amended Bylaws, the Charter of the Board, and the existing rules and regulations. Upon receipt of all nominations, the Nomination Committee convenes to evaluate the qualifications of nominees for election to the Board. In evaluating the nominations, the Nomination Committee adheres to the criteria for selection and the qualifications and disqualifications of directors set forth in the Manual, the Charter of the Board, the Charter of the Board Committees, the Securities Regulations Code (SRC), and those under existing laws, rules, and regulations. After deliberation, the Nomination Committee and the Board issue a resolution endorsing the election of the qualified nominees at the ASM. The members of the Board so elected at the ASM hold office for one year, and until their successors have been elected and qualified in accordance with the amended By-laws. The elected members of the Board are mandated to oversee the management of the Company, and, in the performance of their duties, must exercise their best and unbiased judgment to protect and promote the interest of the Company and its stakeholders.
CORPORATE GOVERNANCE STRUCTURE
1 This includes the provisions under the Revised Corporation Code.
PRINCIPLES AND PROCEDURES FOR NOMINATION AND ENDORSEMENT FOR ELECTION OF CANDIDATES TO THE BOARD OF DIRECTORS
Manila Water encourages the selection of a mix of competent directors, each of whom can add value and contribute independent judgment to the formulation of sound corporate strategies and policies.
Manila Water values the inputs and opinions of each Director, ensuring that a Director shall not be discriminated upon by reason of gender, age, ethnicity, political, religious or cultural beliefs. Towards this end, the Board has adopted a policy of diversity in gender, age and ethnicity, as well as religious, political or cultural background. Through this policy, the Board encourages our shareholders to nominate and select individuals who will promote diversity in the membership of the Board.
Moreover, the Board ensures a formal and transparent board nomination and election process. Towards this end, the following procedure and principles are observed in the nomination of candidates for election to the Board:
Every stockholder, including the minority and non-controlling, has a right to submit nominations for election to the Board.
All nominations to the Board, whether for first time nominees or repeat nominees, or for independent directors, shall be submitted to the Nomination Committee, through the Office of the Corporate Secretary, at least thirty (30) working days before the date of the ASM. The stockholders, in making their nominations, or the Company, may make use of professional search firms or external sources of candidates when searching for candidates to the Board.
Process of Endorsing Nominations
The Nomination Committee shall hold a meeting for the specific purpose of determining whether the nominees to the Board have all the qualifications and none of the disqualifications specified in the Corporation Code of the Philippines1, the Manual, the Charter of the Board, the SRC Rules, and the applicable laws, rules and regulations.
The Nomination Committee shall evaluate each and every nomination and for this purpose, may even make an inquiry with their professional networks and outside references.
The Nomination Committee undertakes the process of identifying the quality of directors aligned with our strategic directions. Towards this end, the Nomination Committee shall confirm that all nominees for election have all the qualifications and none of the disqualifications to become directors, and that they have the competence and professional background that will enable them to perform their duties as directors of a highly regulated business as that of Manila Water.
If the ground for disqualification of a nominated director becomes known prior to the scheduled ASM, the nominated director shall not be endorsed for election at the stockholders' meeting except when such disqualification is temporary and the same is cured or remedied prior to the scheduled stockholders' meeting.
A director with temporary disqualification may still be endorsed by the Nomination Committee for election at the ASM subject to the sixty (60) day curing period, if the ground for temporary disqualification is capable of being cured. However, if the disqualification becomes permanent after endorsement by the Nomination Committee and before the ASM, the nominee shall be given the discretion to refuse his nomination. If the nominee is thereafter elected, or the disqualification becomes permanent during his term of office, the aforesaid director may be removed subject to the provisions of and procedures under Section 2.4.2 of the Charter of the Board.
After evaluation of the qualifications/ disqualifications of the nominees, the Nomination Committee shall issue a resolution whether endorsing or not the nominees for election to the Board.
If a nominee is not endorsed for election by reason of a disqualification, the resolution of the Nomination Committee should clearly specify the grounds relied upon for disqualification.
The Chairman of the Board shall provide input to the Nomination Committee on its recommendation for approval of candidates for nomination or appointment to the Board as well as for the members and chairs of Board Committees.
Election of Directors
At each election for directors, every stockholder shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected, or to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by the number of his shares shall equal, or by distributing such votes on the same principle among any number of candidates.
QUALIFICATIONS AND DISQUALIFICATIONS OF DIRECTORS
General Qualifications of Directors
A nominee to the Board must have the following General Qualifications:
Ownership of at least one (1) share of the capital stock of the Company;
At least twenty-one (21) years of age;
A college degree or its equivalent or adequate competence and understanding of the fundamentals of doing business or sufficient experience and competence in managing a business to substitute for such formal education;
Possesses integrity, probity and shall be diligent and assiduous in the performance of his functions;
Other relevant qualifications, such as membership in good standing in business, professional organizations or relevant industry; and
Non-executive directors should possess such qualifications and stature that would enable them to effectively participate in the deliberations of the Board.
Specific Qualifications of Directors
In addition to the General Qualifications, the following specific qualifications shall be required, if applicable:
At least one (1) of the independent directors must have accounting expertise (accounting qualification or experience);
At least one (1) non-executive director must have prior working experience in the sector that Manila Water is operating in;
Independent directors must have all requisite qualifications for independence under Securities and Exchange Commission (SEC) Memorandum Circular No. 16, Series of 2002;
Officers, executives and employees of the Company may be elected as directors but cannot and shall not be characterized as independent directors;
If a director elected or appointed as an independent director becomes an officer, employee or consultant of the Company, the Company shall forthwith cease to consider him as an independent director; and
If the beneficial ownership of an independent director in the Company or its related corporations shall exceed two percent (2%) of the subscribed capital stock of such corporation, the Company shall forthwith cease to consider him as an independent director, except when the independent director takes the appropriate action to remedy or correct the disqualification within sixty (60) days from the occurrence of the ground, in which case, he may still be considered an independent director.
A nominee to the Board with the following disqualifications shall never be nominated, or if nominated and elected, shall be removed from office:
Any person who has been finally convicted by a competent judicial or administrative body of the following: (i) any crime involving the purchase or sale of securities as defined in the SRC, e.g. proprietary or non-proprietary membership certificate, commodity futures contract, or interest in a common trust fund, pre-need plan, pension plan or life plan; (ii) any crime arising out of the person’s conduct as an underwriter, broker, dealer, investment corporation, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; or (iii) any crime arising out of his fiduciary relationship with a bank, quasi-bank, trust company, investment house or as an affiliated person of any of them;
Any person who, by reason of any misconduct, after hearing or trial, is permanently or temporarily enjoined by order, judgment or decree of the SEC or any court or other administrative body of competent jurisdiction from: (i) acting as an underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or a floor broker; (ii) acting as a director or officer of a bank, quasi-bank, trust company, investment house, investment company or an affiliated person of any of them; (iii) engaging in or continuing any conduct or practice in connection with any such activity or willfully violating laws governing securities, and banking activities. Such disqualification shall also apply when such person is currently subject to an effective order of the SEC or any court or other administrative body refusing, revoking or suspending any registration, license or permit issued under the Corporation Code of the Philippines, SRC, or any other law administered by the SEC or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation promulgated by the SEC or BSP, or otherwise restrained to engage in any activity involving securities and banking. Such person is also disqualified when he is currently subject to an effective order of a self-regulatory organization suspending or expelling him from membership or participation or from association with a member or participant of the organization;
Any person finally convicted judicially or administratively of an offense involving moral turpitude or fraudulent acts or transgressions such as, but not limited to, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation or perjury;
Any person finally found by the SEC or a court or other administrative body to have willfully violated, or willfully aided, abetted, counseled, induced or procured the violation of any provision of the SRC, the Corporation Code of the Philippines, or any other law administered by the SEC, or any rule, regulation or order of the SEC or the BSP;
Any person judicially declared to be insolvent;
Any person finally found guilty by a foreign court or equivalent financial regulatory authority of acts, violations or misconduct listed in the foregoing paragraphs;
Any person convicted by final and executory judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation of the Corporation Code of the Philippines, committed within five (5) years prior to the date of his election or appointment; and/p>
No person shall qualify or be eligible for nomination or election to the Board if he is engaged in any business which competes with or is antagonistic to that of the Company. Without limiting the generality of the foregoing, a person shall be deemed to be so engaged – (i) If he is an officer, manager or controlling person of, or the owner (either of record or beneficially) of ten percent (10%) or more of any outstanding class of shares of, any corporation (other than one in which the Company owns at least thirty percent [30%] of the capital stock) engaged in a business which the Board, by at least three-fourths (3/4) vote, determines to be competitive or antagonistic to that of the Company, or (ii) If he is an officer, manager or controlling person, or the owner (either of record or beneficially) of ten percent (10%) or more of any outstanding class of shares of any other corporation or entity engaged in any line of business of the Company, or when in the judgment of the Board, by at least three-fourths (3/4) vote, deems that the laws against combinations in restraint of trade shall be violated by such person's membership in the Board; or (iii) If the Board, in the exercise of its judgment in good faith, determines by at least three-fourths (3/4) vote that he is the nominee of any person set forth in (h.i.) or (h.ii.). In determining whether or not a person is a controlling person, beneficial owner, or the nominee of another, the Board may take into account such factors as business and family relations.
The following shall constitute grounds for temporary disqualifications of directors:
Refusal to fully disclose the extent of his business interest as well as refusal to comply with all other disclosure requirements under the SRC and its Implementing Rules and Regulations. This disqualification shall be in effect as long as his refusal persists;
Absence or non-participation in more than Fifty Percent (50%) of all meetings, both regular and special, of the Board during his incumbency, or any twelve (12) month period during said incumbency unless such absence was due to illness, death in the immediate family or serious accident. This disqualification applies for purposes of the succeeding election;
Dismissal/termination from directorship in another listed Company for cause. This disqualification shall be in effect until he has cleared himself of any involvement in the alleged irregularity;
Being under preventive suspension by the Company for any reason; and
Conviction that has not yet become final referred to in the grounds for disqualification of directors.
ROLES AND RESPONSIBILITIES OF THE BOARD
In order to strengthen the participation of the Board and its Committees in the enhancement of corporate governance practices of the Company, the Board is guided by its own charter. Specifically, the Charter of the Board, among others:
sets out the specific functions of the Chairman of the Board and the President, emphasizing their separate roles and responsibilities;
imposes limitations on directorships in publicly listed companies and institutionalizes the performance evaluation of the Board, its Committees, and the President;
institutionalizes the annual performance evaluation of the Board, and the President and CEO;
provides for a quorum of two-thirds (2/3) of the number of directors fixed in the Articles of Incorporation; and
requires the Board to conduct an annual review of the mission and vision of the Company.
In compliance with the requirements of the law, the Company's Manual, and the rules and regulations of the SEC, the Company has four (4) independent directors as members of the Board. Under the Charter of the Board, Independence is defined as, with respect to any person, the absence of any restrictions or limitations or freedom from any interests or relationships that would interfere with the exercise of impartial and objective judgment in carrying out the responsibilities of that person. Under the Manual, a director is considered independent if he holds no interests or relationships with the Company that may hinder his independence from the Company or its management which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. More importantly, the Company also subscribes to the requirements of independence under existing laws, rules and regulations, in particular, the SEC Memorandum Circular No. 16, Series of 2002. Hence, the Company ensures that its independent directors have all the qualifications and none of the disqualifications specified in the said SEC Memorandum Circular.
The Board is supported by several committees, namely: Executive Committee, Audit Committee, Related Party Transactions Committee, Nomination Committee, Remuneration Committee, Board Risk Oversight Committee, Corporate Governance Committee, and the Committee of Inspectors of Ballots and Proxies. These Board Committees are required to report to the Board a summary of the actions taken on matters submitted to them for consideration at the next meeting of the Board. Each of the Board Committees has its own charter that provides guidance on the manner by which its members and the committees should exercise their functions and mandates.
The Executive Committee
Composed of five (5) directors as members
Acts by majority vote of all its members and is authorized to act and shall act on matters within the competence of the Board, except those with respect to:
Meets as needed and performs such other functions as may be properly delegated to it by the Board
Held eight (8) meetings in 2018
The Corporate Governance Committee
Composed of three (3) independent directors including the Chairman
Tasked with ensuring compliance with and proper observance of corporate governance principles and practices
Has the following duties and functions, among other functions as may be delegated by the Board from time to time:
Oversees the implementation of the corporate governance framework and periodically reviews the said framework to ensure that it remains appropriate in light of material changes to the Company's size, complexity and business strategy, as well as its business and regulatory environments;
Oversees the periodic performance evaluation of the Board and its committees as well as executive management, and conducts an annual self-evaluation of its performance;
Ensures that the results of the Board evaluation are shared, discussed, and that concrete action plans are developed and implemented to address the identified areas for improvement;
Recommends continuing education/training programs for directors, and assignment of tasks/projects to Board committees;
Adopts corporate governance policies and ensures that these are reviewed and updated regularly, and consistently implemented in form and substance; and
Proposes and plans relevant trainings for the members of the Board.
Additional duties and responsibilities of the Committee shall be set forth in its charter
The Compliance Officer, in coordination with the Corporate Secretary, shall support the Committee in the performance of its functions
Held four (4) meetings in 2018
The Audit Committee
Composed of four (4) directors (three of whom are independent) and is required to be chaired by an independent director
Provides the check and balance mechanism and is expected to bring positive results in supervising and supporting the management of the Company
Responsible for ensuring the development of, compliance with, and periodic review of corporate governance and financial reporting policies and practices of the Company
Recommends and/or concurs to the appointment, replacement, re-assignment and removal or dismissal of the Company's external auditors and the Chief Audit Executive to ensure that the external and internal auditors will function and operate independently of the management as required of their function
Meets at least every quarter and before the quarterly Board meetings and when needed
Held six (6) meetings in 2018
All members of the Audit Committee are required to possess adequate understanding of accounting and auditing principles in general and of the Company's financial management systems and environment, in particular.
Mr. Jaime C. Laya, an independent director and a member of the Audit Committee, is a Certified Public Accountant.
The Related Party Transactions Committee
Considered by the Board as a subset of the Audit Committee, and is composed of all the three (3) independent directors, and chaired by an independent director
Primarily tasked with the duty of enforcing and implementing the Related Party Transactions (RPT) Policy of the Company, with respect to material RPT
Ensures that: material RPT shall have terms and conditions that are fair and equitable to the Company; the approval, award, processing and payment of RPT shall follow the same procedures as the other transactions and contracts of the Company, and therefore, no unusual privilege or special treatment shall be afforded a Related Party; and in case of doubt on the nature of a transaction subject of investigation or review pursuant to the RPT Policy, the Office of the Compliance Officer, in consultation with the RPT Committee, shall determine whether the transaction or relationship constitutes a RPT, and whether the same shall be pursued taking into consideration the cost and benefit to the Company
Held two (2) meeting in 2018
The Nomination Committee
Composed of three (3) independent directors, and under its Charter is required to be chaired by an independent director
Tasked to install and maintain an evaluation process to ensure that all directors to be nominated to the Board during the Annual Stockholders' Meeting have all the qualifications and none of the disqualifications stated in the Manual, the Charter of the Board and the Committees, and under existing laws and regulations
Undertakes the process of identifying the quality of directors consistent with the Company's strategic directions, and to ensure that the directors have the competence and professional background that will enable them to perform their duties as directors of Manila Water, and for this reason, the Committee shall not endorse a nominee for appointment by the Board unless it has determined that all nominees have all the qualifications and none of the disqualifications for the position
Tasked to evaluate the qualifications of all officers nominated to positions in the Company which are appointed by, or required to be appointed by the Board and provides guidance and advice as necessary for the appointment of persons nominated to other positions
Review and revise if necessary, the succession plans for members of the Board and officers with ranks from Group Directors to the President/CEO
Provide assessment on the Board's effectiveness in directing the process of renewing and replacing Board members and in appointing officers or advisors and develop, update as necessary and recommend to the Board policies for considering nominees for directors, officers or advisors
Held four (4) meetings in 2018
The Remuneration Committee
Composed of four (4) members, three (3) of whom are independent directors, and under its Charter is required to be chaired by an independent director
Tasked with the duty: to determine and approve all matters and policies relating to the remuneration and benefits of the Company's directors and key officers; to establish a formal and transparent procedure for developing a policy on remuneration of directors and officers to ensure that their compensation is consistent with the Company's culture, strategy and the business environment in which it operates; to determine and approve all matters relating to the remuneration and benefits of the Board and the Company's officers; to evaluate and recommend for Board approval the pertinent guidelines on executive compensation, including non-monetary remuneration; to periodically review and evaluate the policy on remuneration in order that it be in a sufficient level to attract and retain directors and officers of the Company
Continuously evaluates and recommends for Board approval, pertinent guidelines and policies on executive and employee compensation, including non-monetary remuneration
Held three (3) meeting in 2018
The Board Risk Oversight Committee
Composed of four (4) members, majority of whom are independent directors, and is required to be chaired by an independent director
Tasked to provide assistance in fulfilling the Board’s oversight responsibilities in relation to risk governance in Manila Water, which includes ensuring that the Management maintains a sound and responsive risk management system across the organization; promote an open discussion regarding risks faced by the Company, as well as risks faced by its subsidiaries that may have potential impact on the Company’s operations, and ensure that risk awareness culture is pervasive throughout the organization; ensure that an overall set of risk management policies and procedures exist for the Company; review the Company’s risk governance structure and the adequacy of the Company’s risk management framework/ process; review and endorse to the Board changes or amendments to the Enterprise Risk Management (ERM) Policy; perform oversight functions specifically in the areas of managing strategic, financial, compliance, regulatory, operational and other risks of the Company, and crisis management; in coordination with the Audit Committee, ensure that the Company’s internal audit work plan is aligned with risk management activities and that the internal control system considers all risks identified in the risk assessment process
Established separately from the Audit Committee in order to further enhance governance on risk matters and align with the best practices in risk management and supported by the Enterprise Risk and Insurance Management Department in the performance of its functions
Held two (2) meetings in 2018
The Committee of Inspectors of Ballots and Proxies
Membership consists of the Chief Audit Executive as Chairman, and the Chief Legal Officer and a representative of the external auditor of the Company as members
Carries the mandate to validate proxies issued by the stockholders and to determine if the same are in accordance with existing laws, rules, and regulations prior to the Annual Stockholders' Meeting
Default inspector of ballots and tabulator of votes during the Annual Stockholders' Meeting, and as such, is required to coordinate closely with the Office of the Corporate Secretary and the independent validator of votes appointed for the purpose
Held two (2) meetings in 2018
CORPORATE ORIENTATION AND CORPORATE GOVERNANCE TRAININGS FOR DIRECTORS
The members of the Board are required to regularly attend seminars and conferences to continuously update themselves on the developments in policy, regulations and standards on good corporate governance. These seminars may have themes on key environmental issues, risk management and sustainability. Under the Company's Manual, the members of the Board are also provided with such resources, trainings and continuing education to enable each member to actively, independently and judiciously participate in Board and Committee meetings.
Newly elected members of the Board undergo orientation programs for them to have a working knowledge of the statutory and regulatory requirements affecting the Company. They are also required to keep abreast with industry developments and business trends in order that they may promote the Company’s competitiveness and sustainability. Attendance in a corporate governance seminar conducted by a dulyrecognized private or governmental institution is also a mandatory requirement prior to their assumption of office and during their term of office.
The Company also provides general access to training courses to its directors as a matter of continuous professional education as well as to enhance their skills as directors, and keep them updated in their knowledge and understanding of the Company's business. The Board and Board Committees are also allowed to hire independent legal counsel, accountants or other consultants to advise them when necessary.
At every board meeting, directors are provided with a management update on the operational and financial status of, and other relevant matters, about the Company to ensure that the directors are continuously informed of new developments and the performance of the Company.
Upon assumption of office, a director appointed for the first time undergoes a corporate orientation program conducted by the Office of the Corporate Secretary. The corporate orientation program includes modules on the operations of the Company, as well as relevant contracts of the Company. The orientation also covers existing policies, rules and regulations of the Company. The curriculum of the orientation program may be revised as often as necessary to include other relevant subjects and matters relating to the Company. In addition to the corporate orientation program for new directors, the Office of the Corporate Secretary informs the Board of any updates on the matters covered by the orientation program. The corporate orientation program and updates are usually given during the regular meetings of the Board.
These programs notwithstanding, Manila Water encourages its directors to attend external trainings, courses or continuing professional education programs on corporate governance. The Directors are required to inform the Office of the Corporate Secretary of the trainings or courses attended for record and disclosure purposes.
CORPORATE GOVERNANCE PROGRAMS ATTENDED BY THE BOARD OF DIRECTORS IN 2018
|Director||Program||Training Institute||Date of Training|
|Fernando Zobel de Ayala||Ayala Corporate Governance and Risk Management Summit – Advanced Corporate Governance Training||Institute of Corporate Directors||September 10, 2018|
|Jaime Augusto Zobel de Ayala||Ayala Corporate Governance and Risk Management Summit – Advanced Corporate Governance Training||Institute of Corporate Directors||September 10, 2018|
|Ferdinand M. Dela Cruz||Ayala Corporate Governance and Risk Management Summit – Advanced Corporate Governance Training||Institute of Corporate Directors||September 10, 2018|
|Gerardo C. Ablaza Jr.||Ayala Corporate Governance and Risk Management Summit – Advanced Corporate Governance Training||Institute of Corporate Directors||September 10, 2018|
|Antonino T. Aquino||Ayala Corporate Governance and Risk Management Summit – Advanced Corporate Governance Training||Institute of Corporate Directors||September 10, 2018|
|Delfin L. Lazaro||Ayala Corporate Governance and Risk Management Summit – Advanced Corporate Governance Training||Institute of Corporate Directors||September 10, 2018|
|John Eric T. Francia||Ayala Corporate Governance and Risk Management Summit – Advanced Corporate Governance Training||Institute of Corporate Directors||September 10, 2018|
|Jaime C. Laya||Ayala Corporate Governance and Risk Management Summit – Advanced Corporate Governance Training||Institute of Corporate Directors||September 10, 2018|
|Oscar S. Reyes||Sustainability Strategy in a Disruptive Business Environment: ESG Best Practices and Compliance Issues; and Blockchain Technology Use Cases and Strategic Benefits, Risk and Governance Issues||Matthew Bell and Paul Brody||November 16, 2018|
|Sherisa P. Nuesa||Ayala Corporate Governance and Risk Management Summit – Advanced Corporate Governance Training||Institute of Corporate Directors||September 10, 2018|
|SEC-PSE Corporate Governance Forum||Securities and Exchange Commission/Philippine Stock Exchange, Inc.||October 23, 2018|
|Jose L. Cuisia Jr.||Ayala Corporate Governance and Risk Management Summit – Advanced Corporate Governance Training||Institute of Corporate Directors||September 10, 2018|
On September 21, 2018, members of the Board also attended the Ayala Group Integrated Risk Management and Sustainability Summit themed key environmental issues, risk management, and sustainability.
Under the Charter of the Board, the Board institutionalized a policy of holding at least six (6) meetings in a year. These include the organizational meeting of the Board which is held immediately after the Annual Stockholders' Meeting. Under the By-laws, special meetings may be called by the Chairman, Vice Chairman, President or at the instance of a majority of the members of the Board.
To promote transparency, the Board has a policy of requiring the presence of at least one independent director in all its meetings. In the past years, the Board has not conducted a meeting without the presence of at least one independent director.
Under the Manual, a director's absence or non-participation, for whatever reason in more than fifty percent (50%) of all Board meetings, both regular and special, in a year is a ground for temporary disqualification in the succeeding election.
BOARD ATTENDANCE IN MEETINGS
In 2018, all the members of the Board attended all meetings held during the year. A total of seven (7) meetings were held by the Board in 2018 (exclusive of the Annual Stockholders' Meeting), as follows:
a regular meeting on March 1, 2018;
an organizational meeting on April 16, 2018;
regular meetings on June 4, 2018, August 9, 2018, October 2, 2018 and November 20, 2018; and
a meeting of the Non-Executive Directors on November 20, 2018.
As the only Executive Director, Mr. Ferdinand M. dela Cruz was not a party to the meeting of the Non-Executive Directors.
During the 2018 Annual Stockholders' Meeting held on April 16, 2018 at Ballroom 2, Fairmont Makati in Makati City, the Chairman of the Board of Directors, President and CEO of the Company, and the Chairman of the Audit Committee along with the other directors and executive officers of the Company, were in attendance. Their attendance was duly recorded in the minutes of the said meeting.
QUORUM IN BOARD MEETINGS
Under the Charter of the Board, at least two-thirds (2/3) of the members of the Board (as fixed in the Articles of Incorporation) shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors present at a meeting at which there is a quorum shall be valid as a corporate act, except when a higher quorum is required in contracts binding on the Company.
In the absence of a quorum, a majority of the directors present may adjourn any meeting from time to time until a quorum is obtained.
The Board determines a level of remuneration for directors that shall be sufficient to attract and retain directors, and compensate them for attendance at meetings of the Board and Board Committees and their performance of numerous responsibilities of a Board member. The Remuneration Committee is responsible for recommending to the Board the fees and other compensation for directors. In fulfilling this duty, the Remuneration Committee is guided by the objective of ensuring that the proposed fees should fairly compensate the directors for the work required consistent with the Company's size and industry.
In a special meeting held on April 11, 2011, the Board approved an increase in the Board remuneration. The approved remuneration for each member of the Board consists of P500,000 as a fixed annual retainer fee, P200,000 for each meeting of the Board actually attended, and P50,000 for each Committee meeting actually attended. This Board remuneration structure was approved by the stockholders in its Annual Stockholders' Meeting of even date, and has not been modified since then. In the same annual meeting held on April 11, 2011, the stockholders approved the amendment of the By-laws, giving the Board of Directors the authority to determine the amount, form, and structure of the fees and other compensation of the directors.
The table below summarizes the total compensation remuneration received by and/or to be paid to the directors for their attendance in meetings held in 2018:
|NAME||ATTENDANCE||2018 Remuneration***** (Retainer, Board, Committee and Annual Stockholders' Meetings Fees)|
|Meetings Attended/ Held*||Percentage|
|Fernando Zobel de Ayala**||7/7||100%||2,350,000|
|Jaime Augusto Zobel de Ayala**||6/7||86%||1,900,000|
|Ferdinand M. Dela Cruz**||6/6***||100%||2,100,000|
|Gerardo C. Ablaza Jr.||7/7||100%||2,650,000|
|Antonino T. Aquino||7/7||100%||2,300,000|
|Delfin L. Lazaro**||7/7||100%||2,100,000|
|John Eric T. Francia**||7/7||100%||2,250,000|
|Jaime C. Laya||7/7||100%||2,900,000|
|Jose L. Cuisia Jr.||7/7||100%||2,950,000|
|Oscar S. Reyes||7/7||100%||2,650,000|
|Sherisa P. Nuesa||7/7||100%||2,450,000|
2018 BOARD OF DIRECTORS' ATTENDANCE IN COMMITTEE MEETINGS
|Board Committees and Members||Meetings Attended/Held|
|Fernando Zobel de Ayala (Chairman)||8/8|
|Gerardo C. Ablaza Jr. (Vice Chairman)||8/8|
|Ferdinand M. dela Cruz||8/8|
|Antonino T. Aquino||8/8|
|John Eric T. Francia||7/8|
|Corporate Governance Committee|
|Sherisa P. Nuesa (Chairman/Independent Director)||4/4|
|Jaime C. Laya (Independent Director)||4/4|
|Jose L. Cuisia Jr. (Independent Director)||4/4|
|Oscar S. Reyes (Chairman/Lead Independent Director)||6/6|
|Jose L. Cuisia Jr. (Independent Director)||6/6|
|Jaime C. Laya (Independent Director)||6/6|
|Gerardo C. Ablaza Jr.||6/6|
|Related Party Transactions Committee|
|Sherisa P. Nuesa (Chair/Independent Director)||2/2|
|Jose L. Cuisia Jr. (Independent Director)||2/2|
|Jaime C. Laya (Independent Director)||2/2|
|Board Committees and Members||Meetings Attended/Held|
|Board Risk Oversight Committee|
|Jaime C. Laya (Chairman/Independent Director)||2/2|
|Jose L. Cuisia Jr. (Independent Director)||2/2|
|Oscar S. Reyes (Lead Independent Director)||2/2|
|Gerardo C. Ablaza Jr.||2/2|
|Jose L. Cuisia Jr. (Chairman/Independent Director)||4/4|
|Oscar S. Reyes (Lead Independent Director)||4/4|
|Jaime C. Laya (Independent Director)||4/4|
|Jose L. Cuisia Jr. (Chairman/Independent Director)||3/3|
|Oscar S. Reyes (Lead Independent Director)||3/3|
|Sherisa P. Nuesa (Independent Director)||3/3|
|Fernando Zobel de Ayala||3/3|
|Committee of Inspectors of Ballots and Proxies|
|Xerxes Noel O. Ordanez (Chairman/Chief Audit Executive)||2/2|
|Gerardo M. Lobo II (Head of Legal, and Assistant Corporate Secretary)||2/2|
|External Auditor Representative||2/2|
VISION, MISSION, AND CORPORATE OBJECTIVE
To ensure good governance of the Company, the Board is mandated under the Manual to formulate strategic objectives, key policies and procedures for the management of the Company. Furthermore, the Board has established the mechanism for monitoring and evaluating the performance of the Management, especially that of the President and CEO. Under its Charter, the Board is enjoined to periodically review the vision, mission, corporate strategic objectives and key policies of the Company to sustain the Company's market competitiveness and enhance shareholder value. Accordingly, in its regular meeting held on November 20, 2018, the Board has confirmed the following mission and vision of the Company, as representative of its strategic and corporate objectives:
Our vision is to become a leader in the provision of water, used water and environmental services which will empower people, protect the environment, and enhance sustainable development.
Our mission is to create an exceptional customer experience in the provision of sustainable solutions vital to health and life.
ANNUAL BOARD EVALUATION
The Board has an annual evaluation process that is required to be accomplished by the directors, which enables an informed and objective assessment of the following:
Board and Board Committee processes and meetings;
Compliance with the responsibilities and functions of the Board and Board Committees;
Board Member self-evaluation; and
Evaluation of the performance of the President and CEO.
This evaluation enables the Board and the Management to determine areas that need improvement on the very scope and criteria of the evaluation process. It also allows the Board to explain their respective ratings and to provide their own comments on the matters discussed in the evaluation. The scope and criteria for the Board Evaluation Process is contained in the Charter of the Board of Directors. The Charter of the Board is available for download at the Company's website.
FORM FOR BOARD EVALUATION
Point SystemRate of 1 to 5, 1 being the lowest
|Board Processes and Meetings||Adequacy, frequency, duration, and scheduling of Board meetings per year|
|Attendance to the Board meetings|
|Adequacy of materials for meetings of the Board|
|Content and quality of materials for meetings of the Board|
|Quality of presentations to the Board|
|Quality and adequacy of discussions and deliberations during Board meetings|
|Preparedness of the directors for the Board meetings|
|Compliance with the Responsibilities and Functions of the Board||Involvement of the Board in the determination of the Company's strategic initiatives and direction|
|Effectiveness of the Board in monitoring of management's implementation of corporate strategy|
|Effectiveness of the Board in monitoring the operational and financial performance of the Company|
|Effectiveness of the Board in handling crisis situation|
|Commitment of the Board to good corporate governance practices|
|Consideration by the Board of the interest of the minority shareholders|
|Board-Management Relationship||Existence of open lines of communication and constructive interaction between directors and the management of the Company|
|Clear understanding of the delineation between the roles of the Board and the key officers/management|
|Support of the Board to the management|
|Board Member Self-Evaluation||Exercise of independent judgment in that a Director views each problem/situation objectively and supports plans and ideas which such Director believes are beneficial to the Company|
|Avoidance of any situation where a Director may be placed in a conflict of interest|
|Inclination to disclose any conflict of interest|
|Prompt and complete attendance in Board meetings|
|Preparedness on the topics to be discussed on Board meetings|
|Active and objective participation in the Board discussions|
|Working knowledge on the statutory and regulatory requirements affecting the Company|
|Promotion and support on good corporate governance practices and policies|
FORM OF BOARD COMMITTEE EVALUATION
Point SystemRate of 1 to 5, 1 being the lowest
|Committee Processes and Meetings||Adequacy, frequency, duration and scheduling of Committee meetings per year|
|Attendance to the Committee meetings|
|Adequacy of materials for meetings of the Committees|
|Content and quality of materials for meetings of the Committees|
|Quality of presentations to the Committees|
|Quality and adequacy of discussions and deliberations during Board Committee meetings|
|Preparedness of the directors for the Board Committee meetings|
|Appropriateness of delegation of business to the Committees|
|Adequate information to the Board of Committee acts and approvals|
|Compliance with the Responsibilities and Functions of the Committees||Involvement of the Committee in the determination of the Company's strategic initiatives and direction|
|Effectiveness of the Committee in monitoring of management's implementation of corporate strategy|
|Effectiveness of the Committee in monitoring the operational and financial performance of the Company|
|Effectiveness of the Committee in handling crisis situation|
|Commitment of the Committee to good corporate governance practices|
|Consideration by the Committee of the interest of the minority shareholders|
|Committee Member Self Evaluation||Conscientiousness in the discharge of functions and responsibilities as member of Board Committee|
|Prompt and complete attendance in Committee meetings|
|Preparedness on the topics to be discussed on Committee meetings|
|Active and objective participation in Committee discussions|
FORM OF EVALUATION OF THE CHAIRMAN OF THE BOARD
Point SystemRate of 1 to 5, 1 being the lowest
|Evaluation of Chairman of the Board||Possession by the Chairman of the competence and qualifications to effectively discharge the functions of the office|
|Performance by the Chairman of his functions under the laws, By-Laws, the Charter of the Board, the Manual of Corporate Governance, or under the resolutions adopted by the Board.|
|Ability of the Chairman to lead and motivate the Board|
FORM OF EVALUATION OF PRESIDENT/CEO
Point SystemRate of 1 to 5, 1 being the lowest
|Evaluation of President/CEO||Possession by the President/CEO of the competence and qualifications to effectively discharge the functions of the office|
|Ability of the President/CEO to achieve Key Result Areas and Performance of the CEO against clear, measurable and documented objectives|
|Ability of the President/CEO to lead and motivate the Management|
In addition to the annual Board evaluation process, the Audit Committee adopted SEC Memorandum Circular No. 4 Series of 2012 on the Guidelines for the Assessment of the Performance of Audit Committees of Companies Listed on the Philippine Stock Exchange which took effect on June 30, 2012. Pursuant to this, an annual evaluation is also being conducted to assess the performance of the Audit Committee.
These annual evaluation processes are facilitated by the Office of the Corporate Secretary in coordination with the Corporate Governance Committee.
OFFICE OF THE CORPORATE SECRETARY
The Corporate Secretary ensures that the Board and the Management follow internal and external rules and regulations, and facilitates clear communications between the Board and Management. More importantly, the Company recognizes the mandate of the Office in championing the compliance of the Board and the Company with good corporate governance practices and policies. For this purpose, the Office of the Corporate Secretary, under its Charter, is mandated to coordinate with the Office of the Compliance Officer with regard to the formulation and implementation of the corporate governance practices of the Company, especially those relevant to and affecting the Board. This is to ensure that sound corporate governance practices are embedded across the entire organization.
The Management is primarily responsible for the operations of the Company. As part of its accountability, the Management is required to provide the Board with adequate, regular and timely information on the operations and affairs of the Company.
The roles of the Chairman, and the President and CEO were made separate to ensure an appropriate balance of authority, increased accountability and greater capacity of the Board for independent decision-making.
The Manual requires the Company to disclose the relationship between the Chairman, and the President and CEO, if any, in its annual report to the SEC. The Chairman of the Board, Fernando Zobel de Ayala, and the President and CEO of the Company, Ferdinand M. dela Cruz, are not related to each other.
The Board, with the assistance of the Remuneration Committee, the Nomination Committee and the Company's Corporate Human Resources Group, has adopted a professional development program for employees, officers and senior management. Through competency management, the Company has put in place a process to determine the skills necessary for particular positions in the Company, and identifies key talents for purposes of succession. The Company's Corporate Human Resources Group has developed a Talent Master Plan to determine the optimal organizational structuring, recruitment strategies, performance evaluation methodologies, total rewards management and career development. These are all geared to attract, retain and engage the company's employees, officers and senior management, and to cultivate them to become the Company's future business leaders.
The development of a leadership talent pool is crucial to the success of Manila Water in the future. Hence, it is one of the top strategic priorities of the Company. For the succession of the top key management positions, the Company has formed an Acceleration Pool composed of selected high potential key talents within the organization.
Talents identified to be part of the Acceleration Pool undergo the following:
assessment that gauges a talent's business driver readiness and leadership competencies;
creation of an Individual Development Plan that outlines possible developmental areas and stretched assignments; and
coaching and mentoring sessions with the Management Committee.
The Management Committee is composed of the top key executives of the Company from the President/ CEO to those occupying positions equivalent to Vice Presidents.
THE COMPLIANCE OFFICER
In accordance with the Manual, and in order to ensure adherence to the principles and best practices in corporate governance, the Board appoints a Compliance Officer whose primary role is to operationalize the Manual, and monitor overall compliance with its provisions and requirements. Moreover, the Compliance Officer is tasked with the duty to communicate with the SEC on matters relating to the Company's compliance with the Manual and the clarification of matters required by the said Commission. Together with his primary function, the Compliance Officer is also tasked to oversee the implementation of the Company's Code of Business Conduct and Ethics and the Related Party Transactions Policy.
THE CORPORATE GOVERNANCE OFFIC
The Legal and Corporate Governance Department (the "Department") is the unit tasked to formulate and implement the initiatives and policies on good corporate governance. The Department, on matters of corporate governance, reports directly to the Compliance Officer under the supervision of the Corporate Governance Committee. The Department has been active in the continuous conduct of orientation to all Manila Water employees and business partners on the Company's governance policies, particularly on matters contained in the Manual and the Code of Business Conduct and Ethics, such as transparency, whistle blower policy, honesty and fair dealing, and prompt and adequate disclosure of material information, among other policies.
Among the mandates of the Department is the continuous identification of gaps and challenges on corporate governance practices across the organization. This allows the Department to propose improvements on the Company's policies based on international corporate governance standards. Finally, the Department, in coordination with the Office of the Corporate Secretary, also provides timely updates to the Board and the Management on the current and best practices on corporate governance in the industry and globally.
THE INTERNAL AUDIT
The Internal Audit (IA) team conducts an independent, objective assurance, and consulting activity designed to add value and improve the organization's operations.
It helps the organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.
The IA reports to and supports the Audit Committee in the effective discharge of the Committee's oversight roles and responsibilities. The IA consists of talents and professionals who are either a Certified Public Accountant, Certified Internal Auditor, Certified Information Systems Auditor, Certified in Risk and Information Systems Control, Certified Internal Control Auditor, Civil Engineer, Electrical Engineer, or a mix thereof.
Annually, a risk-based internal audit plan is prepared and approved by the Audit Committee. The IA conducts its activities guided by the Institute of Internal Auditors' (IIA) Professional Practices Framework consisting of the International Standards for the Professional Practice of Internal Auditing (Standards), the Definition of Internal Auditing and the Code of Ethics. In December 2017, the external auditing firm Punongbayan & Araullo conducted an independent validation of the internal audit function's Quality Assessment Review (QAR) and concurred that the internal audit activity "Generally Conforms" to the International Professional Practice Framework (IPPF) and its mandatory elements namely: (1) Core Principles for the Professional Practice of Internal Auditing; (2) Definition of Internal Auditing; (3) Code of Ethics; and, (4) International Standards for the Professional Practice of Internal Auditing (Standards). The rating is considered the highest possible rating per Institute of Internal Auditors (IIA) methodology. The Standards require that the external assessment be conducted at least once every five (5) years.
THE CHIEF RISK OFFICER
The Chief Risk Officer (CRO) oversees the entire risk management function and leads the development, implementation, maintenance and continuous improvement of Enterprise Risk Management (ERM) Program processes and tools. The CRO is the Vice Chairman of the Risk Management Executive Committee (RMEC) which directs the ERM Department in facilitating the ERM process throughout Manila Water and in collecting and analyzing key business risk information for reporting to the RMEC.
ENTERPRISE RISK MANAGEMENT
The Enterprise Risk Management (ERM) Department is responsible for the sustained implementation of the Enterprise Risk Management Program of the Company and ensures that key risks are identified and managed by the respective risk owners.
ERM Department is also responsible for managing the insurance program of the Company and provides oversight on the insurance program of the subsidiaries, with the objective of making the program optimal, cost-effective, risk-based and responsive to the Company's needs.
INVESTOR RELATIONS TEAM
The Investor Relations Team (IR) is tasked to regularly keep the Company's investors and stakeholders informed of the developments in the Company's business. For this purpose, the IR conducts quarterly analysts' briefings and regular meetings with shareholders, fund managers, and analysts to keep them updated on the financial and operating performance of the Company as well as other relevant material information and details on transactions of the Company. A press briefing is also held each year immediately after the Annual Stockholders' Meeting to engage other stakeholders, specifically the media.
The IR is easily reached through the contact details provided herein or in the Company website for any stockholder, stakeholder, or investor concerns.
THE CHIEF SUSTAINABILITY OFFICER
The Chief Sustainability Officer (CSO) ensures that environmental, social and governance issues and challenges of the Company are discussed at the Board and are well communicated to all stakeholders. As a result, there were no significant fines and sanctions above P50,000 noted for non-compliance with relevant socioeconomic and environmental laws and/or regulations in 2018. There were also no incidents of violation involving the rights of indigenous peoples in the reporting period The CSO also leads new initiatives and cross-functional teams, and understands how to translate external factors into internal opportunities. It also ensures that business growth and strategies take into account the environmental and social impacts.
On November 20, 2018, during its Regular meeting, it was approved by the Board to appoint the Company's President and CEO to be the CSO, as reviewed, evaluated, and endorsed by the Nomination Committee.
THE CORPORATE GOVERNANCE MANUAL
Manila Water is dedicated to observing the highest standards of corporate governance in order to serve the best interests of its stakeholders, including the investing public. The Board, Management, employees, and shareholders of the Company believe that sound and effective leadership is fundamental to its continued success and stability. These principles and practices enable the company to create and sustain increased value for all the shareholders.
The corporate governance policy of Manila Water is primarily contained in its Manual. The Company's corporate governance framework is based on the principles of accountability, fairness and transparency, and sustainability. The Manual is available for download at the Company's website.
The Manual contains the governance principles that the Company applies in all its undertakings and supplements Manila Water's Articles of Incorporation and By-laws, Code of Business Conduct and Ethics and other related Company policies. The Manual instituted the policies on:
the Board of Directors', the Board Committees' and management's roles, functions and responsibilities in relation to good governance;
the institution of training for the Board of Directors, executive directors and employees;
evaluation of the Board and Management's performance;
the enhanced roles of the Corporate Secretary and Audit Committee in corporate governance;
general guidelines on related party transactions; and
conflict of interest and prompt and adequate disclosures.
Manila Water is in full compliance with the Corporate Governance Manual and all disclosure rules of the Philippines Stock Exchange and the Securities and Exchange Commission.
As a key policy, the members of the Board and key executives of the Company are required to disclose to the Board any material interest, whether direct or indirect, that they may have in any transaction or matter that directly affects the Company. The Company commits, at all times, to adequately and timely disclose all material information that could potentially affect Manila Water’s share price and such other information that are required to be disclosed pursuant to the Securities Regulations Code (SRC) and its Implementing Rules and Regulations (IRR) and other relevant laws. This information includes, but is not limited to, results of earnings, acquisition or disposal of significant assets, offbalance sheet transactions, changes in Board membership, as well as, changes in shareholdings of majority shareholders, directors and officers, and related party transactions. The Company also discloses its corporate governance practices, corporate events calendar and other material information on its website in a timely manner.
The directors are required to comply with all disclosure requirements of the Manual and the SRC and its IRR, and to voluntarily disclose any conflict of interest, whether actual or potential, upon its occurrence. The disclosure of any conflict of interest, including related party transactions, is required to be made fully and immediately. In cases where related party transactions exist, it is the Company's policy that complete information on such transaction be immediately disclosed, and, if a director or officer is involved, the director or officer concerned shall not be allowed to participate in the decision-making process. The policy also mandates that a director who has a continuing conflict of interest of a material nature shall be required to resign, or if the Board deems appropriate, be removed as a member of the Board.
The Company's Manual is continuously being revised in accordance with the directives and issuances of the SEC and to comply with the highest standards of corporate governance. The latest revisions to the Manual was approved and ratified by the Board in June 8, 2017.
RELATED PARTY TRANSACTIONS
To further instill the Company's policies on related party transactions, the Board adopted the Policy on Related Party Transactions (the "RPT Policy"). The RPT Policy confirms that the Company and its subsidiaries shall enter into any related party transactions solely in the ordinary course of business, on ordinary commercial terms, and on the basis of arm's length arrangements, which shall be subject to appropriate corporate approvals and actions of the Company or the related parties, as the case may be.
Any related party transactions entered into by the Company or its affiliates shall be in accordance with applicable law, rules and regulations, and the RPT Policy. Related party transactions entered into by the Company with one or more of its directors or officers are voidable at the option of the Company, unless the transaction is deemed fair and reasonable under the circumstances and at arm's length, and the procedure for the procurement and approval for similar transactions was strictly complied with.
The RPT Policy provides for the process of approving related party transactions, as well as the implications for violations. In addition, the RPT Policy prohibits related party transactions involving loans and/or financial assistance to a director and loans and/ or financial assistance to members of the Management, except when allowed pursuant to an established Company benefit or plan. Under the RPT Policy, the approval of the Related Party Transactions Committee is required for material related party transactions.
THE CODE OF BUSINESS CONDUCT AND ETHICS
The Company's commitment to the highest standards of ethics, good governance, competence and integrity was institutionalized through the Code of Business Conduct and Ethics (the "Code"). The Code sets forth the standards for professional and ethical behavior, as well as articulate acceptable and unacceptable conduct and practices in internal and external dealings of the Company. The Code should be properly disseminated to the Board, senior management and employees, and should also be disclosed and made available to the public through the company website.
The Code addresses the issues and relationships between and among the Company’s directors, officers and employees, and its customers, suppliers, business partners, government offices and other stakeholders. The Code includes policies on: Honesty and Fair Dealing; Conflict of Interest; Corporate Entertainment and Gifts; Insider Trading; Disclosure; Creditor Rights; Anti-Corruption; and Anti- Sexual Harassment.
Honesty and Fair Dealing
The core principle of the Company is to conduct business honestly and fairly with its investors, suppliers, contractors, service providers, customers and employees and other third parties.
Directors, Officers and employees shall act honestly, ethically and in compliance with all applicable laws, rules and regulations and protect the name and reputation of the Company.
Directors, Officers and employees shall not engage in any unfair dealing practices, such as taking advantage of anyone through abuse of confidential information, manipulation, concealment, or misrepresentation or other similar acts.
Officers and employees involved in the procurement process for services, materials, supplies, and equipment shall strictly comply with the Company's Procurement Policy. The Procurement Policy is an integral part of this Code.
Directors, Officers and employees are required to immediately report all suspected or actual fraudulent or dishonest acts to the Board, in case of directors, and to the immediate supervisor or to the Office of the Compliance Officer in case of officers and employees. The Company shall promptly identify and investigate any suspected fraudulent or dishonest acts. Without prejudice to applicable administrative sanctions, the Company may pursue civil and/or criminal actions against directors, officers and employees as may be warranted.
The Implementing Guidelines on the Reporting of Fraudulent or Dishonest Acts are contained in the Whistle Blower Policy of the Company.
Reporting of Fraudulent or Dishonest Acts (Whistle Blower Policy)
Provides for procedures to be followed to encourage all covered persons to report fraudulent or dishonest acts in order to protect the good name and reputation of the Company, and in the process, discourage the commitment of such acts.
Directors, officers, employees and third parties are required to immediately report all suspected or actual fraudulent or dishonest acts to the Board in case of directors, and to the immediate supervisor or to the Office of the Compliance Officer in case of officers, employees and third parties.
The Company shall promptly identify and investigate any suspected fraudulent or dishonest acts.
Without prejudice to applicable administrative sanctions, the Company may pursue civil and/ or criminal actions against directors, officers, employees and third parties as may be warranted.
To ensure protection of the reporter from any form of retaliation or discrimination, the identity of the person making the report and the contents of the report shall be kept confidential to the extent legally permissible.
Conflict of Interest
Prohibits conflict of interest situations involving all directors, officers, employees and their relatives up to the fourth degree of consanguinity and/or affinity, including common law relationships.
Under the policy, a conflict of interest arises when a director, an officer or employee appears to have a direct or indirect personal or financial interest in any transaction, which may deter or influence him from acting in the best interest of the Company. It is not required that there be an actual conflict; it is only required that there could be perceived conflict by an impartial observer.
All contracts/arrangements by directors, officers and employees, and their relatives that violates this policy on conflict of interest shall be terminated immediately and correspondingly reported to the Office of the Compliance Officer, for appropriate action under the Code.
Corporate Entertainment and/or Gifts
Prohibits all officers and employees from accepting corporate entertainment/gifts from suppliers, contractors and other business partners, which can be viewed as influencing the manner by which an officer or employee may discharge his duties.
Prohibits directors, officers and confidential employees from trading in Manila Water shares:
Ten (10) days before and three (3) days after the release of the financial statements; and Three (3) days before and three (3) days after the release of other material information.
In addition, directors and officers who may be covered by the reporting requirements of the SEC and the Philippine Stock Exchange (PSE) in respect of their shareholding in the Company or any changes thereof, are required to report their dealings in Company shares within three (3) business days after the transaction.
Encourages prompt and adequate disclosure of all material facts or changes in the affairs of the Company, including any information likely to affect the market price of the Company's shares.
Institutionalizes the Company's adherence to its loan covenants and agreements for the protection of the rights of the creditors of the Company.
No distribution or disposal of assets of the Company shall be made except: when allowed by the law; or by decrease of capital stock; or upon lawful dissolution and after payment of all its debts and liabilities; when allowed by the material agreements of the Company, but without prejudice to vested rights.
Strictly prohibits giving and facilitating of payments to any private or government officials or employees, their agents or intermediaries, in order to expedite or secure performance of any governmental action, or to gain any perceived or actual favor or advantage from any private or government entities. The Company must ensure that it and its directors, officers and employees fully comply with the laws governing bribes, unlawful payments and other corrupt practices.
Recognizes the Company's protection of the dignity of its human resources, stakeholders, and customers.
All forms of sexual harassment shall be dealt with appropriately and in accordance with the applicable and all relevant laws, rules and regulations.
Diversity in Board Membership
Promotes equality among the members of the Board regardless of gender, age, ethnicity, or political, religious or cultural beliefs.
The objectives of the Procurement Policies are to promote transparency in the procurement process, and to afford vendors equal access to business opportunity with Manila Water, with the end view of enhancing vendor participation and protecting the interest of Manila Water. Officers and employees of the Company involved in the procurement process for services, materials, supplies and equipment for Manila Water are required to strictly comply with its Procurement Policies.
The Procurement Policies of the Company are downloadable at the Company website.
THE VENDORS' CODE OF CONDUCT
The Vendors' Code of Conduct sets out the rules that will guide Manila Water's vendors in the performance of their obligations and/or transacting business with Manila Water, thus avoiding acts contrary to standards, policies, laws and morals. As business partners of Manila Water, its vendors are expected to act with utmost integrity, efficiency, and competence in performing awarded contracts and/or delivering ordered products. Moreover, they should demonstrate a strong sense of responsibility for public safety and interest that will ultimately promote and protect the good name of Manila Water. The Vendors' Code of Conduct is deemed incorporated in the contracts of Manila Water with its suppliers, vendors and contractors.
A copy of the Vendor's Code of Conduct is downloadable at the Company website.
THE ENTERPRISE RISK MANAGEMENT POLICY
Manila Water has established an Enterprise Risk Management (ERM) Program which aims to use a globally accepted approach in managing imminent and emerging risks in its internal and external operating environments. Under the ERM Program, Manila Water shall appropriately respond to risks and manage them in order to increase shareholder value and enhance its competitive advantage.
In order to bolster the risk oversight and management functions relating to strategic, financial, operational, compliance, legal and other risks of the Company, the Board, on August 11, 2015, approved the establishment of a separate Risk Committee. Subsequently, on November 26, 2015, the Board approved the Charter of the Risk Committee, which transferred the risk oversight and management functions to the to the BROC from the Audit and Governance Committee.
SAFETY, HEALTH, AND WELFARE POLICY
Manila Water is committed to achieving customer satisfaction, upholding environmental sustainability, and ensuring safety, preservation of life and health of its employees and all stakeholders. To achieve these objectives, it is the policy of Manila Water to:
Continuously assess, implement and improve its processes and business conduct by adopting best practices and keeping abreast with the latest innovations to ensure reliability and efficiency of its operations;
Ensure full compliance with relevant laws and standards in pollution prevention and environmental sustainability, safety and health protection, as well as applicable regulatory standards and customer requirements related to the quality of its products and services;
Build a strong culture committed to customer satisfaction, environmental protection, health and safety through education, training and awareness at all levels of the organization that will empower its employees, contractors, suppliers and stakeholders;
Actively promote the conservation and optimal use of precious resources by constantly creating and improving existing programs aimed at pollution prevention, waste minimization, resource conservation and environmental sustainability;
Systematically manage and control its health and safety risks through effective risk assessment processes; and
Regularly revisit, improve, develop and maintain its Quality, Environment, Health and Safety management system to ensure its effectiveness and relevance to the changing needs of the company to drive continuous improvement in operations, quality, environmental, health and safety performances.
It is the duty of the directors to promote shareholders rights, remove impediments to the exercise of shareholders rights and provide effective redress for violation of their rights.
Right to Notice of Meetings and Right to Attend Meetings
To promote transparency and goodwill, it is a Company policy to encourage the attendance of all its stockholders, including minority and non-controlling, and institutional investors, at the stockholders’ meeting of the Company. The Board should encourage active shareholder participation by sending the Notice of Annual and Special Shareholders’ Meeting with sufficient and relevant information at least twenty-eight (28) days before the scheduled meeting.
Unless otherwise provided by law or the By-laws, stockholders as of Record Date constituting at least a majority of the outstanding voting capital stock of the Company is necessary to constitute a quorum. The stockholders may be present in person or represented by proxy.
Right to Propose the Holding of and to Attend Meetings
The Manual provides that the minority shareholders shall have the right to propose the holding of a meeting as well as the right to propose items in the agenda of the meeting, provided that the items proposed are for legitimate business purposes.
Right to Make Nominations to the Board of Directors
Every stockholder, including noncontrolling, has a right to submit a nomination for election to the Board. The stockholders, in making their nominations, or the Company, are encouraged to make use of professional search firms or external sources of candidates when searching for candidates to the Board.
Voting Right and Right to Participate at Stockholders Meetings
In all items for approval, each share of stock entitles its registered owner as of the record date to one vote. The Company has two classes of shares, common and participating preferred shares. Both classes of shares have equal voting rights.
Voting shall be by poll and the Company shall provide the mechanism to implement the same at every stockholders' meeting.
Under the Company’s Bylaws, the affirmative vote of stockholders as of the record date constituting at least a majority of the outstanding voting capital stock of the Company is necessary to approve matters requiring stockholders’ action, unless otherwise provided for under existing laws, with the exception of the following corporate acts and measures which must be ratified and/or approved by the stockholders representing or constituting at least two thirds (2/3) of the outstanding capital stock of the Company:
Amendment of the Articles of Incorporation;
Adoption and/or amendment of the Bylaws (unless the power to amend By-laws have been delegated to the Board by the stockholders);
Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property;
Incurring, creating or increasing bonded indebtedness; Increase or decrease of capital stock;
Merger or consolidation of the Company with another company; Investment of corporate funds in another corporation or business for any purpose other than the primary purpose for which it was organized; and
Dissolution of the Company, among others.
For the election for directors, every stockholder shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected, or to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by the number of his shares shall equal, or by distributing such votes on the same principle among any number of candidates.
The stockholders shall also have an opportunity during the stockholders' meeting to ask questions and raise their issues relevant to the agenda items. The minutes of the meeting record the shareholder questions and corresponding answers given by the directors and officers of the Company.
The Board should encourage active shareholder participation by making the result of the votes taken during the most recent Annual or Special Shareholders' Meeting publicly available the next working day. In addition, the Minutes of the Annual and Special Shareholders' Meeting should be available on the Company website within five (5) business days from the end of the meeting.
The Company continues its practice of offering its shareholders an equitable share of the Company's profits. In 2013, the Board of Directors confirmed its dividend payout policy which entitles holders of common shares and participating preferred shares to annual cash dividends equivalent to 35 percent of the prior year's net income payable at least semi-annually, on such dates as may be determined by the Board of Directors, subject to applicable rules and regulations on record dates and payment dates. The participating preferred shares participate in the earnings at a rate of 1/10 of the dividends paid to a common share. As a matter of policy, payment dates of dividends declared are fixed within thirty (30) days from date of declaration. In 2018, the Company paid a total of P2.151 billion as dividends.
All stockholders have pre-emptive rights or the right to subscribe to new shares of the Company, unless there is a specific denial of this right in the Articles of Incorporation or an amendment thereto. They shall have the right to subscribe to the capital stock of the Company. The Articles of Incorporation may provide the specific rights and powers of shareholders with respect to the particular shares they hold, all of which are protected by law so long as they are not in conflict with the Corporation Code.
Right to Information and Inspection
In addition to regular posting and disclosures of material information at the Company website, a shareholder shall be provided with periodic reports regarding the performance of the Company upon written request for a legitimate purpose. Shareholders shall be allowed to inspect corporate books and records including minutes of Board meetings and stock registries in accordance with the Corporation Code and shall be provided an annual report, including financial statements, without cost or restrictions.
QUORUM AND VOTING PROCEDURES AT THE STOCKHOLDERS MEETINGS
Unless otherwise provided by law or the By-laws, stockholders as of Record Date constituting at least a majority of the outstanding voting capital stock of the Company is necessary to constitute a quorum. The stockholders may be present in person or represented by proxy. The affirmative vote of stockholders constituting at least a majority of the outstanding voting capital stock of the Company is necessary to approve matters requiring stockholders’ action. However, the following corporate acts and measures must be ratified and/ or approved by the stockholders representing or constituting at least two-thirds (2/3) of the outstanding capital stock of the Company:
Amendment of the Articles of Incorporation
Adoption and/or amendment of the By-laws
Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property
Incurring, creating or increasing bonded indebtedness
Increase or decrease of capital stock
Merger or consolidation of the Company with another company
Investment of corporate funds in another corporation or business for any purpose other than the primary purpose for which it was organized
Dissolution of the Company
In all items for approval, each share of stock entitles its registered owner as of the record date to one vote. At each election for directors, every stockholder shall have the right to vote the number of shares owned by him for as many persons as there are directors to be elected, or to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by the number of his shares shall equal, or to distribute such votes on the same principle among as many candidates as he shall see fit.
Voting will be by poll. Stockholders may opt for manual or electronic voting either in person or by proxy. For manual voting, each stockholder will be given a ballot upon registration to enable the stockholder to vote in writing per item in the agenda. For electronic voting, there will be computer stations placed outside the Ballroom where stockholders may cast their votes electronically. Both the paper ballot and computer platform for electronic voting will contain the proposed resolutions for consideration by the stockholders and each proposed resolution will be shown on screens in front of stockholders as the same is taken up at the meeting. Stockholders may cast their vote anytime during the meeting.
In addition, a stockholder may vote electronically in absentia using the online web address provided by the Company subject to validation purposes. A stockholder voting electronically in absentia shall be deemed present for purposes of quorum.
All votes will be counted and tabulated by the Office of the Corporate Secretary and the Committee of Inspectors of Ballots and Proxies. The results of voting will be validated by SGV & Co., the independent party appointed for the purpose.
For the election of the eleven (11) members of the Board of Directors, the eleven (11) nominees receiving the highest number of votes will be declared elected as directors of the Company. However, if there are only eleven (11) nominees, all nominees shall be declared elected upon approval of motion.
The Company is compliant with the requirement of the PSE on minimum public ownership with 55.52 percent of its shares subscribed and owned by the public as of December 31, 2018. In compliance with the requirements of the PSE, the Company regularly and timely discloses its public ownership report and immediately makes a public disclosure of any change thereon.
SUMMARY OF LEGAL AND BENEFICIAL OWNERSHIP OF THE BOARD, KEY OFFICERS, AND MAJOR SHAREHOLDERS
|Name||December 31, 2018||Class of shares||December 31, 2017||Class of shares|
|Fernando Zobel de Ayala||1||Common||1||Common|
|Jaime Augusto Zobel de Ayala||1||Common||1||Common|
|Ferdinand M. Dela Cruz||2,965,686||Common||1,248,264||Common|
|Gerardo C. Ablaza Jr.||4,126,078||Common||4,126,078||Common|
|Antonino T. Aquino||12,749,543||Common||12,749,543||Common|
|Delfin L. Lazaro||1||Common||1||Common|
|John Eric T. Francia||1||Preferred||1||Preferred|
|Jaime C. Laya (ID)||19,800||Common||19,800||Common|
|Jose L. Cuisia Jr. (ID)||1||Common||1||Common|
|Oscar S. Reyes (ID)||330,001||Common||330,001||Common|
|Sherisa P. Nuesa (ID)||5,093,607||Common||5,093,607||Common|
|Officers||December 31, 2018||Class of shares||December 31, 2017||Class of shares|
|Luis Juan B. Oreta*||N.A.||N.A.||1,572,727||Common|
|Virgilio C. Rivera, Jr.||3,265,058||Common||2,242,795||Common|
|Ma. Cecilia T. Cruzabra*||N.A.||N.A.||N.A.||N.A.|
|Geodino V. Carpio||1,961,100||Common||817,600||Common|
|Abelardo P. Basilio||1,069,200||Common||775,200||Common|
|Thomas T. Mattison||474,100||Common||274,100||Common|
|Janine T. Carreon||514,800||Common||228,300||Common|
|Esmeralda R. Quines||837,590||Common||735,390||Common|
|Liwayway T. Sevalla**||63,000||Common||N.A.||N.A.|
|Maidy Lynne B. Quinto***||140,000||Common||N.A.||N.A.|
|Solomon M. Hermosura||50,100||Common||50,100||Common|
|Major Shareholders||December 31, 2018||Class of shares||December 31, 2017||Class of shares|
|Philwater Holdings Corporation||3,999,999,999||Preferred||3,999,999,998||Preferred|
INDEPENDENT EXTERNAL AUDITOR AND ITS REMUNERATION
In the last ASM held on April 16, 2018, the stockholders approved the appointment of SGV & Co. as external auditor of the Company for an audit fee of P2,100,000, exclusive of value-added taxes. Prior to the stockholders' meeting, the Audit Committee endorsed, and the Board approved, the endorsement of SGV & Co. for appointment as the external auditor of the Company.
The external auditor of the Company is tasked with the audit of the Company's annual financial statements. Where the Company engages the services of SGV & Co. for non-audit services or consultancy, the Company, as a matter of policy, ensures that the fees received by SGV & Co. on such non-audit services are not more than the approved audit fees in order not to impair the external auditor's independence which should be maintained at all times to assure the stockholders of the integrity of the Company's financial reports.
|External Audit Fees||Audit and Audit-Related Fees of the Company|
|Audit of Financial Statements||₱2,100,000||₱2,100,000|
|All Other Fees*||₱261,970||₱170,000|
In the pursuit of the Company's thrust to continuously improve awareness of best practices in the conduct of its business and operations especially in corporate governance across the organization, including dealings with its business partners and customers, Manila Water constantly updates its website, www.manilawater.com, with a section dedicated to corporate governance and investor relations. The Corporate Governance section of the website contains all disclosures made by the Company to the PSE and SEC, as well as its Manual, the Code, the Charters of the Board and its Committees, the various corporate governance policies and other matters and information of relevance to the stockholders and all stakeholders.
The Company discloses its corporate governance practices, corporate events calendar, and other material information on its website in a timely manner.
The Investor Relations section houses all information that may be required by the investors, stockholders and stakeholders. The site has been enhanced to be user-friendly and is accessible to the public at all times.
CORPORATE GOVERNANCE RECOGNITION AND AWARDS
The Company's commitment to uphold the highest standards of good corporate governance has again been confirmed and recognized through the prestigious awards it has received in 2018. In particular, the ASEAN's Top 50 Publicly-Listed Companies on Corporate Governance at the 2018 ASEAN Corporate Governance Awards, Top 10 Philippine Publicly-Listed Companies, and Top 5 Industry Sector by the Institute of Corporate Directors, and Platinum Awardee for Excellence in Environmental, Social and Governance Practices by The Asset.