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2019 Integrated Report

Genuine Service

Corporate Governance

Corporate Governance Report

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 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.

 

CORPORATE GOVERNANCE STRUCTURE

 

BOARD COMPOSITION 

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 Securities Regulations Code (SRC), the Revised Corporation Code, 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. 

 

Chairman Fernando Zobel de Ayala during the 2019 Annual Stockholders’ Meeting

 

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 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:

  1. 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. 
  2. Process of Endorsing Nominations

    1. 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 Manual, the SRC, the Revised Corporation Code, and the applicable laws, rules and regulations.

    2. 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 shall undertake the process of identifying the quality of directors aligned with the Company’s strategic directions. Towards this end, the 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 annual stockholders’ meeting, the nominated director will 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 annual stockholders’ meeting 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 annual stockholders’ meeting, 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 provisions of the Manual and the Revised Corporation Code on removal of directors shall apply.

  1. After evaluation of the qualifications/disqualifications of the nominees, the Nomination Committee shall issue a resolution whether or not it endorses the nominees for election to the Board of Directors.
  2. 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.
  3. The Chairman of the Board shall provide input to the Nomination Committee on its recommendation for approval of (a) candidates for nomination or appointment to the Board; (b) members and chairs of Board Committees; and (c) appointment of Executive Officers.

 

  1. Election of Directors 

    The directors of the Company shall be elected by majority vote at the annual meeting of the stockholders at which a quorum is present. 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 at the same principle among any number of candidates.

 

QUALIFICATIONS OF DIRECTORS 

General Qualifications: 

A Director of the Company shall have the following general qualifications: 

  1. Ownership of at least one (1) share of the capital stock of the Company; 
  2. At least twenty-one (21) years of age; 
  3. 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;
  4. Possesses integrity, probity and shall be diligent and assiduous in the performance of his functions;
  5. Other relevant qualifications, such as membership in good standing in business, professional organizations or relevant industry; and
  6. Non-executive directors should possess such qualifications and stature that would enable them to effectively participate in the deliberations of the Board.

A Director of the Company shall have the following specific qualifications:

  1. Non-executive directors should possess such qualifications and stature to effectively participate and help secure objective, independent judgment on corporate affairs and to substantiate proper checks and balances;
  2. Directors who are members of Board Committees shall have such additional qualifications necessary to effectively discharge the functions of the relevant Board Committee;
  3. At least one of the independent directors must have accounting expertise (accounting qualification or experience);/li>
  4. At least one 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;
  5. Officers, executives and employees of the Company may be elected as directors but cannot and shall not be characterized as independent directors;
  6. 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;
  7. 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. However, should the independent director take the appropriate action to remedy or correct the disqualification within sixty (60) days from the occurrence of the ground, he may still be considered an independent director.

 

PERMANENT DISQUALIFICATIONS OF DIRECTORS 

A Director with the following disqualifications shall never be nominated and/or elected to the Board, or if nominated and elected, shall be removed from office: 

  1. 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;
  2. 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 Revised Corporation Code, 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;
  3. 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;
  4. 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 Revised Corporation Code, or any other law administered by the SEC, or any rule, regulation or order of the SEC or the BSP;
  5. Any person judicially declared to be insolvent;
  6. Any person found guilty by final judgment or order of a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct enumerated previously;
  7. 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 Revised Corporation Code, committed within five (5) years prior to the date of his election or appointment; and
  8. No person shall qualify or be eligible for nomination or election to the Board of Directors 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 10 percent or more of any outstanding class of shares of, any corporation (other than one in which the Company owns at least 30 percent 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 10 percent 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 of Directors; 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.
  9. Other grounds as the SEC may prescribe.

 

TEMPORARY DISQUALIFICATION OF DIRECTORS 

The following are grounds for temporary disqualification of incumbent directors: 

  1. 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 IRR. This disqualification shall be in effect as long as his refusal persists;
  2. 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;
  3. Dismissal or termination for cause as director of any publicly listed company, public company, registered issuer of securities and holder of a secondary license from the SEC. The disqualification should be in effect until he has cleared himself from any involvement in the cause that gave rise to his dismissal or termination;
  4. Being under preventive suspension by the Company for any reason;
  5. If the beneficial equity ownership of an independent director in the Company or its subsidiaries and affiliates exceed two percent (2%) of its subscribed capital stock. The disqualification from being elected as an independent director is lifted if the limit is later complied with;
  6. Conviction that has not yet become final referred to in the grounds for permanent disqualification of directors;
  7. A finding of existence of temporary disqualification shall be at the discretion of the Board and shall require a resolution of a majority of the Board. A director shall have sixty (60) days upon the occurrence of any ground for temporary disqualification to remedy or correct the same otherwise, the disqualification shall become permanent.

 

ROLES AND RESPONSIBILITIES OF THE BOARD OF DIRECTORS 

The Corporate Governance Manual provides that “The Board should have a Board Charter that formalizes and clearly states its roles, responsibilities and accountabilities in carrying out its fiduciary duties. The Board Charter should serve as a guide to the directors in the performance of their functions and should be publicly available and posted on the Company’s website.” The Charter of the Board implements the aforesaid provision of the Manual.

The Charter of the Board specifically:

  1. Outlines the composition, manner of election, and term of office of the Board, ensuring a formal and transparent board nomination and election process;
  2. Enumerates the qualifications of Directors, and the manner by which they may be nominated;
  3. Indicates the process for selection, appointment, and re-appointment of Directors;
  4. Provides the grounds for temporary or permanent disqualification of directors, removal of a director, suspension, and reinstatement of a director;
  5. Outlines the functions and responsibilities, manner of appointment and removal, and qualifications of the Chairman of the Board. The Charter also provides for the access limits of the Chairman to management and employees, as well as external advisors, consultants, and legal counsel;
  6. Indicates that the Board should adhere to the Company’s Code of Business Conduct and Ethics, promote and observe diversity in its membership composition, and follow the guidelines regarding the holding of multiple directorships outside of the Company; and
  7. Ensure that there is a quorum comprising two-thirds (2/3) of the number of directors as fixed in the Articles of Incorporation.

Note: This portion no longer appears in the Charter of the Board: 
“sets out the specific functions of the Chairman of the Board, emphasizing their separate roles and responsibilities”. 

 

The Board’s Governance Responsibilities

  1. The Board members shall act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the Company and all shareholders;
  2. The Board shall oversee the development of and approve the Company’s business objectives and strategy, and monitor their implementation, in order to sustain the Company’s long-term viability and strength;
  3. The Board shall be responsible for ensuring and adopting an effective succession planning program for directors, key officers and management to ensure growth and a continued increase in the shareholders’ value. This includes adopting a policy on the retirement age for directors and key officers as part of management succession and to promote dynamism in the Company;
  4. The Board should align the remuneration of key officers and board members with the long-term interests of the Company. In doing so, it should formulate and adopt a policy specifying the relationship between remuneration and performance. Further, no Director should participate in discussions or deliberations involving his own remuneration;
  5. The Board should have the overall responsibility in ensuring that there is a groupwide policy and system governing related party transactions (RPTs) and other unusual or infrequently occurring transactions, particularly those which pass certain thresholds of materiality. The policy should include the appropriate review and approval of material or significant RPTs, which guarantee fairness and transparency of the transactions. The policy should encompass all entities within the Group, taking into account their size, structure, risk profile and complexity of operations;
  6. The Board should be primarily responsible for approving the selection and assessing the performance of the Management led by the Chief Executive Officer (CEO), and control functions led by their respective heads (Chief Risk Officer, Chief Compliance Officer, and Chief Audit Executive);
  7. The Board should ensure the establishment of an effective performance management framework that will ensure that the Management, including the Chief Executive Officer, and personnel’s performance is at par with the standards set by the Board and Senior Management;
  8. The Board should ensure the integrity of the Company’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards;
  9. The Board should oversee that an appropriate internal control system is in place, including setting up a mechanism for monitoring and managing potential conflicts of interest of Management, board members, and shareholders, including misuse of corporate assets and abuse in related party transactions. The Board should also approve the Internal Audit Charter;
  10. The Board should oversee that a sound enterprise risk management (ERM) framework is in place to effectively identify, monitor, assess and manage key business risks. The risk management framework should guide the Board in identifying units/business lines and enterprise-level risk exposures, as well as the effectiveness of risk management strategies;
  11. The Board should adopt a Code of Business Conduct and Ethics, which would provide standards for professional and ethical behavior, as well as articulate acceptable and unacceptable conduct and practices in internal and external dealings. The Code should be properly disseminated to the Board, senior management and employees. It should also be disclosed and made available to the public through the Company website;
  12. The Board should monitor the effectiveness of the Company’s governance practices and make changes as needed;
  13. The Board should oversee the process of disclosure and communications;
  14. The Board shall regularly review, at least annually, the mission and vision of the Company and shall revise the same, as may be necessary, in accordance with the strategic directions of the Company;
  15. The Board shall conduct an annual performance evaluation of the performance of the Board and Committee Processes and Meetings, compliance with the responsibilities and functions of the Board and Board Committees, relationship of the board and management, self-evaluation of each board member, the performance of the Chief Executive Officer (CEO), President, and senior management.

 

INDEPENDENT DIRECTORS 

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 Article 3, Section 2 of the Revised Corporate Governance Manual, 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”. 

A director is considered to be independent if he/she holds no interests or relationships with the Company that may hinder their independence from the Company or its management, which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. 

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. 

 

BOARD COMMITTEES 

The Board is supported by the following committees, namely: Executive Committee, Audit Committee, Related Party Transactions Committee, Nomination Committee, Talent and Remuneration Committee, Board Risk Oversight Committee, Corporate Governance Committee, and the Committee of Inspectors of Ballots and Proxies. These Committees are required to report a summary of the actions taken on matters submitted to them for consideration at the next meeting of the Board of the Directors. 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.

 

EXECUTIVE COMMITTEE 

  • The Board shall appoint from among its members an Executive Committee composed of five (5) members, a majority of whom shall be citizens of the Philippines and shall designate one of such members as Chairman of the Executive Committee.
  • The Executive Committee, in accordance with the authority granted by the Board, or during the absence of the Board, shall act by majority vote of all its members on such specific matters within the competence of the Board of Directors, except with respect to –
    1. Approval of any action for which shareholders’ approval is also required
    2. The filling of vacancies on the Board
    3. The amendment or repeal of By-Laws or the adoption of new By-Laws
    4. The amendment or repeal of any resolution of the Board of Directors which by its express terms is not so amendable or repealable
    5. The distribution of cash dividends and
    6. The exercise of powers delegated by the Board exclusively to other committees, if any.
  • The Executive Committee meets as needed and performs such other functions as may be properly delegated to it by the Board.
  • The Committee shall refer the resolution of matters to the Board Committee that has the authority or competence to act on those matters in accordance with their respective Charters.
  • The Committee shall be guided by the Company’s mission and vision in the fulfillment of its functions.
  • The Executive Committee held twelve (12) meetings in 2019.

Corporate Governance Committee 

  • The Corporate Governance Committee (CG Committee) is tasked with ensuring compliance with and proper observance of corporate governance principles and practices.
  • The CG Committee shall be composed of three (3) members, all of whom shall be independent directors, including the Chairman.
  • The CG Committee 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
  • Performs other functions as may be delegated by the Board from time to time.
  • The CG Committee met four (4) times in 2019.
  • On September 24, 2019, the Committee approved the amendment of the Insider Trading Policy. The amendment was ratified by the Board of Directors on September 27, 2019.

 

Audit Committee 

  • The Audit Committee shall be composed of four (4) non-executive directors as members, the majority of whom shall be independent directors, and shall be chaired by an independent director. The Chairman of the Audit Committee shall not be the Chairman of the Board or of any other committee. All members of the committee must have relevant background, knowledge, skills, and/or experience in the areas of accounting, auditing and finance, and must possess an adequate understanding of the Company’s financial management systems and environment, in particular.
  • Responsible for overseeing the senior management in establishing and maintaining an adequate, effective and efficient internal control framework. It ensures that systems and processes are designed to provide assurance in areas including reporting, monitoring compliance with laws, regulations and internal policies, efficiency and effectiveness of operations, and safeguarding of assets;
  • Recommends the approval of the Internal Audit Charter (IA Charter) which formally defines the role of Internal Audit and the audit plan as well as oversees the implementation of the IA Charter;
  • Through the IA Department, monitors and evaluates the adequacy and effectiveness of the Company’s internal control system, integrity of financial reporting, and security of physical and information assets. Well-designed internal control procedures and processes that will provide a system of checks and balances should be in place in order to (i) safeguard the Company’s resources and ensure their effective utilization, (ii) prevent occurrence of fraud and other irregularities, (iii) protect the accuracy and reliability of the Company’s financial data, and (iv) ensure compliance with applicable laws and regulations;
  • Oversees the IA Department, and recommends the appointment and/or grounds for removal of an internal audit head or Chief Audit Executive (CAE). The Audit Committee should also approve the terms and conditions for outsourcing internal audit services;
  • Establishes and identifies the reporting line of the Internal Auditor to enable him to properly fulfill his duties and responsibilities. For this purpose, he should directly report to the Audit Committee;
  • Reviews and monitors Management’s responsiveness to the Internal Auditor’s findings and recommendations;
  • Prior to the commencement of the audit, discusses with the External Auditor the nature, scope and expenses of the audit, and ensures the proper coordination if more than one audit firm is involved in the activity to secure proper coverage and minimize duplication of efforts;
  • Evaluates and determines the non-audit work, if any, of the External Auditor, and periodically reviews the non-audit fees paid to the External Auditor in relation to the total fees paid to him and to the Company’s overall consultancy expenses. The committee should disallow any non-audit work that will conflict with his duties as an External Auditor or may pose a threat to his independence. The non-audit work, if allowed, should be disclosed in the appropriate reports to the regulatory bodies and agencies (e.g. Company’s Annual Report and Annual Corporate Governance Report, among others);
  • Reviews and approves the Interim and Annual Financial Statements before their submission to the Board, with particular focus on the following matters:
    1. Any change/s in accounting policies and practices
    2. Areas where a significant amount of judgment has been exercised
    3. Significant adjustments resulting from the audit
    4. Going concern assumptions
    5. Compliance with accounting standards
    6. Compliance with tax, legal and regulatory requirements
  • Reviews the financial statements and all related disclosures and reports certified by the Chief Finance Officer (CFO) and released to the public and/or submitted to the Securities and Exchange Commission for compliance with both the internal financial management handbook and existing financial accounting standards, legal and regulatory requirements;
  • Ensure that a transparent financial management system is established to ensure the integrity of internal control activities throughout the organization;
  • Maintain at international standards, the Company’s accounting and auditing processes, practices and methodologies, and ensure that:
    1. The accounting system of the Company is compliant with the current and existing financial accounting standards;
    2. An accountability statement is in place that specifically identifies officers and/or personnel directly responsible for the accomplishments of such task;
    3. Reviews the disposition of the recommendations in the External Auditor’s management letter.
  • Review and approve management representation letter before the same is submitted to the independent auditor;
  • Communicate with the Company’s legal officer/s or counsel/s regarding litigations, claims, contingencies or other significant legal issues that may have an impact on the financial standing of the Company;
  • Performs oversight functions over the Company’s Internal and External Auditors. It ensures the independence of Internal and External Auditors, and that both auditors are given unrestricted access to all records, properties and personnel to enable them to perform their respective audit functions;
  • Coordinates, monitors and facilitates compliance with laws, rules and regulations;
  • Recommends to the Board the appointment, reappointment, removal and fees of the External Auditor, duly accredited by the SEC, who undertakes an independent audit of the Company, and provides an objective assurance on the manner by which the financial statements should be prepared and presented to the stockholders;
  • Meets at least every quarter and before the quarterly Board Meetings and when needed; and
  • Performs other functions as may be delegated by the Board from timeto time;
  • Dr. Jaime C. Laya, a member of the Audit Committee, and an independent director, is a Certified Public Accountant;
  • The Audit Committee held four (4) regular meetings and one (1) special meeting in 2019.

 

Related Party Transactions Committee 

  • The Related Party Transactions (RPT) Committee is composed of three (3) independent directors, and is chaired by an independent director.
  • Is Primarily tasked with the duty of enforcing and implementing the Related Party Transactions Policy of the Company.
  • Evaluates on an ongoing basis existing relation between and among businesses and counterparties to ensure that all related parties are continuously identified, RPTs are monitored, and subsequent changes in relationships with counterparties (from non-related to related and vice versa) are captured. Related parties, RPTs and changes in relationships should be reflected in the relevant Reports to the Board and regulators/supervisors;
  • Evaluates all material RPTs to ensure that these are not undertaken on more favorable economic terms (e.g., price, commissions, interest rates, fees, tenor, collateral requirement) to such related parties than similar transactions with non-related parties under similar circumstances and that no corporate or business resources of the Company are misappropriated or misapplied, and to determine any potential reputational risk issues that may arise as a result of or in connection with the transactions. In evaluating RPTs, the RPT Committee takes into account, among others, the following:
    1. The related party’s relationship to the Company and interest in the transaction;
    2. The material facts of the proposed RPT, including the proposed aggregate value of such transaction;
    3. The benefits to the Company of the proposed RPT;
    4. The availability of other sources of comparable products or services; and
    5. An assessment of whether the proposed RPT is on terms and conditions that are comparable to the terms generally available to an unrelated party under similar circumstances.
  • The Company should have an effective price discovery system in place and exercise due diligence in determining a fair price for RPTs;
  • Ensures that appropriate disclosure is made, and/or information is provided to regulating and supervising authorities relating to the Company’s RPT exposures, and policies on conflicts of interest or potential conflicts of interest. The disclosure should include information on the approach to managing material conflicts of interest that are inconsistent with such policies, and conflicts that could arise as a result of the Company’s affiliation or transactions with other related parties;
  • Reports to the Board of Directors on a regular basis, the status and aggregate exposures to each related party, as well as the total amount of exposures to all related parties;
  • Ensures that transactions with related parties, including write-off of exposures are subject to a periodic independent review or audit process;
  • Oversees the implementation of the system for identifying, monitoring, measuring, controlling, and reporting RPTs, including a periodic review of RPT policies and procedures;
  • Adopts, implements and continuously monitors policies and procedures that will ensure the integrity and transparency of related party transactions between and among the Company and its parent company, joint ventures, subsidiaries, affiliates, major stockholders, officers and directors, including their spouses, children and dependent siblings and parents, and of interlocking director relationships by members of the Board as well as other unusual or complex transactions;
  • Additional duties and responsibilities of the RPT Committee shall be set forth in its Charter;
  • On October 28, 2019, the Related Party Transactions Committee approved the amendments to the Company's Policy on Related Party Transactions in order to comply with the provisions of the Rules on Material Party Transactions for Publicly Listed Companies of the Securities and Exchange Commission. The amendments to the Company's Policy were ratified by the Board of Directors during its Regular Meeting on November 26, 2019;
  • The Related Party Transactions Committee met three (3) times in 2019.

 

Nominations Committee 

  • Is tasked with the duty of implementing a formal and transparent board nomination and election policy that should include how it accepts nominations from the shareholders, including minority and non-controlling, and how it reviews the qualifications of nominated candidates;
  • Composed of three (3) independent directors, and is chaired by an independent director;
  • Establish and maintain a process to ensure that all candidates/nominees to be nominated for election as directors at the Annual Stockholders’ Meeting are qualified in accordance with the By-laws, Manual of Corporate Governance and relevant laws, rules and regulations;
  • Encourage 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;
  • Review and evaluate the qualifications of persons nominated to positions in the Company which require appointment by the Board, and provide guidance and advice as necessary for the appointments of persons nominated to other positions;
  • Review and revise if necessary, the succession plans for members of the Board and officers 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;
  • Discharge any other duties and responsibilities delegated to the Committee by the Board from time to time;
  • Be guided by the Company’s mission and vision in the fulfillment of its functions;
  • The Nominations Committee met seven (7) times in 2019.

 

Talent and Remuneration Committee 

  • Is composed of four (4) members, three (3) of whom are independent directors. Under its Charter, the Committee must be chaired by an independent director.
  • Develops and improves the 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;
  • Determines and approves all matters relating to the remuneration and benefits of the Board, the Management and the employees of the Company;
  • Evaluates and recommends for Board approval the pertinent guidelines on executive and employee compensation, including non-monetary remuneration;
  • Periodically reviews and evaluates the policy on remuneration in order that it be in a sufficient level to attract and retain directors and key officers of the Company;
  • Ensures that any director shall not decide his own remuneration during his incumbent term;
  • Provide in the Company’s Required Reportorial Requirements, a clear, concise and understandable disclosure of all compensation that may be paid to its directors and key officers during the preceding fiscal year;
  • Reviews and provide guidelines on the existing employee policies to strengthen provisions on conflict of interest, compensation and benefit policies, promotion and career advancement and compliance with all regulatory policies;
  • Develops and improves policies related to succession, promotion and hiring of senior managers, directors and officers of the Company to ensure that these are aligned to the strategy and business directions of the Company;
  • Reviews and approves all matters relating to talent management programs and implementation thereof to ensure that talent risks are addressed and mitigated as planned;
  • On November 14, 2019, the Talent and Remuneration Committee approved the addition of the following in its scope of powers, duties and responsibilities:
    1. Total rewards, merit increases, salary, and retirement and benefits plan
    2. Senior management and executive promotions
    3. Overall succession landscape
    4. Tracking of key talents
    5. Talent management and risk updates
  • The amendments were ratified by the Board of Directors during its regular meeting held on November 26, 2019;
  • The Talent and Remuneration Committee met five (5) times in 2019.

 

Board Risk Oversight Committee 

  • The Board Risk Oversight Committee is composed of four (4) directors, three (3) of whom are independent directors, while one (1) is a non-executive director. The Committee is chaired by an independent director.
  • Provides assistance in fulfilling the Board’s oversight responsibilities in relation to risk governance in the Company;
  • Develops a formal enterprise risk management plan which contains the following elements:
    1. Common language or register of risks
    2. Well-defined risk management goals, objectives and oversight
    3. Uniform processes of assessing risks and developing strategies to manage prioritized risks
    4. Designing and implementing risk management strategies.
    5. Continuing assessments to improve risk strategies, processes and measures;
  • Oversees the implementation of the enterprise risk management plan through the Enterprise Risk Management Department where it conducts regular discussions on the Company’s prioritized and residual risk exposures based on regular risk management reports and assesses how the concerned units or offices are addressing and managing these risks;
  • Evaluates the risk management plan to ensure its continued relevance, comprehensiveness and effectiveness;
  • Revisits defined risk management strategies, looks for emerging or changing material exposures, and stays abreast of significant developments that seriously impact the likelihood of harm or loss;
  • Advises the Board on its risk appetite levels and risk tolerance limits;
  • Reviews at least annually the Company’s risk appetite levels and risk tolerance limits based on changes and developments in the business, the regulatory framework, the external economic and business environment, and when major events occur that are considered to have major impacts on the Company;
  • Assesses the probability of each identified risk becoming a reality and estimates its possible significant financial impact and likelihood of occurrence. Priority areas of concern are those risks that are the most likely to occur and to impact the performance and stability of the Company and its stakeholders;
  • Provides oversight over Management’s activities in managing credit, market, liquidity, operational, legal and other risk exposures of the Company. This function includes regularly receiving information on risk exposures and risk management activities from Management; and
  • Reports to the Board on a regular basis, or as deemed necessary, the Company’s material risk exposures, the actions taken to reduce the risks, and recommends further action or plans, as necessary;
  • Promotes 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, 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;
  • Perform other activities related to this Charter as requested by the Board;
  • The Board Risk Oversight Committee met two (2) times in 2019.

 

Committee of Inspector of Proxies and Ballots 

  • Composed of the Chief Audit Executive who serves as the Chairman, the Chief Legal Counsel or Head of the Legal & Corporate Governance Department, and a representative of the external auditor of the Company as members;
  • Validates the proxies submitted by stockholders and prepares a summary of the valid and invalidated proxies to be submitted to the Office of the Corporate Secretary, together with the proxies;
  • Serves as the default inspector of ballots and tabulator of votes during the annual stockholders meeting and for this purpose works closely with the Office of the Corporate Secretary;
  • Performs other duties and functions as may be delegated by the Board from time to time
  • The Committee met once in 2019.

 

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 duly recognized 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 2019

Director 

Program 

Training Provider 

Date of Training 

Fernando Zobel de Ayala 

Ayala Group Integrated Corporate Governance, Risk Management, and Sustainability Summit 

Institute of Corporate Directors 

August 9, 2019 

Jaime Augusto Zobel de Ayala 

Ayala Group Integrated Corporate Governance, Risk Management, and Sustainability Summit 

Institute of Corporate Directors 

August 9, 2019 

Jose Rene Gregory D. Almendras 

Ayala Group Integrated Corporate Governance, Risk Management, and Sustainability Summit 

Institute of Corporate Directors 

August 9, 2019 

Gerardo C. Ablaza, Jr. 

Ayala Group Integrated Corporate Governance, Risk Management, and Sustainability Summit 

Institute of Corporate Directors 

August 9, 2019 

Antonino T. Aquino 

Ayala Group Integrated Corporate Governance, Risk Management, and Sustainability Summit 

Institute of Corporate Directors 

August 9, 2019 

Delfin L. Lazaro 

Ayala Group Integrated Corporate Governance, Risk Management, and Sustainability Summit 

Institute of Corporate Directors 

August 9, 2019 

Jaime C. Laya 

Ayala Group Integrated Corporate Governance, Risk Management, and Sustainability Summit 

Institute of Corporate Directors 

August 9, 2019 

Jose L. Cuisia, Jr. 

Ayala Group Integrated Corporate Governance, Risk Management, and Sustainability Summit 

Institute of Corporate Directors 

August 9, 2019 

Sherisa P. Nuesa 

6th SEC-PSE Corporate Governance Forum 

Securities and Exchange Commission 

October 25, 2019 

Oscar S. Reyes 

Corporate Governance Enhancement Session on 5G Technology Strategy and Governance: Market Trends and New Business Applications, Risks and Challenges; and Cyber Security: Protecting Critical Business Infrastructure 

PXP Energy Corporation 

September 26, 2019 

 

BOARD MEETINGS 

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. 

The directors should attend and actively participate in all meetings of the Board, Committees, and Shareholders in person or through tele-/videoconferencing conducted in accordance with the rules and regulations of the SEC, except when justifiable causes, such as, illness, death in the immediate family and serious accidents, prevent them from doing so. In Board and Board Committee meetings, the director should review meeting materials and if called for, ask the necessary questions or seek clarifications and explanations. 

To promote transparency, the presence of at least one (1) independent director in all meetings of the Board is required. However, the absence of an independent director shall not affect the quorum requirements if he is duly notified of the meeting but notwithstanding such notice fails to attend. 

At least two-thirds (2/3) of the members of 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 non-executive directors (NEDs) should have separate periodic meetings with the external auditor and heads of the internal audit, compliance and risk functions, without any executive directors present to ensure that proper checks and balances are in place within the Company. These meetings shall be chaired by the Lead Independent Director. 

A director’s 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 is a ground for temporary disqualification in the succeeding election. 

 

Board Attendance in Meetings

Name Board Meetings Attended* Total 2019 Remuneration#

Fernando Zobel de Ayala**

9/9 

₱3,200,000.00

Jaime Augusto Zobel de Ayala** 

9/9 

₱2,700,000.00

Ferdinand M. dela Cruz** 

5/5*** 

₱2,325,000.00

Jose Rene Gregory D. Almendras**

5/5***** 

₱1,275,000.00

Antonino T. Aquino 

9/9 

₱3,300,000.00 

Gerardo C. Ablaza, Jr. 

9/9 

₱3,600,000.00 

Delfin L. Lazaro** 

9/9 

₱2,700,000.00 

John Eric T. Francia** 

3/3**** 

₱1,700,000.00 

Oscar S. Reyes 

9/9 

₱3,650,000.00 

Jaime C. Laya 

9/9 

₱3,750,000.00 

Sherisa P. Nuesa 

8/9## 

₱3,150,000.00 

Jose L. Cuisia, Jr. 

9/9 

₱4,000,000.00 

TOTAL

₱35,350,000.00

# Computation of Remuneration include retainer fees, compensation for attendance in board and board committee meetings, and Annual Stockholders’ Meetings Fees
## Sick leave on August 8, 2019.
* Exclusive of the Annual Stockholders’ Meeting held on April 17, 2019, and inclusive of the Meeting of the Non-Executive Directors held on November 26, 2019.
** Remuneration of Messrs. Fernando Zobel de Ayala, Jaime Augusto Zobel de Ayala, Ferdinand M. dela Cruz, Jose Rene Gregory D. Almendras, Delfin l. Lazaro, and John Eric T. Francia were paid directly to Ayala Corporation.
*** Mr. dela Cruz was a Director until August 31, 2019.
**** Mr. John Eric T. Francia was a Director until May 14, 2019.
***** Mr. Almendras was elected as a Director on May 14, 2019. He is not required to attend the meeting of the Non-Executive Directors as he is an Executive Director.

 

In 2019, a total of nine (9) meetings were held by the Board (exclusive of the Annual Stockholders’ Meeting), as follows: 

  1. Regular Board Meeting held on February 26, 2019 
  2. Special Board Meeting held on March 15, 2019 
  3. Organizational Board Meeting held on April 22, 2019 
  4. Regular Board Meeting held on May 14, 2019 
  5. Regular Board Meeting held on August 8, 2019 
  6. Regular Board Meeting held on September 27, 2019 
  7. Regular Board Meeting held on November 26, 2019 
  8. Non-Executive Directors’ Meeting held on November 26, 2019 
  9. Special Board Meeting held on December 10, 2019 

Mr. Jose Rene Gregory D. Almendras, who became an Executive Director upon his appointment as President and Chief Executive Officer on August 8, 2019, was not a party to the meeting of the Non-Executive Directors held on November 26, 2019. Mr. Almendras was elected as Chairman of the Executive Committee following his appointment as Director on May 14, 2019. Effective September 1, 2019, Mr. Fernando Zobel de Ayala was elected as Chairman of the Executive Committee following the resignation of Mr. Almendras as its Chairman. 

 

2019 Board of Directors’ Attendance in Committee Meetings

Executive Committee Meetings Attended/Held

Fernando Zobel de Ayala* 

5/6 

Ferdinand M. dela Cruz ** 

10/11 

Gerardo C. Ablaza, Jr. 

12/12 

Antonino T. Aquino 

12/12 

John Eric T. Francia*** 

5/5 

Jose Rene Gregory D. Almendras**** 

6/6 

Sherisa P. Nuesa# 

2/2 

* Mr. Zobel de Ayala served as member and Chairman of the Executive Committee from January 01, 2019 to May 14, 2019, and from September 01, 2019 to December 31, 2019.
** Mr. dela Cruz served as a member of the Executive Committee until August 31,2019.
*** Mr. Francia served as a member of the Executive Committee until May 13, 2019.
**** Mr. Almendras served as the Chairman of the Executive Committee from May 14, 2019 until August 31, 2019. He was a member of the Committee from September 01, 2019 until December 31, 2019.
# Ms. Nuesa became a member of the Executive Committee from August 08, 2019 until December 31, 2019.

 

Board Risk Oversight Committee Meetings Attended/Held

Jaime C. Laya (Chairman) 

2/2 

Oscar S. Reyes 

2/2 

Jose L. Cuisia, Jr. 

2/2 

Gerardo C. Ablaza, Jr. 

2/2 

 

Corporate Governance Committee Meetings Attended/Held

Sherisa P. Nuesa (Chairman) 

4/4 

Jose L. Cuisia, Jr. 

4/4 

Jaime C. Laya 

4/4 

 

Nomination Committee Meetings Attended/Held

Jose L. Cuisia, Jr. (Chairman) 

7/7 

Oscar S. Reyes 

7/7 

Jaime C. Laya 

7/7 

 

Audit Committee Meetings Attended/Held

Oscar S. Reyes (Chairman) 

5/5 

Jose L. Cuisia, Jr. 

5/5 

Jaime C. Laya 

5/5 

Gerardo C. Ablaza, Jr. 

5/5 

 

Talent and Remuneration Committee Meetings Attended/Held

Jose L. Cuisia, Jr. (Chairman) 

5/5 

Sherisa P. Nuesa 

5/5 

Oscar S. Reyes 

5/5 

Fernando Zobel de Ayala 

5/5 

 

Related Party Transactions Committee Meetings Attended/Held

Sherisa P. Nuesa (Chairman) 

3/3 

Jose L. Cuisia 

3/3 

Jaime C. Laya 

3/3 

 

Committee of Inspectors of Ballots and Proxies Meetings Attended/Held

Christian R. Catacutan 

1/1 

Darwin L. Mendoza 

1/1 

Representative from the External Auditor 

1/1 

 

 

VISION, MISSION AND CORPORATE OBJECTIVES 

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:​​​​​​​

VISION 

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.

MISSION 

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 should conduct an annual self-assessment of its performance, including the performance of the Chairman, individual members and committees. Every three (3) years, the assessment should be supported by an external facilitator.

The Board’s annual performance evaluation covers the following:

  1. Board and Committee Processes and Meetings
  2. Compliance with the responsibilities and functions of the Board and Committees
  3. Board-Management Relationship
  4. Board Member Self Evaluation
  5. Performance of the CEO/President and the Senior 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 Management follow internal and external rules and regulations and facilitates clear communications between the Board and management. He also informs Management of latest corporate governance developments. 

The Corporate Secretary is primarily responsible to the Company and its shareholders, and not to the Chairman or President of the Company and has, among others, the following duties and responsibilities: 

  1. The Corporate Secretary shall exercise such express and implied powers in the By Laws, in the Manual, in the Charters and those that may be authorized under existing laws, rules and regulations. 
  2. The Corporate Secretary shall ensure that the Board and management follow internal and external rules and regulations and facilitate clear communications between the Board and management. 
  3. The Office of the Corporate Secretary, in coordination with the Compliance Officer, shall be the forerunner of the Board in championing corporate governance practices and policies.​​​​​​​

 

MANAGEMENT 

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, Jose Rene Gregory D. Almendras, are not related to each other. 

 

SUCCESSION PLANNING 

The Board, with the assistance of the Talent and 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 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: 

  1. assessment that gauges a talent’s business driver readiness and leadership competencies; 
  2. creation of an Individual Development Plan that outlines possible developmental areas and stretched assignments; and 
  3. 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 

The Compliance Officer is a member of the Company’s management team in charge of the compliance function. Similar to the Corporate Secretary, he/she is primarily liable to the Company and its shareholders, and not to the Chairman or President of the Company. 

The Compliance Officer has, among others, the following duties and responsibilities: 

  1. Ensures proper on-boarding of new directors (i.e., orientation on the Company’s business, charter, articles of incorporation and by-laws, among others);
  2. Monitors, reviews, evaluates and ensures the compliance by the Company, its officers and directors with the relevant laws, this Manual, rules and regulations and all governance issuances of regulatory agencies; 
  3. Reports the matter to the Board if violations are found and recommends the imposition of appropriate disciplinary action; 
  4. Ensures the integrity and accuracy of all documentary submissions to regulators; 
  5. Appears before the SEC when summoned in relation to compliance with the Revised Corporate Governance Manual; 
  6. Collaborates with other departments to properly address compliance issues, which may be subject to investigation; 
  7. Identifies possible areas of compliance issues and works towards the resolution of the same; 
  8. Ensures the attendance of board members and key officers to relevant trainings; and 
  9. Oversees the implementation of the Company’s Code of Business Conduct and Ethics and the Related Party Transactions Policy; 
  10. Performs such other duties and responsibilities as may be provided by the SEC. 

 

2019 Annual Stockholders’ Meeting, Makati City

 

THE CORPORATE GOVERNANCE OFFICE 

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. 

The internal audit activity will govern itself by adherence to the Institute of Internal Auditor’s mandatory guidance including the Definition of Internal Auditing, the Code of Ethics, and the International Standards for the Professional Practice of Internal Auditing (Standards). This mandatory guidance constitutes principles of the fundamental requirements for the professional practice of internal auditing and for evaluating the effectiveness of the internal audit activity’s performance. 

The Internal Audit; 

  • reviews the effectiveness by which risks that may threaten the achievement of organizational and financial reporting objectives are identified and managed; 
  • reviews the reliability and integrity of the financial reporting process and operating information and the business process used to identify, measure, classify and report such information;
  • reviews the adequacy of the system of internal controls, planned and in use, to safeguard the Company’s assets and operations,
  • reviews the effectiveness of management controls meant to ensure the economic and efficient utilization of resources and achieve the Company’s corporate vision and objectives;
  • review the adequacy, existence and degree of adherence to Company policies, procedures and sound business practices;
  • reports the result of audit reviews and other activities in a manner that helps management address the identified risk issues/concerns and take appropriate action within a reasonable period of time;
  • appraises the adequacy of action taken by management in response to reported risk issues, control weaknesses and opportunities for improvement;
  • provides assistance to the Audit Committee in the discharge of their oversight function with regard to corporate governance. Such activities include establishing the communication process to discuss with the Committee issues and controls affecting the financial reporting and risk management process, compliance with laws and regulations and internal controls;
  • coordinates with the Compliance Officer in ensuring that the provisions of the Company’s Corporate Governance Manual are appropriately and adequately complied with;
  • updates the Committee and Senior Management on developments and emerging trends and issues in corporate governance (local and international), especially in areas directly affecting their roles and responsibilities;
  • Deliver the specific requirements from the IAA, as specified in the Company’s Corporate Governance Manual, as follows: 
    • Provide reasonable assurance that the Company’s key organizational and procedural controls are complied with and that the Internal Audit cover the evaluation of the adequacy and effectiveness of controls. 
    • Submit an Annual Internal Audit Plan for review and approval of the Committee. 
    • Seek the approval from the Committee relative to any deviations from the approved Annual Internal Audit Plan. 
    • Submit periodic reports to the Committee on the status of the IAA, accomplishments, key findings and recommendations. 
    • Render an Internal Audit Annual Report to the Committee on the IAA’s activity, purpose, authority, responsibility and performance; such annual report should contain the results of the review of the risk management process and significant exposures, as well as a report on governance issues.
    • Assess whether the information technology governance of the organization sustains and supports the organization’s strategies and objectives. (new standard-ISPPIA 2110.A2)
    • Render a report to the Committee that the Company’s IAA for the given year has been performed in accordance with the Provisions of the International Standards on the Professional Practice of Internal Auditing (ISPPIA). IAA may report that their engagements are “conducted in conformance with the International Standards for the Professional Practice of Internal Auditing”, only if the results of the quality assurance and improvement program support the statement. (new standard-ISPPIA 2430)
    • Monitor compliance with the Company’s Risk Management Policy and structure as approved by the Board of Directors and provide reasonable assurance on compliance with such policy and structure.
    • Participate in risk assessment workshops and other activities of the Risk Management Unit.
    • Contribute and/or provide quality assurance in the creation and updating of the Company’s risk portfolio and common risk language.
    • Provide quality assurance on risk mitigation strategies designed by the risk owners.
    • As part of the planned audit reviews, provide assurance on the integrity of critical risk information and measures.
    • Evaluate the potential for the occurrence of fraud and how the organization manages fraud risk. (new standard–ISPPIA 2120.A2)
    • Assist management in establishing or improving risk management process (but must refrain from assuming management responsibility by actually managing risks. (new standard-ISPPIA 2120.C3)
    • The IAA will conduct such other activities as may be requested by the Committee, the President and other members of senior management, with certain requests of the latter subject to further clearance from the Committee depending on the materiality of such requests.

 

Quarterly Analysts’ Briefing, Makati City

 

THE CHIEF RISK OFFICER 

In managing the Company’s Risk Management System, the Company shall have a Chief Risk Officer (CRO) who is the ultimate champion of Enterprise Risk Management (ERM). The CRO shall have adequate authority, stature, resources and support to fulfill his/her responsibilities, in accordance with the Company’s size, risk profile and complexity of operations. 

The CRO shall provide support to the Board Risk Oversight Committee. For this purpose, there shall be a clear communication line between the Board Risk Oversight Committee and the CRO. 

The CRO Supervises the entire ERM process and spearheads the development, implementation, maintenance and continuous improvement of ERM processes and documentation; communicates the top risks and the status of implementation of risk management strategies and action plans to the Board Risk Oversight Committee; collaborates with the CEO in updating and making recommendations to the Board Risk Oversight Committee; suggests ERM policies and related guidance, as may be needed; and provides insights if risk management processes are performing as intended; reported risk measures are continuously reviewed by risk owners for effectiveness; and if established risk policies and procedures are being complied with. 

 

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. 

On April 24, 2019, the Metropolitan Waterworks and Sewerage System (MWSS) imposed a penalty of P534.05 million on the Company as outlined in Section 10.4 of the Concession Agreement. The Company was also requested to set aside funds amounting to P600 million for the development of a medium-to-long water source for the East Zone. 

On September 18, 2019, the Company received a copy of the decision from the Supreme Court upholding the complaint of the Pollution Adjudication Board (PAB) that the Company, Maynilad Water Services, Inc. (Maynilad), and the Metropolitan Waterworks and Sewerage System (MWSS) (the “Petitioners to the complaint”) violated Section 8 of Republic Act No. 9275 or the Philippine Clean Water Act of 2004. In the ruling of the Supreme Court, the Company was adjudged jointly and severally liable with the MWSS for the total amount of P921.5 Million. A similar ruling was adjudged on Maynilad. In addition, from finality of said Decision until payment of said amount, the Petitioners to the complaint shall be fined P322,102 a day, subject to a further ten percent (10%) increase every two (2) years until full compliance with Section 8 of the Philippine Clean Water Act. The Petitioners to the complaint have filed their respective Motion for Reconsideration with the Supreme Court. Said motion is currently pending resolution. 

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 September 27, 2019, during its Regular meeting, the Board of Directors approved the appointment of Mr. Mark Tom Q. Mulingbayan as the Company’s Chief Sustainability Officer following the endorsement of the Nomination Committee. 

 

THE CORPORATE GOVERNANCE MANUAL 

The Manual aims to improve, systematize, and make the Company’s governance transparent, and demonstrate the Company’s commitment to good governance, by developing and furthering: 

  • Responsible, accountable, and value-based performance management; 
  • Effective Board oversight, with Board Committees that act in the best interests of the Company and its stakeholders, including minority shareholders, and seek to enhance shareholder value in a sustainable manner; and 
  • Adequate information disclosure and transparency, as well as effective system of compliance, risk management and internal control. 

The Manual principally contains the corporate governance structure of the Company, recognizes and safeguards the rights of every shareholder, and promotes shareholders’ rights, particularly the rights to information and to participate in the governance process. It supplements and complements the Articles of Incorporation and By-Laws of the Company. 

Pursuant to the SEC Memorandum Circular No. 19, Series of 2016 on the Code of Corporate Governance for Publicly Listed Companies, the Company adopted a new Manual of Corporate Governance and submitted the same.

The Compliance Officer is primarily tasked to operationalize the Manual by putting in place the appropriate policies in coordination with the Corporate Secretary and the relevant Board Committees and to monitor compliance with the provisions and requirements of the Manual and the Company policies on corporate governance, as well as the rules and regulations of the regulatory agencies. 

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, off-balance 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 on November 26, 2019. 

 

RELATED PARTY TRANSACTIONS 

As a general rule, the Company shall avoid Related Party Transactions (RPT). In instances where RPTs cannot be avoided, the Company shall disclose all relevant information on the same, including information on the related or affiliated parties and the affiliation of directors and principal officers. 

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, and 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 this Policy.

Disclosure Requirements: 

  • The Company must comply with all disclosure requirements of RPT mandated under the Manual, and the applicable laws, rules and regulations. 
  • The Related Parties must comply with all the disclosure requirements of RPTs required under applicable law, rules and regulations of the SEC, PSE and the BIR, and other relevant government agencies. 
  • Each director, executive officer and members of the Key Management is responsible for providing written notice to the Office of the Compliance Officer of any potential RPT involving him or her or his or her Immediate Family Member, including any additional information about the transaction that may reasonably be requested by the Company. 
  • The Office of the Compliance Officer, by himself, or in consultation with the Management Committee and with the Chief Legal Counsel or external counsel, as appropriate, will determine whether the notified transaction does, in fact, constitute an RPT requiring compliance with this Policy. 
  • Disclosure of an RPT shall include information about the price of the transaction, outstanding balances, if any, major terms and conditions and guarantees, if any. The Office of the Compliance Officer may require additional and other relevant information sufficient to enable the Office of the Compliance Officer to determine any Conflict of Interest and the potential effect of the relationship. 
  • In addition, each director, executive officer and member of the Key Management may be required to complete a questionnaire that inquires about their RPTs and those of their Immediate Family Members. 


Guidelines Prior to entering into an RPT: 

  • All RPTs shall have terms and conditions that are fair and equitable to the Company. 
  • The approval, award, processing and payment of RPTs shall follow the same procedures as the other transactions and contracts of the Company. No unusual privilege or special treatment shall be afforded a Related Party. 
  • In case of doubt on the nature of a transaction subject of investigation or review pursuant to this Policy, the Office of the Compliance Officer, in consultation with the 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. 
  • Prior to the award of any Material RPT, the Company shall submit the same for the review of the Committee to confirm that it has undergone the same process as an ordinary transaction and to determine that the Material RPT under review is in the best interest of the Company. A Material RPT is any RPT with a total contract value of at least Fifty Million Pesos (P50,000,000.00). 
  • When a Material RPT is submitted to the Committee for review, the presence of at least two (2) independent directors shall be necessary to constitute a quorum of the Committee. 
  • Non-Material RPTs shall be subject to the review and/or approval of the Compliance Officer. 
  • The following RPTs shall not be allowed: a) loans and/or financial assistance to a Director; b) Loans and/or financial assistance to the Key Management, except when allowed pursuant to an established company benefit or plan. 

 

CODE OF BUSINESS CONDUCT AND ETHICS 

The Code of Business Conduct and Ethics provides the standards for professional and ethical behavior, as well as articulate acceptable and unacceptable conduct and practices in internal and external dealings. The Code should be properly disseminated to the Board, senior management and employees. It should also be disclosed and made available to the public through the Company website. The Board should ensure the proper and efficient implementation and monitoring of compliance with the Code of Business Conduct and Ethics and internal policies. 

This Code of Business Conduct and Ethics shall be the guiding principle and shall apply to all directors, officers and employees when transacting business on behalf of the Company. 

The directors, officers and employees shall be accountable to the Company, discharge their duties with utmost honesty, integrity and competence, and at all times, follow the highest standards of business conduct and ethics. 

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 covers the Company’s policies on Honesty and Fair Dealing, Conflict of Interest, Corporate Entertainment/Gifts, Insider Trading, Disclosure, Creditor Rights, Anti-Corruption, and Anti-Sexual Harassment.

Honesty and Fair Dealing to Diversity in Board Membership 

  • 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 comply 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.

 

THE WHISTLE BLOWING POLICY OR POLICY FOR REPORTING OF FRAUDULENT OR DISHONEST ACTS 

The whistle blowing policy provides a framework where employees may freely communicate their concerns about illegal or unethical practices, without fear of retaliation and to have direct access to an independent member of the Board or a unit created to handle whistle blowing concerns. 

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 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. 

A Whistle Blower Committee is the committee commissioned and empowered under this policy to receive, process, and resolve whistle blower reports and complaints. This committee shall be composed of the Compliance Officer as the Chairman, the Chief Audit Executive, the Chief Legal Counsel, and a senior ranking manager from the Corporate Human Resources Group. The duties and responsibilities of this committee is provided in the policy. 

Whistle blowers can initiate reports and complaints through in-person meetings or through any of the following channels: electronic mail; registered or regular mails, website of the Company, telephone call, and facsimile, as may be made available from time to time. 

The Whistle blower shall be protected from any form of retaliation or discrimination by the concerned person, his co-employees or superiors. All Whistle blower complaints and reports including the identity of the whistle blower, witnesses and employees named in the Complaint and the report, as well as the activities and investigations undertaken pursuant to this Policy, will be treated in a confidential and sensitive manner, unless the Company is otherwise required or compelled by law or order of competent authority to release the information. 

A copy of the Whistle Blower Policy and the Implementing Guidelines on Reporting of Fraudulent or Dishonest Acts is available for download at the Company’s website. 

 

CONFLICT OF INTEREST 

A conflict of interest arises when a Director, or 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 or seen to be a conflict by an impartial observer. 

When an actual or apparent conflict of interest arises, a Director must inform the Board, and the Officer or employee must immediately inform his immediate supervisor or the Compliance Officer. Such Director, Officer or employee should not participate in, or in any way seek to influence, any negotiations, or decisions pertaining to the transaction, which is the subject of interest. 

The Director, Officer or employee must also file a Conflict of Interest Report with the Board in case of a director or to the immediate supervisor and the Office of the Compliance Officer in case of an officer or employee. The report shall indicate a brief description of the conflict, the date when the Board, or immediate supervisor and the Office of the Compliance Officer were notified, and the action taken on the conflict. 

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 GIFTS 

Directors, Officers and employees shall strictly follow the principles of highest ethical business standards and comply with all relevant laws and regulations. 

Towards this end, Directors, Officers and employees shall not accept corporate entertainment/gifts with an approximate value of more than Three Thousand Pesos (P3,000.00) or anything that can or can be viewed to influence the manner on which a director, officer or employee may discharge his duties. 

Within five (5) business days from receipt of corporate entertainment and gifts, directors, officers and employees are required to submit a report to the Board, in case of directors, or to their immediate supervisor and the Office of the Compliance Officer, in case of officers and employees. The report shall identify the giver, date of receipt, and type and approximate value of the corporate entertainment/gifts received. 

 

INSIDER TRADING 

All Directors, Key Officers, employees, consultants, advisers of the Company, and members of the immediate families of directors and key officers who are living in the same household as the directors and key officers (the “Covered Persons” who have direct or indirect knowledge, from time to time, of material facts or changes in the affairs of the Company, which have not been disclosed to the public, including any information likely to affect the market price of the Company’s shares, shall: 

  1. Not trade in the Company’s securities directly or indirectly; and 
  2. Not communicate, directly or indirectly, such material non-public information to any person until the material non-public information is disseminated to the public and two (2) trading days have lapsed from the disclosure thereof to allow the market to absorb such information. 

All Covered Persons shall be restricted from trading the Company’s securities during the following blackout periods: 

  1. Five (5) trading days before and two (2) trading days after the disclosure of the quarterly and annual financial results and; 
  2. Two (2) trading days after the disclosure of any material information other than the above 

All Covered Persons are required to report their trades on a quarterly basis to the Office of the Compliance Officer. 

  1. All Directors and Key Officers shall report their trades to the Office of the Compliance Officer within three (3) business days from dealing with such securities. 
  2. All other Covered Persons shall likewise report to the Office of the Compliance Officer within ten (10) calendar days from the end of each quarter their trades with the Company’s securities during such quarter. 
  3. All Directors, Officers, and employees are required to report their trades on a quarterly basis to the Office of the Compliance Officer within fifteen (15) calendar days from the end of each quarter. 

A copy of the form used to report trading activities is found in Annex C of the Revised Corporate Governance Manual and is available for download at the Company’s website. 

 

DISCLOSURE 

The Company hereby adopts a policy of 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 to give a fair and complete picture of the Company’s financial condition, results and business operations. 

The Company shall ensure transparency of information to its shareholders, stakeholders and the public. It shall regularly and truthfully update its shareholders, stakeholders and the public on its financial and operational results, business prospects and all other relevant information. 

The Company shall fully comply with all the disclosure and reporting requirements of the SEC, PSE and all other government and regulatory agencies. 

Directors, Officers and employees shall not knowingly misrepresent or cause others to misrepresent information relating to the Company to government and regulatory agencies, independent auditors, the media or any other person. 

No Director, Officer or employee shall disclose any confidential information obtained from the Company for personal gain or for the advantage of any other person. This prohibition shall include investment in securities and association with a competitor, customer or supplier of the Company. 

 

CREDITOR RIGHTS 

The Company values its partnership with its creditors. The Company shall at all times, strictly comply with its covenants under its agreements with its creditors. 

No distribution or disposal of assets of the Company shall be made except: 

  1. When allowed by the law; or 
  2. By decrease of capital stock; or 
  3. Upon lawful dissolution and after payment of all its debts and liabilities; 
  4. When allowed by the material agreements of the Company, but without prejudice to vested rights.

 

ANTI-CORRUPTION 

The Company strictly prohibits giving or facilitating 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. 

 

ANTI-SEXUAL HARASSMENT 

The Company values the dignity of every individual, promotes the enhancement of the development of its human resources, guarantees full respect for human rights, and uphold the dignity of its stakeholders, customers, workers, employees, applicants for employment, students or those undergoing training, instruction or education. 

The Company shall ensure that its directors, officers and employees subscribe strictly to this policy. All forms of sexual harassment shall be dealt with appropriately and in accordance with the applicable and all relevant laws, rules and regulations on the subject matter. 

Sexual Harassment means unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature. 

 

DIVERSITY IN BOARD MEMBERSHIP 

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. The Company values the inputs and opinions of each director, ensuring that a Director shall not be discriminated upon by reason of gender, age, ethnicity, or political, religious or cultural beliefs. 

 

PROCUREMENT POLICIES 

Officers and employees involved in the procurement process for services, materials, supplies, and equipment for Manila Water are required to comply with the Procurement Policies. 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, to the end view of enhancing vendor participation and the interest of Manila Water. 

 

THE VENDOR’S CODE OF CONDUCT 

The Vendors’ Code of Conduct sets out the rules that will guide the Company’s vendors in the performance of their obligations and/or in transacting business with the Company, thus avoiding acts contrary to standards, policies, laws and morals. As business partners of the Company, 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 the Company. The Vendors’ Code of Conduct is deemed incorporated in the contracts of Manila Water with its suppliers, vendors and contractors. 

The Vendor’s Code of Conduct is found in Appendix 9 of the Revised Corporate Governance Manual and is available for download at the Company’s website. 

 

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, the Company shall appropriately respond to risks and manage them in order to increase shareholder value and enhance its competitive advantage. 

In line with best corporate governance practices and to ensure effective management of strategic, operational, financial and compliance-related risks, the Board of Directors of Manila Water Company, Inc. created the Board Risk Oversight Committee to provide assistance in fulfilling the Board’s oversight responsibilities in relation to risk governance in the Company. 

 

SAFETY, HEALTHY 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: 

  1. 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; 
  2. 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; 
  3. 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; 
  4. 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; 
  5. Systematically manage and control its health and safety risks through effective risk assessment processes; and 
  6. 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 and services. 

 

STOCKHOLDERS’ RIGHTS 

It is the duty of the Board to promote stockholder rights, remove impediments to the exercise of stockholder 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 Appoint a Proxy 

The stockholders shall be apprised ahead of time of their right to appoint a proxy if they cannot attend their meetings in person. Subject to the requirements of the By-laws, the exercise of that right shall not be unduly restricted and any reasonable doubt about the validity of a proxy should be resolved in the stockholder’s favor. 

Right to Propose the Holding of Meetings and to Propose Agenda Items 

All stockholders including minority and non-controlling, 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, all in accordance with the By Laws and the existing laws. 

With regard to the right of stockholders to propose agenda items, the Company shall ensure the exercise of the right including in the notice and agenda of stockholders meeting an item for the consideration of such other business as may properly come before the meeting. 

Right to Make Nominations to the Board of Directors 

Every stockholder, including non-controlling and minority, 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 By-Laws, 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: 
    1. Amendment of the Articles of Incorporation; 
    2. Adoption and/or amendment of the By-Laws (unless the power to amend By Laws have been delegated to the Board by the stockholders); 
    3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property; 
    4. Incurring, creating or increasing bonded indebtedness;
    5. Increase or decrease of capital stock; 
    6. Merger or consolidation of the Company with another company; 
    7. Investment of corporate funds in another corporation or business for any purpose other than the primary purpose for which it was organized; and 
    8. 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. 

Dividend Rights 

The Company continues its practice of offering its shareholders an equitable share of the Company’s profits. Stockholders have the right to receive dividends subject to the requirements of existing laws and contractual covenants on dividend declaration, and the dividend payout policy of the Company. 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 2019, the company declared P2.243 billion as dividends.

Pre-Emptive Right 

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 any amendment thereto in relation to the feature of a particular class of share. 

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 on relevant information about 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. 

Appraisal Right 

In accordance with the Corporation Code, shareholders may exercise appraisal rights under the following circumstances: 

  • In case any amendment to the Articles of Incorporation has the effect of changing or restricting the rights of any stockholders or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence; 
  • In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Corporation Code; and 
  • In case of merger or consolidation. 

Quorum and Voting Procedures at the Stockholders’ Meetings 

Under the Company’s By-Laws, 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 By-Laws (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. 

Voting shall 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.

 

PUBLIC OWNERSHIP 

The Company is compliant with the requirement of the PSE on minimum public ownership with 55.89 percent of its shares subscribed and owned by the public as of December 31, 2019. 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 Number of Shares Owned as of December 31, 2019 Class of Shares Number of Shares Owned as of December 31, 2018 Class of Shares

Fernando Zobel de Ayala 

Common 

Common 

Jaime Augusto Zobel de Ayala 

Common 

Common 

Jose Rene Gregory D. Almendras 

5,000 

Common 

N.A. 

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 

Common 

Common 

Jaime C. Laya (ID) 

59,800 

Common 

19,800 

Common 

Sherisa P. Nuesa (ID) 

5,093,607 

Common 

5,093,607 

Common 

Jose L. Cuisia (ID) 

Common 

Common 

Oscar S. Reyes (ID) 

330,001 

Common 

330,001 

Common 

Ferdinand M. dela Cruz1 

N.A. 

N.A. 

2,965,686 

Common 

John Eric T. Francia2 

N.A. 

N.A. 

Preferred 

 

Name Number of Shares Owned as of December 31, 2019 Class of Shares Number of Shares Owned as of December 31, 2018 Class of Shares

Solomon M. Hermosura 

50,100 

Common 

50,100 

Common 

Virgilio C. Rivera, Jr. 

3,265,058* 

Common 

2,242,795 

Common 

Abelardo P. Basilio 

1,069,700*** 

Common 

1,069,200 

Common 

Ma. Cecilia T. Cruzabra 

N.A. 

N.A. 

N.A. 

N.A. 

Esmeralda R. Quines 

707,590 

Common 

837,590 

Common 

Janine T. Carreon 

514,800** 

Common 

514,800 

Common 

Liwayway T. Sevalla 

63,000* 

Common 

63,000 

Common 

Maidy Lynne B. Quinto 

175,000** 

Common 

140,000 

Common 

Arnold Jether A. Mortera3 

342,900** 

Common 

N.A. 

N.A. 

Robert Michael N. Baffrey4 

470,723** 

Common 

N.A. 

N.A. 

Evangeline M. Clemente5 

312,400** 

Common 

N.A. 

N.A. 

Geodino V. Carpio6 

N.A. 

N.A. 

1,961,100 

Common 

Thomas T. Mattison7 

N.A. 

N.A. 

474,100 

Common 

1Mr. Ferdinand M. dela Cruz resigned as Director, President & Chief Executive Officer (CEO) effective August 31, 2019.
2Mr. John Eric T. Francia resigned as Director effective May 14, 2019.
3Mr. Arnold Jether A. Mortera was appointed as Acting Group Director for Corporate Operations during the Organizational Meeting of the Board held on April 22, 2019.
4Mr. Robert Michael N. Baffrey was appointed as Acting Group Director for Subsidiary Operations on July 1, 2019and took effect on July 16, 2019.
5Ms. Evangeline M. Clemente was appointed as Acting Group Director for Strategic Asset Management on July 17, 2019 and took effect on August 1, 2019.
6Mr. Geodino V. Carpio resigned as Chief Operating Officer (COO) for Manila Water Operations on April 16, 2019.
7Mr. Thomas T. Mattison resigned as Group Director for Corporate Operations effective April 22, 2019.
*Indirectly owned/ESOWN 
**Includes indirectly owned/ESOWN 
***Includes shares held through PCD Nominee Corporation and ESOWN 

 

INDEPENDENT EXTERNAL AUDITOR AND ITS REMUNERATION 

In the last ASM held on April 22, 2019, the stockholders approved the appointment of Sycip Gorres Velayo and Company (SGV & Co.) as external auditor of the Company for an audit fee of P2,200,000 exclusive of value-added taxes and out of pocket expense. 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. 

The External Auditor shall (a) perform fair audits independently from the Company, its management and controlling shareholders, so that shareholders and other users may maintain confidence in the Company’s accounting information; (b) check whether any fact conflicts with the audit results in the information disclosed regularly with the audited financial statements, and demand correction, if necessary; (c) attend the annual stockholders meeting and answer any questions on audit reports and on themselves, their work and their remuneration; and (d) perform such other functions as may be approved by the Audit Committee in the engagement of the external auditor, provided, however, that non-audit work shall not be in conflict with its functions as external auditor.

External Audit Fees Audit and Audit-Related Fees of the Company
2019 2018

Audit Fees 

P2,200,000.00 

P2,100,000.00 

Tax Fees

₱178,400.00

-

Non-Audit Fees1

₱997,000.00

₱261,970.00

TOTAL 

₱3,375,400.00

₱2,361,970.00

1 Includes proxy validation, validation of ASM votes, Loan Compliance report and training.

 

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. On June 11, 2019, the company received a 3-star arrow recognition from the Institute of Corporate Directors for its performance rating against the 2018 ASEAN Corporate Governance Scorecard. In 2018, it was also named as one of 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.