Aboitiz | Corporate Governance

Sustaining Leadership – Building Block for
Breakthrough Performance

How does a company pursue its mission to create long-
term value for its stakeholders?

For Aboitiz Equity Ventures, Inc. (AEV), this requires a
constancy of focus and a continuous drive to pursue
and achieve our corporate strategic objectives. The
Company pursues its corporate mission guided by four
strategic pillars: Grow the business, engage stakeholder,
execution excellence, and build human capital.

In 2015, we focused not just on building human capital,
but also building sustainable leadership as the driver
for sustained growth and breakthrough performance.
Like any living organism, AEV’s organization needs to
be nurtured in order to live up to constantly changing
stakeholder expectations. Our Company’s commitment
requires the development of our team leaders and
members who learn how to lead by example, to mentor
and foster teamwork, create a work environment that
fosters speaking out, and to deliver the sustainable
resulting growth.

Leadership Succession
We are pursuing the Group’s succession management
program and casting a wider net for our key talents
across the Group. One of the milestones of the Aboitiz
Group in 2015 was the setting up of a clear succession
and management transition plan for the CEOs and COOs
of AEV and AboitizPower - a development that makes
sense to the entire organization. A transition plan is
now in place to address the future retirement of our
C-suite executives.

Sustaining leadership is one of our commitments to
our stakeholders as we move forward in our Aboitiz
growth journey. This leadership brand focuses on

creating shared value in every community, sector and
society that our Company serves. AEV will pursue
growth in its core businesses of power, banking and
financial services, food, land, and infrastructure, while
at the same time aiming to drive economic and social
development alongside its communities.

According to Innosight, the average lifespan of
corporates on the S&P index is shrinking from an
average life span of 60 years in the 1960s to a 7-year
rolling average lifespan in current times. Creative
disruptive forces of today pose challenges for our
companies. In the face of disruptive technologies that
are reshaping how businesses are being conducted,
our organization is taking the bold step to set a new
benchmark for diversification and sustainable growth,
in the same way the first generation of Aboitiz leaders
blazed the trail over a 100 years ago when they
established the Aboitiz standards of doing business.

AEV’s brand of leadership is driven by our Aboitiz
BetterWorld mindset. As we continue to build and
strengthen our organization’s bench, we will nurture
leaders from among the ranks. In 2015, the Company
successfully pursued its group-wide leadership
coaching, mentoring and development program of our
people resources. Since the start of the program in
2015, 168 team leaders out of a target of 249 leaders
in the Aboitiz organization have completed coaching
and mentoring courses.

As the Company today prepares its future leaders, the
management teams are all united in one goal: to build
a sustainable enterprise that can be entrusted to future
generations. Today and in the future, the Aboitiz story
will be told by our own people and our stakeholders,

and it will be a story of the good that the Company and
the organization have done and will create for society.

Aboitiz Power Corporation (AboitizPower) and
its business units are also aligned to the AEV
Corporate Center’s strategic pillars. AboitizPower’s
vision is “A Better Future and its mission is: To
find Better Solutions”. The company’s corporate
brand attributes are pro-active, expert, and
responsible. AboitizPower considers the following
as its responsibilities: to provide reliable and ample
power supply needed by the country; to ensure that
supply of electricity is provided at a reasonable and
competitive price, and with the least adverse effect
on the environment and communities.

The management of AboitizPower is “trooping the
colour” as it rallies from 2015 through to 2016 to
stay ahead of the game; and pursue with execution
excellence the ambitious goals we have set.
AboitizPower has been constantly striving to be the
best at operations, maintenance, capacity and supply
optimization, as well as project execution. Under the
1AP organizational brand, we have been working on
transforming a good AboitizPower organization into a
great organization - with policies and standards that
promote cost efficiency and steady growth, and service
levels intended to improve stakeholder engagement.

The year 2015 was quite a productive one for the
AboitizPower organization as we engaged the entire
organization under Project Forward to take a great
leap in continuous improvements in systems and
operations. Through Project Forward, AboitizPower
established and documented important internal
business processes for operational efficiency.

AEV’s and AboitizPower’s health, safety, and
environmental track records are generally very good.
This is clear and measurable proof that businesses
can be aligned both to the principles of sustainability
yet make good economic sense.

The Boards of AEV and AboitizPower conscientiously
ensure that they are kept abreast of developments in

the industries and business environment, and share
their expertise and insights with Management. As
team leaders and members of AEV and AboitizPower,
we collectively set and pursued our 2015 strategic
goals and business objectives without losing sight of
the vision and mission of our companies. For their
part, the respective Boards work tirelessly to ensure
accountability of past and current company actions
through a review of corporate strategies and reports
to shareholders, legal and regulatory compliance
reports, audit reports, financial results and budgets,
and contemporaneous events that affect the
businesses of AEV and AboitizPower.

Aboitiz Corporate Governance Guiding
Principles
The Aboitiz governance structure is grounded
on the organization’s core values of integrity,
teamwork, innovation, and responsibility. These
values, together with the Group’s brand attributes
of being driven, driven to lead, driven to excel,
and driven to serve, provide a moral guide for
meeting the challenges of everyday business and in
satisfying various stakeholder interests and concerns.
These core values, attributes, vision, and mission
constitute the Aboitiz DNA. More importantly, these
values constitute the strong foundation for the
organization’s corporate governance structure.

The Aboitiz Group continues to believe in and
adopt the following core principles and practices:
(i) the Company’s personality is independent from
that of its Board, officers and employees; (ii) the
Company has its own distinct rights and duties; (iii)
the Board has the original power to decide on the
Company’s policies; (iv) the Company can demand
loyalty from its Board, officers and employees; (v)
the Company’s business must be pursued through a
long-term sustainability strategy; (vi) shareholders
and stakeholders must be treated equitably and
with fairness; (vii) a system of accountability; (viii)
transparency in corporate operations and company
reports; (ix) an ethical business; (x) creating shared
value (CSV); and most importantly, (xi) sustainability
and environmental compliance.

In 2015, the AEV and AboitizPower Boards also set
in motion the review and updating of the respective
companies’ Code of Ethics and Business Conduct,
engaged a gap analysis study of FCPA practices, and
a study for a Group-wide related parties transaction
manual that would be relevant as a conglomerate
as well as operating business units. The Board Risk
& Reputation Committee and the Board Audit
Committee have embedded regular assurance
procedures for the Aboitiz risk universe. Today, Aboitiz
Group audits are now risk-based. These are intended
to preserve and protect the rights of shareholders,
to ensure shareholders’ equitable treatment by the
companies, to enhance the stakeholder value, to
promote continuous improvement of stakeholders’
engagement, and to make timely and responsive
corporate disclosures balanced with the requirements
for confidentiality in a competitive business
environment. The Boards receive regular updates on
the top residual risks of their companies.

In 2015, our management team enhanced the
IT Committee leadership and its organizational
structure to ensure that the Group-wide IT system
and policies support and sustain our Group strategy
and objectives. Focus was given to important IT
governance initiatives that encompassed cloud
computing policies, mobile device policies, cyber risk
and threat responses, among others.

Responsibilities of the Board
Principles
The Boards of Directors of Aboitiz Group companies
are fully engaged Boards. The Boards are composed
of highly professional directors who work under
environments of respect and collegiality, where
candidness and robust discussions are not only
encouraged, but is the norm.

The AEV and AboitizPower Boards are each composed
of three independent directors, and independent-
minded executive and non-executive members
who have diverse professional backgrounds. These
encompass areas such as economics, corporate finance,
engineering, accounting, audit, chief executive and chief

operations experience, investment banking, private,
government sector and multilateral agencies sector, as
well as experience in policy-making bodies.

The selection process for the Boards involves
the nomination of directors by both controlling
shareholders and minority shareholders who actively
participate in the process. Minority shareholders
nominated the independent directors for the
2015 - 2016 term. The criteria for selection of the
nominated independent directors include, not only
their expertise and professional backgrounds, but
also their track record for being independent minded,
their strategic thinking, and their understanding of
the drivers of our companies’ businesses. The Board
Corporate Governance Committee believes that this
contributes to the successful execution of our vision
as a conglomerate doing business in our specific
industries. This governance committee, sitting in
its capacity as a Nominations and Compensation
Committee, then approves the nomination by
shareholders of executive and independent directors
for endorsement to the shareholders for their vote at
the annual shareholders’ meeting.

Directors are elected at the annual shareholders’
meeting by personal vote or by proxy. A Proxy Validation
Committee validates all proxies prior to the meeting.
Voting is done through an electronic platform and the
results are immediately disclosed to the assembly within
a few minutes of the voting’s completion.

The directors lend their broad experience and
expertise to the Board and the management team
in all relevant matters affecting the Aboitiz Group.
AEV and AboitizPower are continually reviewing the
roles and responsibilities of their Boards to assess
the propriety and value of existing and proposed
Board and Board Committee protocols, systems and
policies. All directors have been carefully selected,
nominated, and elected based on their credentials
as well as their ability to contribute and share their
expertise in all relevant matters affecting the business
units of AEV and AboitizPower.

The existing company policies of AEV and AboitizPower,
such as those found in the By-Laws, the Amended
Manual of Corporate Governance, the Code of Ethics
and Business Conduct, Board protocols, other Board
secretariat guidelines, and the Aboitiz Information
Management System protocols, ensure excellence in the
performance of the directors’ roles and responsibilities.

In 2015, the independent directors of both AEV
and AboitizPower worked closely with the internal
audit teams in the performance of their functions as
members of the Board Audit Committee.

To broaden the directors’ depth of knowledge and
industry competence, AEV and AboitizPower organized
seminars, lectures and orientations on highly technical
topics unique to or relevant to the Aboitiz Group’s
businesses. These included discussions on changing
regulatory oversight of the energy market and their
impact to AboitizPower, analysis and review of Aboitiz
risk maturity index results up to 2015, top residual
risks of the Aboitiz Group, cyber risks, political and
country risks, the World Economic Forum Global Risks,
mandatory corporate governance seminar, Philippine
economic briefings, and a review of the Aboitiz Group’s
strategic objectives and identified business strategies.

AEV and AboitizPower each have three Board
committees that assist their respective Boards in their
oversight responsibility over the Aboitiz business
units. These committees are the Board Corporate
Governance Committee (incorporating the former
Nomination and Remuneration Committee), the
Board Risk and Reputation Management Committee,
and the Board Audit Committee. Three independent
directors sit on the Board Corporate Governance and
Board Audit Committees, comprising a majority of
the membership of these Board committees. In the
Board Risk and Reputation Management Committee,
while not constituting the majority of the committee
membership, two independent directors sit in the
respective Board committees.

2015 was a hectic year for the directors with their
attendance and active participation at regular and

special meetings. They were diligent in the performance
of their duties, and had an attendance score of above
96.3 and 92.59%, respectively, and a Board appraisal
average score of 3 on a scale of 1-5.

Rights of Shareholders
Principles
The rights of shareholders are unequivocally
recognized in the AEV and AboitizPower By-laws,
Code of Ethics and Business Conduct, and Amended
Manual of Corporate Governance. The policy
statements found in these documents reflect the
commitment of both companies to ensure the
protection of shareholder interests and concerns, as
well as the free exercise of these rights. These include
the rights to receive notices and attend shareholders’
meetings, to participate and vote in meetings on the
basis of the one-share, one-vote rule, to cumulate
their votes, to inspect corporate books and records,
to vote in person, in absentia or by proxy, to receive
dividends, to nominate and elect directors to the
Board, and to ratify corporate action, among others.

The Aboitiz Group believe that the rights and
interests of shareholders are aligned to that of the
controlling shareholders, not only in terms of returns
on their investments, but also in the sustainability
of the businesses. AEV and AboitizPower take
exceptional efforts in ensuring that their shareholders
receive timely public information affecting the
businesses they have invested in, and that everyone
receives their dividends in accordance with the
established dividend policy.

The commitment of AEV and AboitizPower to their
shareholders’ rights is shown in their well-defined
and published dividend policy, the regular holding of
the annual shareholders’ meetings, and the timely
and accurate disclosures with the Securities and
Exchange Commission, the Philippine Stock Exchange
and the Philippine Dealing Exchange. The Board
Secretariats of AEV and AboitizPower liaise with and
provide directions to the companies’ stock transfer
agent to ensure appropriate responses and the
immediate resolution of shareholders’ queries and
requests brought to their attention.

Equitable Treatment of Shareholders and Fair
Dealings for All Shareholders Principles
All shareholders, regardless of the amount of their
shareholdings, are given the right to participate in
company decision-making, pursuant to the one-share
one-vote policy of AEV and AboitizPower.

As a matter of policy and practice, to ensure that
directors, officers, and even majority shareholders
do not take advantage of their position of knowledge
in the AEV and AboitizPower Group, related party
transactions and amounts are disclosed. The related
party transactions of the Group are reported in the
consolidated annual Audited Financial Statements.

AEV and AboitizPower also strictly enforce their
respective Policies on Trading of Company Securities,
which regulate insider trading, and impose a trading
blackout policy to prevent insider opportunism. The
management teams of both companies are quite
vigilant in ensuring that insider trading and trading
blackout rules are followed by the team leaders and
team members who are privy to sensitive transactions.

All shareholders receive notices of all shareholders’
meetings and all agenda items for discussion and
decision during the said meetings are stated in the
notices. No new agenda item will be taken up during the
meeting. For the guidance of shareholders, the rationale
of agenda items subject to shareholder approval is
included in the notices to shareholders’ meetings.

As long as shareholders provide their contact
details, AEV and AboitizPower send out notices to all
shareholders of record for all annual shareholders’
meetings, as well as provide them with copies of the
Annual Report. The agenda items are listed in the
notices and are discussed and voted upon at the annual
shareholders’ meetings. At the meetings, the Board
of Directors, the chief executive officer (CEO), chief
financial officer, the auditors, the stock transfer agent,
and other key officers of AEV and AboitizPower attend
and make themselves available to answer questions
from shareholders and investors. Questions from
shareholders on the floor are encouraged by the CEO.

AEV and AboitizPower strictly enforce their Codes
of Ethics and Business Conduct. The Codes outline
the general expectations of and set standards for
directors, employee behavior and ethical conduct.
These encompass prohibited practices involving
conflicts of interest, proper dealings with proprietary
and confidential information, and truthful disclosures
of material information with transparency in the
best interests of the customers, the companies, the
shareholders, and the public.

Role of Stakeholders
Principles
The business model of AEV and AboitizPower is
anchored on the sustainable growth of the Group’s
businesses with the full engagement of its stakeholders.
Key stakeholders include the team leaders and team
members who work towards achieving business
strategies; the customers whom they serve; the host
communities of the companies and business units;
the local government units that support and host the
Group’s businesses; the regulators of the businesses;
and the environment that sustains growth.

The Group recognizes that corporate governance
principles revolve around relationships between
and among these stakeholders and the Group’s
goals. Together, they contribute to the successful
pursuit of business goals. AEV and AboitizPower
corporate governance practices include policies and
procedures that promote awareness and observance
of stakeholders’ rights at the company level. Indeed,
stakeholder engagement is one of the strategic pillars
and is part of the Aboitiz corporate culture.

The Aboitiz Group is committed to the principles
of sustainability to balance the interests of people,
planet, and profit. By following this rule, the Group
has obtained and maintains a good health, safety, and
environmental track record, a clear proof that a business
can align itself to the principles of sustainability while
operating a profitable business.

The Group launched its Sustainability Policy in 2013,
in the belief that all stakeholders must be treated

with fairness and that corporate social responsibility
is an integral part of doing business. In 2014, AEV
and AboitizPower continued to implement this policy
and as an initiative for the year, jointly launched the
BetterWorld campaign to encourage all stakeholders to
adopt this policy for sustainability. In 2015, the Group
began its journey on the Creation of Shared Value as a
corporate culture. (See Sustainability Report at www.
aboitizfoundation.org). Through the Aboitiz Foundation,
Inc., our Group is pursuing concrete projects to fulfill
eight out of the 17 UN Sustainable Development Goals,
namely: no poverty, zero hunger, good health & well-
being, quality education, responsible production &
consumption, climate change, life below water, and life
on land.

As a commitment to its team members, both AEV
and AboitizPower embarked on a transformational
leadership program across the organization through
the creation of Leadership Circles. As a result of
the Leadership Circle initiatives, both organizations
committed to six leadership dimensions that would
characterize the way the AEV and AboitizPower
leaders would lead.

The leadership dimensions are mentoring and
development, fostering teamwork, courageous
authenticity, achieving results, sustaining growth,
and integrity. These are intended to create a deep
bench in the Aboitiz organization with the objective
of achieving sustainable breakthrough performance.
Both companies recognize the value of their respective
people resources. Team members are encouraged to
craft their own individual development plans and career
path as a way to ensure they fit in the right jobs. The
right fit ensures a truly engaged team and consequently,
sustainable leadership.

The Aboitiz Group is especially proud of its track record
in corporate social responsibility (CSR) commitments.
AEV and AboitizPower, through their business units and
through the Aboitiz Foundation, have long-standing and
deeply-rooted practices, commitments, and partnerships
in the field of CSR. Over the last five years, the Group

has allocated more than P2 billion for its various CSR
projects that are focused on education, enterprise
development, and the environment.

For 2015, the Aboitiz Foundation budgeted around
P415 million for its CSR projects. These projects were
funded by AEV and AboitizPower business units.
(See Aboitiz Foundation Report on its website). An
article in the March 2016 Forbes magazine stated that
based on publicly available financial statements, the
Aboitiz Foundation, together with the Ramon Aboitiz
Foundation, Inc., are collectively the biggest social
initiatives giver in the Philippines.

Disclosure and Transparency
Principles
The Boards and Management of AEV and AboitizPower
believe that good governance practices, especially in the
areas of disclosure and transparency, elicit the trust and
confidence of stakeholders. The Aboitiz Group puts a
high premium to its collective reputation and constantly
works at keeping this well-earned trust gained from its
dealings with stakeholders over the years.

AEV and AboitizPower exert effort and time to
consistently maintain their legal compliance and good
corporate governance track records. In 2015, there was
no deviation from or violation of the rules set forth in
the Manual of Corporate Governance, other company
governance and compliance policies, and protocols.
Below is a quick view of the 2015 PSE Governance
Disclosure Report of AEV and AboitizPower.

Pursuant to the Group’s commitment to transparency
and accountability, AEV and AboitizPower continue
to improve their respective dedicated corporate
governance pages on their websites (www.aboitiz.com)
and (www.aboitizpower.com). These web pages contain
company information such as the annual corporate
governance reports, the Board Committees, the Manual
of Corporate Governance, Code of Ethics and Business
Conduct, minutes of the Annual Shareholders Meetings,
Investor Relations information, and other relevant
information to stakeholders. The pages serve as a
resource center for stakeholders and the public.

The Aboitiz business model integrates the principle of
sustainability by way of business practices that ensure
a long-term corporate life, through an organization
that focuses on the creation of shared value and takes
concrete responsibility for the environment, and
through execution excellence not only in business
operations but also in the implementation of CSR
programs that deliver on promises.
(Visit www.aboitiz.com for the full AEV and
AboitizPower Corporate Governance Report with more
details on current corporate governance practices,
corporate achievements, milestones, and initiatives for
the year 2015)

2015 AEV and AboitizPower Awards
Principles
AEV and AboitizPower have consistently maintained
the Aboitiz core values and conformed to corporate
governance principles in the face of evolving

stakeholder concerns and demands in an ever-changing
business environment. Our Group’s dedicated and
steadfast adherence to these values and principles is
clear proof of the value of the Aboitiz business motto:
We can do well by doing good.

AEV and AboitizPower, along with their subsidiaries and
affiliates, have been consistently recognized in local and
international surveys, assessments, and scorecards, as
among the Philippines’ best-managed companies. In
2015, both companies received many awards, especially
in the field of corporate governance and stakeholder
engagement. AEV was ranked among the top 50
ASEAN public companies in the inaugural launch of
the ASEAN Corporate Governance Scorecard during
the APEC Summit in Manila in November 2015. These
awards were given in recognition of the companies’
commitment to corporate governance best practices.