Aboitiz Corporate Governance 

 

Over the years, the Aboitiz Group has grown its core businesses of power, banking and financial services, food infrastructure, land, and portfolio services. Today, more than ever, while advancing businesses in new jurisdictions, the challenge for the Aboitiz Group is to ensure that it remains faithful to its values, focused on its purpose, and is true to its brand promise.  

 

As the Group grows, AEV continues to improve on previous achievements in corporate governance. Most significantly, in 2018, the Institute of Corporate Directors (ICD) recognized the two companies as among the top 10 best performing publicly-listed companies (PLCs) in the Philippines based on the ASEAN Corporate Governance Scorecard (ACGS). For the first time since the ACGS was launched, both AEV was recognized as among the top 50 best performing PLCs in the ASEAN region.  This is no small feat, considering that this exclusive list used to be dominated by PLCs based in more developed jurisdictions such as Singapore.  These accolades challenge the Group to maintain its exemplary standards even as it expands in different markets and industries across Asia.

 

The awards also serve to recognize that good corporate governance practices have always been the cornerstone of how the Group does business. The Group’s purpose – To drive change for a better world –  coupled with the Aboitiz culture with its core values of integrity, teamwork, innovation and responsibility, keep team members aligned, steady, and focused on the goal, despite any challenges they may face.  It is therefore not a surprise that despite stricter standards in 2018, there were no recorded deviations from, or violations of the Amended Manual on Corporate Governance (the “Manual”), the Code of Ethics and Business Conduct (the “Code of Ethics”), or any other company governance and compliance policies and protocols.   

Aboitiz Corporate Governance Framework

The Group’s corporate governance framework is rooted in the Aboitiz core values, which has been institutionalized in the respective Corporate Governance Manuals (Revised Manual) and Codes of Ethics and Business Conduct of AEV and AboitizPower, as well as in their key company policies and protocols. This governance framework applies to the Group as a whole – led by diverse and competent Boards and Board Committees at AEV and AboitizPower, each supported by capable and accountable management team and empowered team members, united in living the time-honored
Aboitiz core values.

Aboitiz Governance Structure

Board of Directors

 

The AEV and AboitizPower Boards of Directors are at the helm of our Group’s corporate governance journey. Independent from management, they are committed to provide each company a strategic roadmap towards long-term growth, competitiveness, and building a sustainable business that, it is hoped, will thrive for another 100 years. Each Board performs the crucial role of articulating and reviewing each company’s purpose, vision and mission, and strategies to carry out its goals. They ensure that the strategic direction of each company’s businesses are well defined, properly managed, and are aligned with the overall strategic goals of the Aboitiz Group.

 

The Boards of AEV and AboitizPower each have nine members, all of whom come from diverse professional backgrounds. They are composed of legal and finance professionals, engineers, former or current CEO/COOs, auditors, and accountants. Many of them have management experience in the private and government sectors, as well as in multilateral agencies. AboitizPower has three Independent Directors, three Non-Executive Directors, and three Executive Directors. AEV has three Independent Directors, five Non-Executive Directors, and one Executive Director. The Chairmen of the AEV and AboitizPower Boards are highly experienced, NonExecutive Directors who are not involved in the Group’s day-to-day operations. They therefore remain focused on refining each company’s longterm strategy. The Lead Independent Directors are highly qualified professionals who are familiar with the operations of each company, and the industries it does business in.

 

In 2020, the members of the AEV  Boards of Directors were the following:

 

 

 

Commitment to the Corporate Mission, Vision, and Strategy

 

The directors of AEV and AboitizPower acknowledge the importance of their role to lead and steer their respective companies as profitable and sustainable enterprises. The Board’s role for each company is to represent and protect the interests of its shareholders – the owners of the business – and other key external stakeholders. Guided by the Aboitiz Group’s purpose, brand promise, mission, and vision, the members of each Board, together with key officers and heads of the Strategic Business Units, participate in an Annual Board Retreat and Strategy Refresh. They review and align the corporate initiatives and strategic roadmaps of the Group’s core businesses with contemporary market and economic trends, both locally and worldwide. In 2020, this annual engagement was held in a series of online sessions that began on October 29, 2020.

 

Roles and Responsibilities of the Board of Directors    

 

The Company believes that compliance with the principles of good governance begins with the Board of Directors.  The Director’s office is one of utmost trust and confidence. The Board of Directors is expected to act in a fully informed basis, in good faith, with due diligence and care and act in the best interest of the Company in a manner characterized by transparency, accountability and fairness in the exercise of leadership in directing the Company’s sustainable growth.
The Board is actively engaged in discussions of strategic business issues and the directors are consulted for their invaluable inputs through the special strategy board meetings and gatherings with the management teams.  The Board Corporate Governance Committee formalized these gatherings into an annual Board Retreat or strategy meetings in an atmosphere of relaxed, open and intellectual exchange.

 

As part of its director development program and to ensure that the members of the Board remain up to date with business and legal developments, the Board is provided with regular legal bulletins, and invited to economic and industry-specific briefings and strategy and management conferences within the Aboitiz Group.  All directors, including the Independent Directors, actively participate in corporate governance seminars to further enhance their knowledge and expertise.

 

The Company’s By-Laws require that the quorum for valid board meetings is a majority of the members of the Board, in accordance with the with the Revised Corporation Code of the Philippines.  As a matter of long standing Board practice, decisions of the Company’s Board are always made with the consensus or vote of all the Company’s independent directors, thus resulting in a unanimous vote of all directors of the Board.

 

Board Independence

 

By virtue of the Manuals and their respective Committee charters, the AEV and AboitizPower ESCG (Environmental, Social and Corporate Governance) Committees were tasked to develop and recommend a set of corporate governance principles, aimed to promote the independence of their respective Boards, including standards and guidelines applicable to the selection, contribution, and conduct of Board members.

 

In 2020, the AEV and AboitizPower Boards were composed of a majority of Non-Executive Directors. AEV has three qualified Independent Directors and five Non-Executive Directors out of its nine Board members. Meanwhile, AboitizPower has three qualified Independent Directors and three NonExecutive Directors out of its nine Board members. In addition, both Boards have each appointed a Lead Independent Director who serves as an intermediary between the Chairman and the other directors whenever necessary.

 

Diversity

 

The diversity in professional and personal backgrounds (age, ethnicity, culture, skills, competence, gender, knowledge, and expertise) of Board members ensures that no director or group of directors can dominate the deliberation and decision-making process. AEV and AboitizPower can also benefit from the diverse perspectives in formulating sound corporate strategies and advancing towards long-term success. The annual selection process of directors is intended to appoint a diverse mix of highly-competent directors and officers with in-depth knowledge and experience in the core industries where AEV and AboitizPower are involved. Other factors considered are independent-mindedness, ethical behavior, and value contribution.

 

Recognizing that a sustainable enterprise goes beyond the current generations of leaders, the AEV and AboitizPower Boards appointed Ms. Ana Maria A. Delgado and Mr. Danel C. Aboitiz, respectively, as Directors in 2018. Ana and Danel are part of a new generation of homegrown leaders who add fresh perspectives to each Board’s deliberation. Ana is also the first female member of AEV’s Board of Directors. In 2020, the AEV and AboitizPower Boards initiated a process to review the profiles of the current Board members, in relation to an ideal profile, to determine their subjective and objective qualifications that are aligned with the long-term strategic direction of the Group. This initiative is meant to identify areas in which each Board can improve in terms of ensuring its members have complementary competencies and skill sets, and to assess the qualifications of potential future
candidates to each Board.

 

Term Limits of Independent Directors 

 

AEV and AboitizPower both comply with the requirements of SEC Memorandum Circular No. 19, Series of 2016, prescribing a maximum term of nine years for independent directors, starting from 2012. In the nomination, selection, and election of the members of its Boards, AEV and AboitizPower recognize and respect the inviolable statutory right of each shareholder to vote and be voted as a director. If either AEV or AboitizPower intends to retain an independent director who has served the maximum of nine consecutive years, the shareholders of the relevant company shall be advised and provided with meritorious justifications during the Annual Shareholders’ Meeting (ASM) for which the election will take place.

 

Directorships in Other Listed Companies

 

The ESCG Committee of AEV and AboitizPower, respectively, selects qualified nominees for election as directors. One consideration is the number of directorships a nominee has in other corporations or organizations. As a corporate practice, AEV and AboitizPower directors, including Independent Directors, are discouraged from sitting as directors in more than five publicly-listed companies (PLCs). Executive Directors of AEV and AboitizPower do not generally sit on other boards of PLCs outside the Group, unless they have substantial interests in those PLCs or have been elected as independent directors. Both the AEV and AboitizPower Manuals require that the CEO and other executive directors shall submit themselves to a low active limit on membership in other corporate boards. In 2020, none of the AEV and AboitizPower directors sat in more than five PLCs.

 

Nomination, Selection, and Election of Directors

The Aboitiz Group believes that the nomination, selection, and election of directors are the fundamental elements of a well-functioning corporate governance system. AEV and AboitizPower both follow a formal and transparent board nomination, selection, and election process to ensure that the interests of all shareholders are protected. Any shareholder may nominate a director and independent director. The ESCG Committees of AEV and AboitizPower act as the nomination committees and oversee the selection of candidates for their respective independent, executive, and non-executive directors. In determining the right candidates for directors, both AEV and AboitizPower may use professional search firms and external sources of candidates, including director databases and professional organizations in the Philippines or abroad.

 

The members of the Boards of AEV and AboitizPower comply with the qualifications for directors found in the Revised Corporation Code, Securities and Regulation Code and its Implementing Rules and Regulations, related SEC issuances, and best practices in corporate governance. Considering that AEV and AboitizPower are involved in complex and highly regulated businesses, Board members are identified and nominated based on their wealth of experience, in-depth knowledge, wisdom, and capability to contribute to the long-term success of each company. The ESCG Committees of both companies, after rigorous screening of the candidates, provide the final list of candidates for directors to each company’s Corporate Secretary, for inclusion in the ASM agenda. This gives the stockholders the opportunity to assess the background and qualifications of the nominees before the actual ASM.

 

Every year during the ASMs, AEV and AboitizPower shareholders elect their representatives to the Boards by voting in person, by proxy, and – for the first time in 2020 – by voting in absentia. Proxy votes received by the Corporate Secretary of AEV and AboitizPower before the ASM are validated by each of the company’s Proxy Validation Committee. The members of the AEV and AboitizPower Proxy Validation Committees include each of the company’s compliance officer, its principal accounting officer, and the head of its internal audit team. AEV and AboitizPower both follow the rule of One-Share, One-Vote. Under this rule, any minority shareholder can influence the Board composition by individual nomination and by the power of cumulative voting rights. The right to cumulative voting is a statutory right granted by the Revised Corporation Code. A director holds office for one year until his successor is elected at the next ASM, in accordance with the Revised Corporation Code, each company’s by-laws, and the relevant SEC guidelines.

 

Board Committees

 

The Environmental, Social, and Corporate Governance Committees (formerly the Corporate Governance Committee) of AEV and AboitizPower are responsible for developing and recommending to their respective Board of Directors the appropriate governance principles applicable to the whole Group. The ESCG Committees also perform the functions of the Nomination and Remuneration Committees. In carrying out their duties and responsibilities, the ESCG Committee is supported by the company’s Compliance Officer, Chief External Relations Officer, as well as the Group Chief Human Resources Officer. These officers regularly attend committee meetings to act as resource persons. The chairmen of the ESCG Committees are the Lead Independent Directors.

 

In 2020, the Board ESCG continued to (1) review and monitor AEV and AboitizPower compliance with new laws and regulations (the Revised Corporation Code, various SEC and BIR issuances, among others); (2) review and update the Revised Manual to align with the best practices in the Integrated Annual Corporate Governance Report and the ASEAN Corporate Governance Scorecard; and (3) ensure that the nomination, selection, election, remuneration, and assessment of each company’s directors and officers are aligned with the Revised Manual. In the same year, the committees amended their respective Revised Manuals and Charters to establish a Board oversight and governance framework to promote and integrate the sustainability and corporate governance initiatives of AEV and AboitizPower.

 

The Audit Committees continued to provide oversight over AEV and AboitizPower financial reporting policies, practices and controls, and over the internal and external audit functions necessary for making good audit-related decisions. In 2020, the Audit Committee updated its Charter to improve the Company’s control performance by having an adequate and effective control system. Chaired by independent directors, the Audit Committees are composed of all three independent directors and two non-executive directors. Each company’s Chief Financial Officer and Internal Audit Head, who performs the functions of a Chief Audit Executive, are regular attendees and resource persons at committee meetings.

 

Sufficiency of Internal Control and Compliance System

 

The AEV and AboitizPower Audit Committees assist their respective Boards in fulfilling oversight responsibilities over their company’s system of internal control. They are responsible for monitoring, overseeing, and evaluating the duties and responsibilities of management, the internal audit activity, and the external auditors as those duties and responsibilities relate to the organization’s processes for controlling its operations. In 2020, the President and Chief Executive Officer, Chief Financial Officer, and Internal Audit Head of AEV and AboitizPower attested to the sufficient internal control and compliance system of their respective companies.

 

Audit and Non-Audit Fees

The Independent External Auditor of AEV and AboitizPower is the accounting firm of SyCip Gorres Velayo & Co. (SGV), with Ms. Maria Veronica Andresa R. Pore as current audit partner who has served since 2017. As a policy, the Board Audit Committee makes recommendations to the Board concerning the choice of external auditor and pre-approves audit plans, scope, and frequency before the audit is conducted. Audit services of external auditors for the years 2020 and 2019 were pre-approved by the Board Audit Committee. The Committee also reviewed the extent and nature of these services to ensure that the independence of the external auditors is preserved. The breakdown of the audit and non-audit fees paid by AEV and AboitizPower to their respective auditors are found in the companies’ Information Statements and Annual Reports.

The audit-related fees include assurance and services that are related to the review of AEV’s financial statements pursuant to its bond issuances. As a policy, the Board Audit Committee makes recommendations to the Board concerning the choice of external auditor and pre-approves audit plans, scope, and frequency before the audit is conducted. Audit services of external auditors for the years 2020 and 2019 were pre-approved by the Board Audit Committee. The Committee had also reviewed the extent and nature of these services to ensure that the independence of the external auditors is preserved.

 

The Risk and Reputation Committees exercise oversight functions over each company’s (i) enterprise risk management and (ii) reputation management, including their respective corporate brands and communication strategies. In 2020, the Board Risk and Reputation Committees updated their charter to continually identify, monitor, and manage the Group’s top risks.

 

The Related Party Transactions (RPT) Committees of AEV and AboitizPower are composed entirely of independent directors. In 2020, these committees approved the Revised RPT Policy and Charter of each company in compliance with the SEC memorandum circular on Material RPTs. In addition, they continued to review and approve each company’s CFO Guidelines on the Implementation of the RPT Policy, which requires all directors and officers to execute a certification to identify their related parties to be able to identify potential conflicts of interest. In 2020, AEV and AboitizPower updated the RPT Certification for Directors and Officers in compliance with the Bureau of Internal Revenue Regulation No. 19-2020 on the reporting guidelines for the transactions of individuals and juridical entities with related parties. The RPT Committees continued to ensure that related party transactions are taken on an arm’s-length basis and within market rates, with sufficient documentation, and coursed through the appropriate levels of approval. Except for the presence of the AEV and AboitizPower CFOs as resource persons, management is not invited to and has no participation in the RPT Committee.

 

The Executive Committees of AEV and AboitizPower were organized in May 2018 and are composed of five regular members, with at least two nonexecutive directors. The committees were formed to assist the Board in the management and oversight of each company’s day-to-day operations and strategic decision–making during the intervening period between full Board meetings. The President and CEO of AEV and AboitizPower are the chairmen of their respective Executive Committees.

 

The Cybersecurity Committee of AboitizPower were organized in April 2020. The purpose of the Committee is to carry out the responsibilities delegated by the Board of the Company in relation to its duty to provide strategic direction and ensure the establishment of a system of governance (processes, policies, controls, and management) for the Company and its Strategic Business Units (“SBU”, collectively the “Aboitiz Group’) on matters relating to information security and cybersecurity.

 

Please click here to view the Committee members and its charters.

Annual Executive Session of Independent Directors

As provided in the Company’s Board Protocol, the Company’s Independent Directors meet at least once a year for an Executive Session. The Independent Directors may also meet periodically in an executive session with no other Director or management present except for the Chairman of the Board Environmental, Social and Corporate Governance Committee (ESCG) who shall call for and preside the meeting.

 

Topics for discussion during these executive sessions shall be determined by the Independent Directors, but actions of the Board generally should be taken separately during Board meetings. The Independent Directors met virtually with the non-executive directors, including the Chairman of the Board ESCG, at Taguig City on July 29, 2020, for their informal discussion of issues.

Nomination, Selection & Election of Directors

Nomination, Selection, and Election of Directors

 

The Aboitiz Group believes that the nomination, selection, and election of directors are the fundamental elements of a well-functioning  corporate governance system. AEV and AboitizPower both follow a formal and transparent board nomination, selection, and election process to ensure that the interests of all shareholders are protected. Any shareholder may nominate a director and independent director. The ESCG Committees of AEV and AboitizPower act as the nomination committees and oversee the selection of candidates for their respective independent, executive, and non-executive directors. In determining the right candidates for directors, both AEV and AboitizPower may use professional search firms and external sources of candidates, including director databases and professional organizations in the Philippines or abroad.

 

The members of the Boards of AEV and AboitizPower comply with the qualifications for directors found in the Revised Corporation Code, Securities and Regulation Code and its Implementing Rules and Regulations, related SEC issuances, and best practices in corporate governance. Considering that AEV and AboitizPower are involved in complex and highly regulated businesses, Board members are identified and nominated based on their wealth of experience, in-depth knowledge, wisdom, and capability to contribute to the long-term success of each company. The ESCG Committees of both companies, after rigorous screening of the candidates, provide the final list of candidates for directors to each company’s Corporate Secretary, for inclusion in the ASM agenda. This gives the stockholders the opportunity to assess the background and qualifications of the nominees before the actual ASM.

 

Every year during the ASMs, AEV and AboitizPower shareholders elect their representatives to the Boards by voting in person, by proxy, and – for the first time in 2020 – by voting in absentia. Proxy votes received by the Corporate Secretary of AEV and AboitizPower before the ASM are validated by each of the company’s Proxy Validation Committee. The members of the AEV and AboitizPower Proxy Validation Committees include each of the company’s compliance officer, its principal  accounting officer, and the head of its internal audit team.

 

AEV and AboitizPower both follow the rule of One-Share, One-Vote. Under this rule, any minority shareholder can influence the Board composition by individual nomination and by the power of cumulative voting rights. The right to cumulative voting is a statutory right granted by the Revised Corporation Code. A director holds office for one year until his successor is elected at the next ASM, in accordance with the Revised Corporation Code, each company’s by-laws, and the relevant SEC guidelines.

Annual Shareholder Meetings

The Company encourages active shareholder participation by sending the ASM notice and agenda at least 28 days before the ASM.  The notices, agenda, and the rationale for each agenda item, as well as sample proxies and meeting venue are also made available on the Company’s website.  Comprehensive profiles of the nominees for directors are disclosed in advance to allow shareholders to evaluate them before the ASM.
The Definitive Information Statement (SEC Form 20-IS) is sent to shareholders at least 15 business days before the ASM.  Copies of the Integrated Annual Report are also provided during the meeting with downloadable versions posted in the Company’s website. Shareholder registration has also gone fully digital.  To register, shareholders are only required to present their valid IDs in order for their information to be pulled out from the shareholder database.  The shareholder will then be requested to check and / or update their personal information for accuracy.

 

Board members, the CEO, CFO, independent auditors, stock transfer agent and other key officers attend the ASM and make themselves accessible to shareholders.  Questions from shareholders are also encouraged by the Chairman during the meeting.

 

During the 2018 ASM, shareholders approved and ratified the amendment of the Company’s By-Laws to change the ASM date from the third Monday of to the fourth Monday of April of each year.  The change in the ASM date ensures that the Company’s financial reports and information statements are published within the first quarter following the end of the previous fiscal year, in accordance with best corporate governance practices.  The amendment also clarified that, in accordance with existing laws and regulations, the ASM venue may be held in any city or municipality within Metro Manila. Shareholders and stakeholders were also able to evaluate the conduct of the meetings, including presentations, registration process, venue, as well as food and refreshments.  Suggestions for improvement were evaluated and discussed by the ASM working teams during a post-mortem meeting.

 

Virtual Annual Stockholders Meeting

 

The year 2020 brought with it the challenge of an unprecedented global pandemic. Business activities worldwide ground to a near standstill as governments imposed tight restrictions on travel and social gatherings to control the spread of COVID-19. Faced with these challenges, AEV and AboitizPower each held – for the first time ever – a Virtual ASM. Despite the difficulties posed by the community quarantine restrictions, both ASMs were held on schedule, and in a business-as-usual manner, without needing to avail of the ASM extension period granted by the SEC to Philippine Companies. The notices for the 2020 ASM, information statements, and the annual reports were also distributed on time to stockholders, through all available channels, including via quick response (QR) code, electronic mail, publication in newspapers of general circulation, and through each company’s respective websites.

 

Driven by its commitment to practice sound corporate governance and guided by its core value of innovation, AEV and AboitizPower were able to provide an accessible and convenient venue for its shareholders to exercise their basic and inviolable right to elect their representatives to the Boards of Directors while remaining in the comfort and safety of their homes.

 

In 2020 and 2021 ASM,  Aboitiz provided the ASM notice and information on all proposed resolutions, and the rationale and corresponding explanation for each agenda item requiring shareholders’ approval, 28 days before the date of the ASM.

 

Please click here to know more about ASM-related materials.

 

Minutes of the ASM

 

The approved shareholders’ resolutions with a summary of votes, the results of the organizational meetings, and the minutes of the ASM of AEV and AboitizPower were disclosed and posted on their respective websites the next day, or on April 28, 2020. The minutes can be accessed in the Investor Relations Section of www.aboitiz.com and www. aboitizpower.com.

 

Remuneration Policy

The Board Environmental, Social and Corporate Governance Committee (ESCG) ensure that the remuneration for directors and key executives is consistent with the Group’s culture, strategy, and business policies. Remuneration rates are also maintained at a level sufficient to attract and retain directors and officers who are needed to successfully run their respective companies. The Group engages the services of independent remuneration consultants to determine the compensation, as well as any annual salary increases, for directors, officers, and team members.

Guided by the Aboitiz Compensation Philosophy, factors such as individual and organizational performance, and inflation, among others, are taken into account to ensure that the compensation structure will attract, retain, and engage the best talents to contribute to the success of the business. Each year, the results of the study are presented and discussed during the first meeting of the AEV ESCG Committee.

 

During its February 18, 2019 meeting, the Corporate Governance Committee approved the increase the directors’ monthly allowance from PHP180,000 to PHP200,000 for the Chairman, and from PHP120,000 to PHP150,000 for other directors. The committee also approved the increase in the per diem for every meeting attended as follows:

In no case has each Board’s total yearly compensation exceeded 10% of their respective company’s net income before income tax of the preceding year. In 2020, the directors received the following compensation:

Other than the directors’ per diem and monthly allowance, there are no other standard arrangements pursuant to which directors are compensated or to be compensated.  

 

The Board of Directors do not participate in discussions or deliberations involving his/her own remuneration.  Thus, all proposed changes in Board remuneration are approved by the shareholders and disclosed to the public in a timely manner through PSE and SEC disclosures and the Company’s Annual Report (SEC Form 17-A).  The Company believes that the information provided in the disclosures provide sufficient information on director and executive remuneration, while maintaining the privacy of the individuals concerned in compliance with applicable laws and regulations.

Performance Assessment of the Board, Board Committees & Senior Management

The AEV Board of Directors conduct an annual performance assessment of the Board members and key officers.  The Board members conduct a self-assessment of their individual and collective performance of the Board and Board Committees, and also evaluate the performance of the Chief Executive Officer, the Group Internal Audit Head, Chief Risk & Reputation Officer, and the Chief Compliance Officer of the company.

 

The directors and key officers are evaluated based on the following criteria: compliance with best governance practices and principles; participation and contribution to the Board and committee meetings; and assessment of performance against their duties and responsibilities as provided in the company’s Manual, Articles, and By Laws.  Assessment results for the past three years are compared, and these are presented to the respective Board Environmental, Social and  Corporate Governance Committees and to all Board members.

 

In 2020, the Board Assessments were conducted by an independent Third Party Board Evaluators, Good Governance Advocates and Practitioners of the Philippines, Inc. (GGAPP).

Annual Corporate Governance Seminar

AEV and AboitizPower believe that their directors should remain abreast with current industry devel- opments and business trends in order to promote the Group’s competitiveness. It is equally important that all directors are aware of their duties and re- sponsibilities, and provided with all the information needed to discharge their functions.

 

The AEV and AboitizPower Revised Manuals require every director to (i) undergo an initial onboarding session upon first appointment to the Board, and (ii) commit to a continuing professional training program (formal and informal) to be kept updated on recent developments in internal policies, relevant laws and regulations, and various business risks relevant to the Group. The Chairmen of both Boards, with the assistance of their respective Compliance Officer,  ensure that directors and key officers comply with these requirements.

 

On September 9, 2020, the Aboitiz Group conducted, as scheduled, its Annual In-House Corporate Gover- nance Seminar. The seminar was held virtually for the first time and the online platform provided a safe and convenient venue for the Group’s directors and key officers, to listen to and interact with experts from different parts of the globe regarding current and relevant corporate governance issues. The webi- nar was accredited and the proceedings monitored by representatives from the SEC. In 2020, all of the AEV and AboitizPower directors and officers attend- ed a corporate governance seminar in compliance with the SEC’s Code of Corporate Governance.

 

In 2020, the directors and officers attended the following seminars and learning sessions:

Attendance at Board & Board Committee Meetings

Board directors are expected to serve with diligence. The schedule for the regular Board and committee meetings for the upcoming year is also approved and distributed to Board directors before the start of the year.

The table below shows the attendance record of AboitizPower directors for the Board and Board Committee meetings in 2020:

*Ex-Officio Members are non-voting members.
Rights of Shareholders

Rights of Shareholders

 

Shareholder rights are of paramount importance in the AEV and AboitizPower By-laws, Codes, and Revised Manuals. The goal is to ensure the protection of shareholder interests and concerns through the free exercise of shareholder rights. Among the rights of shareholders, regardless of the number of shares they own, are: to receive notices of and to attend shareholders’ meetings; to participate and vote on the basis of the on share, one-vote policy; nominate and elect Board members (including via cumulative voting); inspect corporate books and records; vote in person or in absentia through proxy; receive dividends; and ratify corporate action.

 

AEV and AboitizPower believe that the rights and interests of minority shareholders are aligned with those of the controlling shareholders, not only in terms of returns on their investments, but also in the sustainability of the Group’s businesses. Both companies ensure the timely disclosure to shareholders regarding their respective businesses, and that shareholders receive dividends in accordance with established dividend policies. The Board Secretariat has adopted certified Board protocols and procedures under the ISO 9001:2015 Management Board and System to ensure the effectiveness of Board and shareholders’ commitments. This includes coordination with stock transfer agents to ensure appropriate responses and the timely resolution of shareholders’ queries and requests.

 

Right to Dividends

 

Every year, AEV and AboitizPower pay dividends in an equitable and timely manner. All shareholders are treated equally, receiving an amount of dividends per share that is proportionate to their shareholdings. The period for payment of dividends is based on trading requirements or constraints of the SEC and PSE.

 

In the last five years, AEV has paid the following dividends:

Right to Participate in Fundamental Corporate Changes

 

As a matter of policy, AEV and AboitizPower encourage the active participation of shareholders in corporate decisions, such as amendments to the Articles of Incorporation and By-laws, appointment of auditors, and the approval of audited financial statements, among others.

At the ASM, the Board of Directors present and submit to the shareholders the proposed actions for approval. The shareholders are also given an opportunity to ask questions regarding the proposed actions during the meeting. Only upon receipt of the affirmative vote of shareholders representing at least 2/3 of the issued and outstanding capital stock of each company, will such action be considered as duly approved by the shareholders.

 

In 2020, AEV and AboitizPower amended their Articles of Incorporation to (1) Article Two: include in the primary purpose the power to act as guarantor or surety for the loans and obligations of its affiliates and associates; (2) Article Four: amend the corporate term to perpetual existence, and (3) Article Seven: amend the features of the preferred shares. The amendment to Article Four was proposed to align with the provisions of the Revised Corporation Code on the perpetual existence of corporations. Meanwhile, the amendments to Articles Two and Seven were proposed to give AEV and AboitizPower the additional flexibility in their capital- and fund-raising activities. The proposals received the affirmative vote of shareholders representing at least 2/3 of the issued and outstanding capital stock of each company.

 

On October 1, 2020, the SEC approved the amendment of the Articles of Incorporation of AEV and AboitizPower.

Effective Participation in Shareholders’ Meetings

 

The Company strives to maintain a transparent and fair conduct of its Annual and Special Shareholders’ Meetings and ensures that accurate and timely information are available to the shareholders to enable them to make a sound judgment on    all matters brought to their attention for consideration or approval. The Definitive Information Statement and the Aboitiz Integrated Annual Report, distributed prior to and during the ASM, include the highlights and summary of the financial condition of the Company. The Definitive Information Statement filed with the PSE, PDEx and SEC is prepared with the objective of providing full and accurate information enabling stakeholders to make informed decisions. Shareholders are provided with individual profiles of new and returning directors, as well as a summary of the Board meeting attendance and performance record of its directors. Agenda items are included in the notices with a corresponding rationale.

 

Approval of Directors’ Remuneration and Per Diem

 

The Company has a policy on transparency of compensation for its Directors and key officers, in accordance with the SEC rules. Information on the basis of Board remuneration is readily accessible through the Company’s SEC Form 17-A (Annual Report), the Annual Corporate Governance Report, Board Corporate Governance Committee minutes and its Company Website. The Board Corporate Governance Committee ensures that the Directors’ and executives’ remuneration are consistent with the Company culture, strategy and business policies at a level sufficient to attract and retain Directors and officers who are needed to run the Company successfully. The Company rewards its individual Directors and Officers based on ability to execute their duties and responsibilities. It is the Company’s philosophy to reward officers and employees based on individual performance measured through established Human Resources management metrics.

 

Performance is evaluated and compensation is reviewed on an annual basis. The Company ensures that it pays its Directors and Officers competitively by comparing rates with other Philippine based companies through participation in and access to market salary surveys.

 

Nominations of Board of Directors and the Right to Elect Directors Individually

 

All shareholders have the right to nominate individually all the members of the Board. Nominations for the position of a director are received by the Corporate Secretary in accordance with the Company’s By- Laws and recently amended Guidelines for the Nomination and Election of Independent Directors which was approved on March 23, 2017. The process of nomination is clearly set out in the Company’s Definitive Information Statement, Annual Report, Guidelines for the Nomination and Election of Independent Directors, and these information are readily accessible through the Company’s website. The gist of the nominations guidelines is also broadcast to the shareholders at every Annual Shareholders’ Meeting. The Board Corporate Governance Committee oversees the selection of candidates for the Board of Directors.

 

Disclosure of ASM Voting Results and Tabulation Procedures

 

The exercise of a shareholder’s voting right is encouraged by the Company to ensure meaningful participation in all shareholders’ meetings. The Board is committed to removing costs and other administrative or practical impediments to a shareholder’s right to vote. The counting of shareholders’ votes is done in accordance with the general provisions of the Corporation Code and the Company’s internal procedures. The Office of the Corporate Secretary supervises the counting of votes through an electronic platform and through the appointed third party vote canvasser/validator.

 

The voting methods and vote-counting systems employed by the Company during every shareholders’ meeting are disclosed in the Information Statement and clearly explained by the Corporate Secretary to shareholders during the shareholders’ meeting to ensure the intelligent exercise of the shareholders’ right to vote.

 

The Company follows the system of cumulative voting for the election of directors, to allow shareholders an opportunity to elect each member of the Board of Directors individually. Other matters are also decided through voting by shares of stock. The Company adheres to the one-share, one-vote policy for the same class of shares. Proxy voting is allowed at all meetings and is facilitated through proxy voting forms. In its regular board meeting last November 12, 2010, the Board of Directors of the Company approved the deletion of the notarization requirement of proxy forms to be used in all stockholders’ meetings of the Company. This is to facilitate easy voting by shareholders, in line with the Company’s efforts to promote shareholder engagement and to improve corporate governance practices.

 

The Company makes the results of the votes publicly available the next working day.

 

Opportunity to Ask Questions, Questions and Answers Raised During the ASM as Documented in the Minutes of Meeting

 

The Office of the Corporate Secretary ensures that all minutes of annual and special meetings of shareholders clearly and satisfactorily reflect all matters taken up during these meetings. All shareholders are encouraged and given the right to participate in the meetings. The opportunity to ask questions or raise issues, the questions, answers, issues and motions raised, the agreements and resolutions arrived at, the corporate acts approved or disapproved, and the voting results are reported in the minutes. The Company also discloses to PSE, PDEx and the SEC all the items approved at the shareholders’ meeting no later than the next business day. The voting results including quorum and summary of resolutions approved are made publicly available by the next working day through the Company’s website under Investor Relations’ page.

 

At every ASM, the Company ensures the effective exercise of the rights of its shareholders. There are no barriers or impediments preventing shareholders from consulting or communicating with one another, with the Directors and with the Corporate Secretary. Questions raised during the shareholders’ meeting by the shareholders are minuted or documented.

 

Attendance of the Board of Directors, Management and Committee Members During the ASM

 

The Chairman and members of the Board of Directors, the President and Chief Executive Officer, Executive Vice President and Chief Operating Officer, the Chairman of the various Board Committees particularly the Board Audit Committee, and the Company Corporate Secretary all attend the ASM of the Company to answer any questions which shareholders may have concerning the Company. Likewise, the Chairman and all members of the Board of Directors, other key officers and the Company’s auditors are present at the shareholders’ meeting to give shareholders the opportunity to interact with the Board and top management on the current state of the Company’s  business and affairs and to ask any questions from the Directors and Corporate Officers. Shareholders and investors are encouraged to ask the CEO or any officer of the Company any questions they may want clarified.

 

The minutes of the ASM available in the Company’s website also documents the attendance and participation of the Board of Directors, Management and the members of the different Board committees.

 

Voting by Proxy/ Voting in Absentia

 

The shareholders may vote in person or by proxy. Arrangements for proxy voting or voting in absentia are in line with existing rules and regulations. The Company provides shareholders with a copy of the proxy form through the following: (1) printed copy enclosed in the Definitive Information Statement; (2) digital copy inserted in the USB kit containing the soft files of the Information Statement; and (3) downloadable form from the Company’s website.

 

In its regular board meeting last November 12, 2010, the Board of Directors of the Company approved the deletion of the notarization requirement of proxy forms to be used in all shareholders’ meetings  of the Company. This is to facilitate easy voting by shareholders, in line with the Company’s efforts to improve corporate governance practices.

 

Every year, a Proxy Validation Committee, consisting of representatives from senior management was formed by the Company in order to validate and count proxies received for the ASM. An independent auditor, Luis Cañete & Company, was appointed as independent inspector/ scrutineers for the validation of votes during the 2019 and 2020 ASM.

 

The Company intends to secure electronic voting in absentia in its future ASMs.

 

Voting by Poll

 

Voting during the ASM is done by poll, under the supervision of the Company’s Corporate Secretary, Stock and Transfer Agent, and validated by the Proxy Validation Committee and an independent third party inspector of votes. The Board Secretariat also uses an electronic platform to record the votes.

 

Appointment of Independent Party Inspector to Validate Vote at the ASM

 

At the ASM, the Company engages an independent third party to assist in the validation of proxy and the counting of votes. In the 2017 ASM, a Proxy Validation Committee, consisting of representatives from senior management, was formed by the Board Secretariat in order to validate and count proxies received for the meeting. Luis Cañete & Co., an independent third party, provided the proxy and vote validation functions for the 2017 ASM.

 

Disclosure of the Results of the ASM

 

Approved Shareholders’ resolutions and the minutes during the ASM are disclosed and made publicly available on the Company’s website on the next working day after the ASM. The minutes of the 2019 meeting of shareholders were uploaded to the Company’s website the day after the ASM or on April 23, 2019. The minutes can be accessed on the Company’s website at www.aboitiz.com under Investor Relations’ page.

 

Agenda for the Shareholders’ Meeting Rationale and Explanation for Each Agenda Item

 

The Company provides at least 28 days prior notice of the meeting and information on all proposed resolutions and rationale thereof with corresponding explanation for each agenda item requiring shareholders’ approval in the notices of the ASM. The Company also publishes notices of the shareholders’ meetings in national newspapers of general circulation.

 

Each resolution relates to only one agenda item, and a brief rationale or explanation for its inclusion in the ASM is provided. The Company does not include any additional and unannounced agenda item in the ASM if not disclosed prior to the ASM.

 

Appointment of Independent Party in cases of Mergers, Acquisitions or Takeovers

 

The Board delegates to Management the power and discretion to engage independent parties to evaluate the fairness of the transaction price for the acquisition or disposal of assets, which will depend on the size of the transaction, the jurisdiction(s) involved, and the availability and capacity of expertise in-house. Depending on the factors mentioned, Management then decides whether to engage an independent party to evaluate the fairness of the transaction price.

 

The Company has a deep bench of competent investment and finance experts who are capable of evaluating the fairness of the transaction price. The Chief Strategy Officer of the Company has a wealth of experience in management, investment banking, and private equity investing, including almost 38 years of experience in energy markets. Taking into account the size of the transaction and its overall effect on the Company’s businesses and positions, the entire transaction, including the transaction price, is presented to the Board for approval.

 

In 2018, the Company appointed Morgan Stanley as financial advisor to the Aboitiz Group in the acquisition of a 75% stake in Gold Coin Management Holdings Limited.

 

Policies and Practices to Encourage Effective Exercise of Ownership Rights

 

The Company strives to maintain a transparent and fair conduct of its annual and special shareholders’ meetings and ensures that accurate and timely information should be made available to the shareholders to enable them to make a sound judgment on all matters brought to their attention for consideration or approval. The Definitive Information Statement and the Aboitiz Integrated Annual Report, distributed prior to and during the ASM and available in the Company’s website, include the highlights and summary of the financial condition of the Company. The Definitive Information Statement filed with the PSE, PDEx and SEC is prepared with the objective of providing full and accurate and truthful information enabling stakeholders to make informed decisions. Shareholders are provided with individual profiles of new and returning directors, as well as a summary of the Board meeting attendance and performance record of its Directors. Agenda items are included in the notices and includes a rationale for each agenda item.

 

The Company continues to exert efforts to extend the communication channels between the Company and the institutional shareholders through its Investor Relations Office and to the nominee registered shareholders through the PCD Nominee Corporation. The Governance and Compliance team reach  out and provide copies of the notice and agenda of the ASM, sample proxy forms, and the Definitive Information Statement prior to the shareholders’ meeting for dissemination to the brokers to ensure that institutional investors are properly represented during the shareholders’ meeting.

 

As a matter of policy, the Company does not solicit proxies.

Conflict of Interest

The Aboitiz Group believes that it is the duty of the Board of Directors to advance the Group’s interests and those of its stakeholders. To this end, AEV has adopted a Policy on Conflict of Interest, which promotes an ethical corporate culture and prohibits directors, officers, team leaders, and team members from taking advantage of access to corporate property and proprietary information for personal gain. The policy also encourages the disclosure of relationships, actions, or transactions that may give rise to a conflict of interest.

 

In addition, AEV directors are required to abstain or inhibit themselves from any Board discussion or decision that affects or has relevance or relation to their personal, business or professional interests; are prohibited from engaging in any business that competes with or is antagonistic to the Group; and must notify the Board, through the Corporate Secretary, prior to accepting any directorship outside the Aboitiz Group during their term.

Disclosure & Transparency

The Board and Management of the Company believe that a commitment to proper disclosures and transparency of the businesses elicit the trust and confidence of stakeholders. The Aboitiz Group puts a high premium to its reputation and work at keeping this well-earned trust of stakeholders gained over the years. Pursuant to the Group’s commitment to transparency and accountability, the Company continues to improve its dedicated corporate governance web page on its website.

The corporate website makes available to the public, copies of the annual corporate governance reports, annual reports, company disclosures, investor reports, organizational information, and Board and Board Committee membership, policies such as the Manual on Corporate Governance, Code of Ethics and Business Conduct, minutes of the ASM, Investor Relations Information, and other information relevant to stakeholders. The website serves as a resource center for stakeholders and the public. The Board Secretariat is also fully committed to ensuring full and accurate disclosures of information to shareholders, to the general public and all other stakeholders.

Transparent Ownership Structure

As of December 31, 2020

 

Please click here for the latest ownership structure.

 

Monitoring of Insiders’ Share Ownership

While the Company encourages stock ownership by employees, to ensure ethical conduct, the Company through its Governance and Compliance Team and Board Secretariat, monitors the share ownership of directors, executives, officers and management team through the regular SEC disclosures of beneficial ownership (SEC Form 23-B), and tracking of compliance through the implementation of the Company’s General Trading Policy and Trading Black-out dates.

The Company is committed to elevating its standards of disclosure and transparency and the quality and depth of its corporate governance practices to enable the investing community to understand   the true financial condition of the Company. Through the Investor Relations Office, the Office of the Corporate Secretary, the Annual Report, Aboitiz Integrated Annual Report, the Company website, the Company’s Information Statement and all disclosures to the PSE, PDEx and SEC, the Company publishes timely material information on all matters regarding the Company, including, the financial situation, performance, ownership, and governance of the Company. Regular disclosures include details of the Company’s subsidiaries, associates, joint ventures and special purpose vehicles, if any. There are no special arrangements enabling certain shareholders to obtain a degree of control disproportionate to their equity ownership that needs to be disclosed.

 

Identity of the Beneficial Owners Holding 5% or More Shares 

Disclosure of Direct and Indirect Shareholdings of Major/Substantial Shareholders

Disclosure of Direct and Indirect Shareholdings of Directors and Senior Management

 

The Company discloses beneficial ownership in its Annual Report and Information Statements to the SEC including trading of Company shares of its directors and key officers. Non-compliance with the policy may carry criminal and civil liabilities as well as reputational damage to the Company, the Board, the Management and the Office of the Compliance Officer strictly enforce compliance with the Trading Policy.

 

The Company has an existing policy requiring the Board of Directors and the officers to report to the Office of the Corporate Secretary any transaction related to the purchase and disposal of Company shares within one business day from the date of the transaction. The Company discloses the direct and indirect (deemed) ownership or shareholdings of major and/or substantial shareholders and the details of the subsidiaries, associates, joint ventures and special purpose enterprises/vehicles. The Company’s Information Statement and Public Ownership Report regularly filed by the Company likewise show the direct and indirect ownership of the Company’s shareholders, which include its Board, the Management Team, and employees. Regular disclosures to the PSE, PDEx and SEC are made in the event of any dealings in Company shares. These disclosures are available at the Company’s website and can also be accessed from the PSE portal.

 

Based on the Company’s Public Ownership Report which was filed with the SEC and PSE and subsequently posted in the Company’s website, below is the direct and indirect ownership of directors and senior management of the Company as of December 31, 2019 and December 31, 2020:

Insider Trading Prohibition

 

Insider trading is strictly prohibited under the Company’s General Trading Policy, the Code of Ethics and Business Conduct, the Company’s Manual on Corporate Governance, and under the PSE and SEC rules. The Company’s General Trading Policy prohibits every member of the Company’s organization, from any misuse of insider information. All team members of the Company are mandated to exercise prudence in handling material non-public information in the course of their work and in relation to the trading or dealing with AEV securities. The Company strictly enforces its trading blackout and insider trading policy to curtail opportunistic dealings in the Company’s shares. Any violations are required to be reported to the Board Corporate Governance Committee.

 

Reporting of Share Trades

 

The Company ‘s General Trading Policy requires the Board of Directors and the officers to notify the Company at least one (1) day before they deal in the company shares. Directors and key officers are required to regularly report their beneficial ownership of shares in the Company and any dealings in AEV shares must be reported to the Corporate Secretary within one day from the sale or purchase of AEV shares. In addition, the Company discloses beneficial ownership in its Disclosures (SEC Form 23-B and Public Ownership Report, the Annual Report, and the Information Statements to the SEC including trading of Company shares of its directors and key officers. There has been no investigation of violation and conviction of insider trading and abusive self-dealing by directors, management and employees in the past five years that the Trading Policy has been in place.

Enterprise Risk Management

The Aboitiz Group believes that a balance between business priorities and societal needs is needed for a sustainable future. The Risk Management Team supports the Group’s sustainability efforts by ensuring that we have an Enterprise Risk Management program that helps manage sustainability issues and create shared value for our communities. We are able to accomplish this by utilizing a robust risk management process, creating awareness, and building team member capabilities while maximizing available resources and technologies. The year 2020 underscored the importance of Risk Management in organizations. Our well-established Enterprise Risk Management program, with its Level 4 Risk Maturity rating, backed the Group’s resilience during the unprecedented pandemic. Risk Management will continue to take a full organizational approach, integrating with other business functions to drive a clearer understanding of our risks.

To adapt to the changing environment, we revisited the Financial and Supply Chain Risk Management Frameworks and the Group Risk Management Competencies in 2020. In light of the pandemic, we incorporated many revisions and the enhancements in our risk treatment plans. We also started to formalize the Pandemic Risk Management Framework as a guide for current and future occurrences. In collaboration with our external partners, we continued to build the risk management capability of the organization through e-learnings and other knowledge-sharing sessions on risk topics.

We will continue to collaborate with the Strategy and Reputation Teams for the sustainability and climate risk-related initiatives of the Group; the output will eventually be integrated into the Risk Management Framework. In 2021, apart from our ERM operational activities, we will start setting up our Risk Management and Risk Finance systems. We will also enhance our existing Risk Framework to better support the management of the Group’s top risks and material sustainability issues, including climate-related risks.


See discussion of the Company’s risk management initiatives in the company’s Integrated Annual Report and Definitive Information Statement.

Economic, Social, and Environmental Impact

The Aboitiz Group remains committed to support economic growth, social development, and environmental stewardship in the conduct of its businesses. The concept of balance between planet, people, and profit is not a new concept on how the Aboitiz Group operates its businesses. Advocacy and adherence to environmental sustainability and care for stakeholders have always been part of the Aboitiz Way – living the core value of Responsibility. In 2020, AEV and AboitizPower officially established an ESG governance structure to integrate existing corporate social responsibility, corporate governance, and environmental sustainability programs. The goal is to create an integrated approach in developing, implementing, monitoring, and communicating initiatives and results to the Group’s internal and external stakeholders.

The Aboitiz Integrated Sustainability Report outlines the coordinated efforts of the Group’s sustainability stewards and applying ESG principles to improve the Group’s performance on team member engagement and development, corporate social responsibility, customer focus, disaster resilience, carbon emissions reduction, resource efficiency, renewable energy, waste management, financial growth, and financial returns. The Sustainability Report is available for viewing and downloading at www.aboitiz.com.

Transparency, Communication, and Sustainability Reporting

The Aboitiz Group’s governance framework includes the timely, complete, and accurate disclosure of all material information regarding AEV and AboitizPower. Information includes earnings results, acquisitions or disposals of assets, Board changes, RPTs, shareholdings of directors, and changes in ownership. In addition, the Group’s Consolidated Annual and Sustainability Report, which is based on GRI Sustainability Reporting standards, sets out its values and governance model. The integrated report links the Group’s strategy and its commitment to a sustainable global economy. Through the report, the Group is able to measure, understand, and communicate its economic, environmental, social and governance performance. From these, goals can then be set, and change managed more effectively. In 2020, the Board of Directors of AEV and AboitizPower approved the proposed governance framework needed to organize, cascade, manage, and communicate the Group’s ESG initiatives to its internal and external stakeholders.

Safeguarding creditors’ rights

The Company values the contribution of its clients, business partners, suppliers and other stakeholders as it strives to achieve its corporate mission and vision.  In recognition of the contributions of its valued shareholders, the Company is committed to engage in fair practices when dealing with them.

The Aboitiz Group seeks to outperform its competition fairly and honestly through superior performance.  Every director, officer and employee must therefore always keep the best interests of the Company’s clients paramount and endeavour to deal fairly with suppliers, competitors, the public and one another.  No one should take unfair advantage of anyone through manipulation, abuse of privileged information, misrepresentation of facts or any other unfair dealing practices.

 

Please click here to view the Company’s Code of Ethics and Business Conduct.