Aboitiz Corporate Governance in 2018

 

Over the years, the Aboitiz Group has grown its core businesses of power, banking and financial services, food infrastructure, land, and portfolio services. In 2018, this growth was bolstered when the Food Group acquired 75% of Gold Coin Management Holdings Limited. It was a feat that increased the scope and breadth of the Food Group’s animal feeds manufacturing business into 20 feed mills situated in 11 Asia-Pacific countries.  

 

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 its core values and has been institutionalized in the respective Manual, Codes of Ethics, and key company policies and protocols of AEV. These include policies on trading, sustainability, and on whistleblowing, as well as on the different Board Committee charters.  These documents are frequently reviewed and updated to align with the best corporate governance practices. The respective Boards of Directors of the two companies oversee, monitor, and review the effectivity of the Group’s corporate governance framework.

 

In addition, the Manuals,  Codes of Ethics, and other policies are continuously disseminated to all team members through various means – during the new hires orientation, HR seminars and trainings, and e-learning courses, among others. Team members also have ready access to these documents through the Group’s internal documents storage system (e-docs) and the AEV website.

Aboitiz Governance Structure

The Board of Directors

 

The Group believes that compliance with the principles of good corporate governance starts with the Board of Directors.  The AEV Board of Directors performs the crucial role of determining and reviewing each company’s purpose, vision and mission, and strategies to carry out its objectives.  They ensure that the strategic business direction of the various businesses are soundly established and are in line with the overall Group’s goals and strategy.   Mindful of their responsibility to foster long-term success and secure each company’s sustained growth and competitiveness across all businesses, members of the AEV Board, individually and collectively, are expected to perform their functions in a way that is consistent with the Aboitiz core values.

 

Directors are drawn from a pool of highly qualified professionals, each with their own subject matter expertise to contribute to the management and operations of the Group.  Each Board has three independent directors and six independent-minded executive and non-executive members, all of whom come from diverse professional backgrounds. They are a mix of legal and finance professionals, engineers, former or current CEO/COOs, auditors, and accountants, many of them with management experience in the private and government sectors, as well as in multilateral agencies.

 

The Chairman of the AEV Board are highly experienced, non-executive directors who are not involved in the Group’s day-to-day operations.  They therefore remain focused on refining each company’s long-term strategy.

 

AEV has five Board committees: Corporate Governance, Risk and Reputation Management, Audit, Related Party Transactions (RPT), and the Executive Committee.  All three independent directors sit in these committees, except in the Executive Committee.  Majority of the members of the Corporate Governance, Audit, and the RPT Committees are independent directors.  Each committee oversees or implements an important aspect of the Group’s corporate governance framework and has its own charter, which can be viewed at the Company website.

 

Roles and Responsibilities of the Board of Directors 

 

The roles and responsibilities of a member of the Board of Directors are clearly defined in the Company’s Amended By-Laws and in the Company’s Manual on Corporate Governance. The main purpose of the Board, as expressly stated in the manual, is to represent and protect the interests of the owners of the business, i.e., the internal shareholders, and all other key external stakeholders, regardless of category, in accordance with the Company’s corporate charter and applicable laws. To ensure a clear distinction of the responsibilities in the management of the Company’s business, the positions of the Company’s Chairman and CEO are held separately by different individuals.

 

Commitment to Corporate Vision and Mission

 

The Company recently adopted its Purpose Statement: to drive change for a better world. Guided by our core values, we the Aboitiz Group are committed to drive change for a better world by advancing business and communities and create long term value for our stakeholders.

 

In line with the Company’s Purpose Statement the Board of Directors recognizes its role of providing leadership and stewardship to the Company, its shareholders, and all other stakeholders. The role of the Board is to represent and protect the interests of the owners of the business and other key external stakeholders, regardless of category, within the boundaries of its corporate charter, and all relevant statutes and legal regulations and rules. The primary purpose of the Company’s Board is to provide governance and oversight to the Company and its businesses in which it has direct or indirect interests. In addition, its responsibilities extend to other stakeholders in respect of compliance with regulatory standards; the provision of appropriate information and updates; and the effective representation and protection of the Aboitiz brand and reputation. The Board is responsible for the success of the Company through its supervision and oversight over affairs in a responsible and effective manner.

 

Review of Corporate Vision and Mission

 

The Company’s Board of Directors recognizes its role of providing leadership and stewardship to the Company, its shareholders, and all other stakeholders. The role of the Board is to represent and protect the interests of the owners of the business and other key external stakeholders, regardless of category, within the boundaries of its corporate charter, and all relevant statutes and legal regulations and rules. The primary purpose of the Company’s Board is to provide governance and oversight to the Company and its businesses in which it has direct or indirect interests. In addition, its responsibilities extend to other stakeholders in respect of compliance with regulatory standards; the provision of appropriate information and updates; and the effective representation and protection of the Aboitiz brand and reputation. The Board is responsible for the success of the Company through its supervision and oversight over affairs in a responsible and effective manner.

 

The Board participates in an Annual Board Retreat and Strategy Refresh to discuss both the strategic roadmap and policies of the Company, and a review of the Company’s vision and mission. The Board together with key officers participated in a strategy workshop last November 23, 2019, to refresh the Company’s vision, mission, strategy and corporate initiatives and core businesses. As a result of this strategy refresh, the Company has now added a fifth leg to its core businesses; adding infrastructure to the existing lines of banking and financial services, power, real estate and land development and food.

 

Policy on the Diversity of the Members of the Board

 

The annual selection process is intended to appoint a diverse mix of highly-competent directors and officers with in-depth knowledge and experience in the core industries of the Company and/or corporate management and financial expertise. Other factors that are considered are independent- mindedness, ethical behavior and value contribution. The Company follows a formal and transparent board nomination and election process to ensure the protection of the interests of all shareholders. Any shareholder may nominate a Director and Independent Director. Nominees for Directors are submitted to the Board Corporate Governance Committee (to which the Nominations and Compensation Committee has been merged into). The overall procedure is in compliance with the Amended Implementing Rules and Regulations of the Securities Regulation Code.

 

Term Limits of Independent Directors

 

The Company complies with the requirements of SEC Memorandum Circular No. 19, Series of 2016 prescribing term limits for Independent Directors. As a rule, Independent Directors may serve for a maximum of nine (9) consecutive years, starting from 2012, making sure however that the stockholders’ legal right to vote and be voted directors remains inviolable. If the Company wants to retain an independent director who has served for nine consecutive years, the Board shall provide meritorious justifications and advise the stockholders of such justifications during the ASM.

 

 

Limitation on Board Membership of Independent Directors

 

In the Company’s Manual on Corporate Governance, the Board Corporate Governance Committee shall consider among others, number of directorship/active memberships and officerships in other corporations or organizations in the selection of board of members. The same limitation applies to independent directors.

 

The Independent Directors of the Company do not sit in more than five (5) boards of publicly-listed companies (PLCs). Justice Jose C. Vitug (Ret.) sits as an Independent Director in only one other PLC, the ABS-CBN Holdings Corporation. Mr. Manuel R. Salak III is not a director in any other PLC, and Mr. Raphael P.M. Lotilla sits on the board of Trans-Asia Petroleum Corporation. This is shown in the certification of affiliations required from each of the nominated Independent Directors. Likewise, executive directors do not generally sit on other boards of PLCs outside the Group, unless they have substantial interest in the said company or they have been asked to sit in the capacity as independent directors. The executive directors do not sit in more than two boards of listed companies outside the Aboitiz Group.

 

Executive Directors in the Boards of Other Listed Companies

 

Executive Directors do not generally sit on other boards of PLCs outside the Group, unless they have substantial interests in those PLCs or they have been asked to sit in the capacity as independent directors.

 

The Company’s executive directors do not sit in more than two boards of publicly listed companies outside the Aboitiz Group. The Company’s Manual on Corporate Governance also provides that the CEO and other executive directors shall submit themselves to a low active limit on membership in other corporate boards.

Board & CSU Committees

The Company and its Management teamwork through other committees for the formulation and implementation of management policies.

Board Audit Committee

Purpose / Objective

 

  • Ensures the integrity of the Company’s financial reporting processes, including ensuring the integrity of financial reports and other financial information provided by the Company to the public, governmental and/or regulatory bodies.
  • Ensures the adequacy and effectiveness of the Company’s internal control system, governance processes and risk management processes and reviewing the performance on the Company’s internal audit function.
  • Reviews the annual independent audit of the Company’s financial statements and the external auditors’ qualifications and independence.
  • Ensures compliance with applicable laws and regulations which may represent material financial exposure to the company.

Board Corporate Governance Committee

Purpose / Objective

 

The purpose of the Corporate Governance Committee is to oversee the adoption and implementation of governance principles and guidelines of the Aboitiz Group, including the following:

 

  • The establishment of legal and regulatory compliance structures and processes required under securities laws, rules, and regulations and other applicable laws;
  • The adoption of the nomination process and procedures for Board membership and senior leadership roles in the Aboitiz Group, and the review of various compensation matters;
  • The selection and identification of qualified individuals to become members of the Board;
  • The determination of the appropriate composition of the Board and its committees;
  • The performance evaluation of the Board, Board Committees, and Senior Officers; and
  • The onboarding and continuing education of directors;

Board Executive Committee

Purpose / Objective

 

The Executive Committee was constituted to assist the Board of Directors in overseeing the Company’s day to day operations. This ensures agility in the management of the Company and in strategic decision-making, as well as compliance with the Company’s governance policies, during the intervening period between Board meetings.

Board Related Party Transactions Committee

Purpose / Objective

 

The Board Related Party Transactions (RPT) Committee was constituted to ensure transparency and fairness of RPT within the Group. Its duties and responsibilities under the charter include:

 

  • to review proposed material RPT for the purpose of determining whether or not the transaction is conducted at an arm’s length basis and on terms no less than favorable than any such terms available to unconnected third parties under the same or similar circumstances.
  • to review, on an ongoing basis existing relations between and among business 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.
  • to ensure that appropriate disclosures are made, and/or information are provided to regulatory and supervisory authorities relating to AEV and AboitizPower’s RPT exposures, and policies on conflicts of interest.
  • to report to the Board, 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.
  • to ensure that transactions with related parties, including write-off of exposures are subject to a periodic independent review or audit process; and
  • to oversee the implementation of the system for identifying, monitoring, measuring, controlling, and reporting RPTs.

Board Risk and Reputation Management Committee

Purpose / Objective

 

The Board Risk and Reputation Management Committee is established to provide a venue for discussion of risk and reputation management issues for the purpose of:

 

  • Establishing and maintaining a constructive and collaborative relationship among the Group’s senior management team and the Board.
  • Assisting the Board, and to some extent the Board Audit Committee, in fulfilling its corporate governance responsibilities through better integration and collaboration of risk, reputation and audit management functions.

The Board Risk and Reputation Committee is authorized to deal with any activity within its Charter, including the authority to secure the attendance of outsider experts with relevant experience and expertise as it deems necessary in the performance of its duties.

 

The Committee shall represent the Board in discharging its responsibility relating to risk and reputation management related matters around the Group as outlined below. The Committee does not have decision-making authority, except in the circumstances described herein or to the extent that such authority is expressly delegated by the Board:

 

  • At least annually, review and consider the Group’s risk management policy considering (but not limited to) the following: strategic risks, operational risks, financial risks, legal and compliance risks, emerging risks, project risks.
  • Provides a forum to review exposures and strategies to mitigate risks with relevant Group senior leaders and business managers and make recommendations to the Board related to changes to the policy based on this review;
  • Undertake a periodic review of the delegated authorization and control levels. Following consultation with the CEO, COO and CFO, make recommendations to the Board related to any changes in these levels seen to be appropriate based on this review;
  • Review the Group’s senior leadership’s proposed risk appetite and risk tolerance at least annually and if advisable, recommend it for Board approval;
  • At least annually, reviews policies and procedures in consultation with individual business leaders and risk managers and recommend changes as appropriate.
  • Monitor and review the Group’s senior leadership’s reports on the following: Group’s risk profile-identifying material risks associated with the Group’s business and operations; emerging risk issues and trends; compliance with the risk appetite and risk tolerance limits and established policies and procedures; overall adherence to the Group’s defined risk appetite;
  • Ensure the proper implementation of the reputation management framework across the Group by identifying, evaluating and monitoring reputation issues to mitigate risk;
  • Review with the Group senior leadership the following: results of the reputation survey that is conducted annually by the reputation management team; Group’s corporate brand and communication strategy; exposures and strategies that will mitigate reputation risks; social media strategy and corporate policy in place, as well as strategy and programs on corporate social responsibility to ensure that these are updated; ensure the proper implementation of the reputation management framework across the Group by identifying, evaluating and monitoring reputation issues to mitigate risk.

CSU Level Committees

Purpose / Objective

 

  • Provides a standard way of pulling together information on investment opportunities.
  • Provides an early opportunity for information to flow in two ways to help team members and management to understand any deal.
  • Ensures timely investment and timely evaluation of opportunities available to us.

Business Insights (Data) Committee

Purpose / Objective

 

  • AEV Data Science and Analytics will harness all data to create synergy and improve efficiencies in the Aboitiz Group.
  • Gather all the data permitted by data privacy rules and link it together, so we gain a deeper understanding of our customer ecosystem while improving customer experience.
  • The mandate is to leverage on the Aboitiz Group’s capabilities, so we can expand and explore new products and services relevant to the B2B and B2C market.

Corporate MANCOM

Purpose / Objective

 

  • Review the overall strategic direction, plans, programs, initiatives and budgets of the Corporate Service Units (CSU)
  • Review group-wide initiatives, projects and programs prior to endorsement and approval by the Group Mancom; monitor execution of approved initiatives, projects and programs
  • Review and approve AEV policies and benefits
  • Conduct Key Talent Reviews (KTR) for officer positions
  • Review and approve CSU manpower plantilla
  • Review and approve promotions from manager to AVP, and from AVP to VP level
  • Review CSU achievements of goals and performance

Digital Committee

Purpose / Objective

 

  • Sets and oversees group Digital Strategies and Direction
  • Create a digital strategy and framework to enable the Aboitiz Group to become an intelligent and digital-ready business.
  • Provide common goals on technologies, processes, and capabilities to build models for digital business and service delivery.
  • Strengthen organizational culture and stakeholder experiences by building a unified digital environment.

Finance Committee

Purpose / Objective

 

  • Reviews long-term financing requirements including operational companies, greenfield projects, and business development projects, which include acquisitions
  • Reviews placement limits and investment outlets
  • Reviews credit lines (short-term lines and credit borrower’s limit)
  • Reviews cash flows
  • Reviews foreign exchange hedging requirements
  • Updates on market directions on interest rates and foreign exchange

Government Relations Council

Purpose / Objective

 

  • Monitors, assesses, and leads discussion on proposed government policies and legislation
  • Monitors, assesses, and leads discussions on key national issues

Group Human Resource Committee

Purpose / Objective

 

  • Develops Group HR strategy and goals; recommends to Group Mancom for approval
  • Develops Group HR Policies and Guidelines; recommends to Group Mancom for approval
  • Champions Group projects, initiatives, and programs that support HR strategy; monitors execution of plans at SBU/BU level; supports critical BU needs in partnership with CEO/COO
  • Develops RACI where relevant; Identifies role of Corporate HR vs SBU/BU HR Teams
  • Partners with AEV Group HR team to deliver on AEV CSU roles – Governance, Business Partnering and Center of Excellence
  • Manages Group talent-related risks in partnership with CEO/COO/ SBU HR and Risk Teams

Group MANCOM/Risk Management Council

Group MANCOM Purpose/Objectives

 

  • Develops group business goals and strategies, for approval by the ACO, AEV, and AboitizPower Boards
  • Reviews and provides input into SBU business goals and strategies
  • Communicates goals and strategies, along with appropriate success measures, to other leaders throughout the Group
  • Oversees the successful execution of group strategies and achievement of goals
  • Reviews and approves all group policies and guidelines.
  • Reviews and approves group-wide initiatives, projects and programs that are aligned to group strategic goals; approves cost allocation across BUs
  • Conducts Key Talent Reviews (KTR), reviews succession plans, and approves appointments and promotions for senior management positions

 

Risk Management Council Purpose/Objectives

 

  • Provide a venue for discussion of Group Risk Management strategies, programs and initiatives
  • Promote a proactive perspective in identifying, mitigating or managing all known and emerging risks
  • Assist the Board in ensuring that Aboitiz Group has a structured, consistent and effective approach to risk management

 

Duties and Responsibilities

 

  • Ensure a structured and consistent approach to Group risk management through establishing four major focus areas demonstrated as risk management strategic pillars: Governance, Business Partnering, Process and Integration and Capability Building.
  • Promote a proactive and dynamic perspective in monitoring and handling all known and emerging risks, risk trends and mitigation strategies.
  • Establish a clear and credible approach to fulfilling its social and environmental responsibilities to avoid exposure to reputational risks.
  • Assist the board in ensuring that the company has an effective risk management process, which includes the management of the key risks the company is facing and the follow up of risk appetite, risk tolerance, risk framework and risk strategy.
  • Continually obtain reasonable assurance from risk management heads that all known and emerging risks have been identified and mitigated or managed.
  • Review and assess the effectiveness of the company’s enterprise-wide risk assessment processes and risk management capabilities, recommend improvements, where appropriate; review and address, as appropriate, management’s corrective actions for deficiencies that arise with respect to the effectiveness of such programs.
  • Ensure that risk management is aligned with the Statement of Risk Appetite approved by the Board.
  • Enhance corporate governance by developing and implementing a comprehensive, Enterprise Risk Management (ERM) programs to cultivate awareness, understanding, and support for risk management initiatives as part of the Group’s overall strategic plan.
  • Approves all insurance strategies and insurance premiums beyond 2B insured value.

Insurance Management Committee

Purpose/Objectives

 

  • Formalize the governance and management of insurance requirements across the Group.
  • Ensure risk transfer strategy is in accordance with BU’s / Group’s risk management plan.
  • [General] Oversight function on insurance requirements of the group including review, evaluation, sufficiency and competitiveness of insurance programs
  • [General] Management of operation and administration of the Group’s Captive Insurance company.
  • Approval of insurance programs for risks up to Php2B. Beyond this amount, endorse approval to Risk Management Council
  • Review, validate and approve insurance management strategies
  • Approval of the appointment of Risk Management Advisor (insurance broker)
  • Approval on the use of Risk Management Fund of the Group

IT Committee

Purpose/Objectives

 

  • Ensure the effective and efficient use of technology and resources in executing the digital strategies and direction of the group.
  • Develop IT strategies and the Group IT Plan
  • Ensure IT risks are managed at an optimal level
  • Secure maximum value from IT-enabled initiatives
  • Monitor and evaluate IT execution and performance

Legal and Compliance Committee

Purpose/Objectives

 

  • Provide a venue for discussion of major legal and compliance risk management issues of the Aboitiz Group;
  • Review key governance, legal and compliance policies for the Group;
  • Address cross-functional challenges in transactions and projects by promoting high coordination among the SBUs and AEV.
  • Foster strong partnership and alignment of practices among the SBUs and AEV.

Reputation Council

Purpose

 

  • Develops strategy and group-wide initiatives related to reputation management, CSR, and sustainability
  • Sets policies and guidelines related to corporate communication, media relations, branding, CSR and sustainability
  • Reviews, monitors, and reports implementation progress of group-wide projects related to corporate communication, media relations, branding, CSR, and sustainability

Objectives

 

  • To BUILD trusting relationships
  • To ENHANCE our brand through effective communication
  • To PROTECT against risks
  • To RESTORE and rebuild trusting relationships

Retirement Fund Committee

Purpose

 

  • Resolve all questions relating to the operations, administrations, and interpretation of the rules and regulations of the Retirement Plan, except those strictly pertaining to its investments.

Risk Management Steering Committee

Purpose

 

  • AEV’s Risk Management Steering Committee (“Steercom”) is an oversight committee of all risk management activities in the Aboitiz Group.
  • It provides assurance to the Board Risk and Reputation Management and Risk Management Council that at all times, AEV has a sound, comprehensive, appropriate, and effective risk management framework in place, capable of addressing risk-related issues that may affect the achievement of the Company’s objectives.

 

Objectives

 

  • Reviews and recommends group-wide Risk Management and Insurance policies, strategies and initiatives for RM Council review and approval
  • Reviews, monitors, and reports implementation progress of group-wide Risk Management and Insurance projects and initiatives
  • Serves as forum for discussing key risk issues, emerging risks and sharing Risk Management knowledge, best practices, experience and research work

Safety Committee

Purpose

 

  • Safety in Aboitiz Group at NAC Tower, BGC, Taguig City requires that everyone is formally informed of policies, procedures and practices.
  • Implementation of safety programs is effective if meetings are held in the realization of desired key results areas and if the need to organize safety workforce is addressed.

 

Objectives

 

  • Ensure that an organization between management and rank & file is in place to comply with regulatory standards, spearhead effective and efficient implementation of OSH policies and programs;
  • Promote and maintain and atmosphere of open and harmonious discussion of safety issues for the prevention of accidents and injuries and control of hazards;
  • Applicable safety organization and meetings are indispensable in the continual effectiveness and efficiency in implementing safety programs

Security Council

Purpose/Objectives

 

  • Oversight council of all physical assets security management activities in the Aboitiz Group
  • Provides assurance to AEV Board and Senior Management that at all times, the Group has a sound, comprehensive, effective and efficient physical security management framework in place, capable of addressing security-related threats and issues that may affect the achievement of the Company’s objectives

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 Corporate Governance Committee 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 with the non- executive directors, including the Chairman of the Board Corporate Governance Committee, at Taguig City on November 23, 2018 for their informal discussion of issues.

Nomination, Selection & Election of Directors

The Aboitiz Group believes that the nomination, selection, and election of directors are fundamental elements of a well-functioning corporate governance system.  The Corporate Governance Committee acts as the nomination committee and oversees the selection of candidates for independent and regular directors. The committee ensures that there is diversity in the Board in terms of experience, profession, age, and gender.

 

Directors are nominated by shareholders based on their expertise and professional backgrounds, track record, capacity for strategic thinking, and understanding of the Group’s businesses.  The Corporate Governance Committee then evaluates and recommends the final list of candidates.  All directors are elected at the annual shareholders meeting (ASM), by personal vote or by proxy.  A Proxy Validation Committee validates all proxies prior to the ASM.

 

Criteria in Selecting New Directors

 

For an effective Board, the Company takes serious consideration of the selection of members of the Board. The selection is based on the following minimum qualifications: (i) ownership of at least one share of stock of the Company in compliance with the Corporation Code of the Philippines; (ii) university education or sufficient experience in managing the business, in lieu of a college education; (iii) at least 21 years old; (iv) proven to possess integrity and probity; (v) no conflict of interest; (vi) able to devote his time in fulfilling his duties and responsibilities as Director; (vii) practical understanding of the businesses of the Company; (viii) membership in good standing in relevant industry, business or professional organizations; and (ix) previous business experience. Each member of the Board is identified and selected for the depth of experience and wisdom he is expected to provide to the Company, considering that the Company’s business is a unique aggrupation of businesses, requiring the capability to understand power industry financials and technical matters.

 

The annual selection process is intended to appoint a diverse mix of highly competent directors and officers with in-depth knowledge and experience in the core industries of the Company or corporate management, financial expertise, audit and governance experiences. Other factors considered are independent-mindedness, ethical behavior and value contribution of each director. The Company follows a formal and transparent board nomination and election process to ensure the interests of all shareholders. Any shareholder may nominate a director and Independent Director. Nominees for directors are submitted to the Board Corporate Governance Committee, to which the Nominations and Compensation Committee has been merged into. The overall procedure is in compliance with the Amended Implementing Rules and Regulations of the Securities Regulation Code.

 

The criteria for selection of independent directors include, not only their expertise and professional backgrounds, but also their track records for being independent minded, their strategic thinking, and their understanding of the drivers of our Group’s 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. The 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 at the annual shareholders’ meeting.

 

As a corporate practice, Directors of the Company sit as directors in no more than five (5) publicly-listed companies. (See Manual on Corporate Governance, at www.aboitiz.com)

 

Process Followed in Appointing New Directors

 

The Company’s Guidelines for the Nomination and Election of Independent Directors are available in the Company’s website at www.aboitiz.com under the Corporate Governance webpage.

 

The Company also discloses the process of electing regular and independent directors in the Definitive Information Statement, copies of which are distributed to the shareholders and uploaded in the Company’s website at www.aboitiz.com.

 

Re-Election of Directors

 

All directors are elected every year. A Board director holds office for one year until his successor is elected at the next ASM in accordance with the Corporation Code of the Philippines, the Company’s By- Laws and the SEC guidelines. Shareholders may nominate board members individually through the nomination process. At the ASM, and in accordance with the Revised Corporation Code of the Philippines, the Company follows 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 Corporation Code of the Philippines.

 

Directors Selection Database

 

The Company uses professional search firms, external sources of candidates including director databases, professional organizations (whether Philippines or offshore) when searching for candidates for nomination of independent directors. The Company uses all available professional databases and information resources for the selection of Directors, whether through professional search firms or other external sources of candidates.

Annual Shareholder Meetings

The AEV Board encourage active shareholder participation by sending the ASM notice and agenda at least 28 days before their respective shareholders’ meeting.  The notices, agenda, and the rationale for each agenda item, as well as sample proxies and meeting venue are also made available on each company’s website.  Comprehensive profiles of the nominees for directors are disclosed in advance to allow shareholders to evaluate them before the ASM.

 

In addition, AEV sends out hard copies of their respective Definitive Information Statement to shareholders at least 15 business days before the ASM.  Copies of the integrated colored annual report are also provided during the meeting.  Downloadable versions of these documents are posted on the websites of the two companies.

 

Shareholder registration for AEV’s ASM have gone fully digital.  To register, shareholders are only required to present their valid IDs and they can check their personal details for accuracy.

 

Voting results verified by an independent Board of Election inspectors, are now digitally tabulated and disclosed to attendees within minutes after voting closes.  The results are also uploaded to the AEV website a day after the ASM.  

 

Board members, and each company’s Chief Executive Officer, Chief Financial Officer, 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, AEV shareholders and stakeholders were 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.

 

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 May to the fourth Monday of April of every year. The amendment also clarified that in accordance with Section 51 of the Corporation Code, the ASM venue may be at any city or municipality in Metro Manila. The change in the ASM date will ensure 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.

Remuneration Policy

The Board Corporate Governance Committee ensures that the remuneration for directors and 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 the company.

 

AEV ensures that they give competitive remuneration to their respective directors and officers, and regularly benchmarks their compensation against other similar-sized Philippine-based companies through market salary surveys.

 

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:

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.  

 

In support of the proposal, the Group Chief Human Resources Officer explained that the last increase in directors’ compensation was in 2015 when the shareholders approved the increase in monthly allowance from PHP100,000 to PHP120,000 for members of the Board, and from PHP150,000 to PHP180,000 for the Chairman of the Board.  Since then, the companies’ businesses have expanded in scope and became more complicated in nature. There is thus a need to increase the remuneration of the directors so that it remains comparable with companies that have the same Board size, revenue, assets, and market capitalization. Upon recommendation of the Board Corporate Governance Committee,   the Board of Directors approved the proposal during its March 7, 2019 board meeting, and resolved to endorse the same for approval by the shareholders in the 2019 ASM on April 22, 2019.

 

AEV rewards their corporate officers based on their individual performance and on their ability to execute their duties and responsibilities effectively. Both companies regularly report the names of their five highest paid corporate officers, including the Chief Executive Officer, in their respective Annual Reports (SEC Form 17-A). They believe that this provides sufficient information on director and executive remuneration, while maintaining the privacy of the individuals concerned in compliance with applicable laws and regulations.

 

The Group engages the services of independent remuneration consultants to determine the compensation, as well as any annual merit increases, for directors, officers, and team members. Factors such as inflation and consumer price index are taken into account to ensure that the compensation structure will sustain the Group’s competitiveness while also attracting and retaining the best talent. The results of the study are then presented and discussed during the company’s first Corporate Governance Committee meeting for the year.

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 Corporate Governance Committees and to all Board members.

Annual Corporate Governance Seminar

Mandatory seminars are conducted to impress upon and refresh all employees’ awareness and understanding of the Company’s Manual of Corporate Governance and Code of Ethics and Business Conduct, as well as the underlying principles of corporate governance and ethical behavior and conduct for the company.

 

In 2011, the Board mandated a Corporate Governance Seminar for all employees. This was followed by a mandate in 2012 requiring all newly-hired employees to attend a new hires’ seminar and an annual Quality Focus seminar which includes an orientation on the company’s Manual of Corporate Governance and Code of Ethics and Business Conduct.

 

In 2013, the company launched its online Corporate Governance E-learning Course for all newly-hired employees. This was taken by all employees through a web-based portal with a standard test, the results of which are reported to management and the Board Corporate Governance Committee.

 

On July 24, 2014 and March 25, 2015 in compliance with Memorandum Circular 20, Series of 2013 of the Securities and Exchange Commission and in partnership with the Institute of Corporate Directors, the company held its Aboitiz Annual Corporate Governance Seminar at its principal office in Bonifacio Global City, Taguig City. The seminar was attended by the Company’s Board of Directors and key officers.

 

On March 28, 2016, the company held its 2016 Mandatory In-House Corporate Governance Seminar at the Shangrila at the Fort, Bonifacio Global City, Taguig City. The Securities and Exchange Commission approved the company’s accreditation as a corporate governance seminar provider.

 

On March 28, 2017,  The Pan-Asia Risk and Insurance Management Association (PARIMA) held its first regional conference in Manila at the Shangri-La at the Fort Manila, Taguig City, Philippines. This year’s theme is ‘Sustainable, Resilient, & Intelligent Future,’ which aimed to strengthen and educate risk management professionals and key industry players in today’s rapidly changing risk landscape. With more than 270 participants, the PARIMA Manila Conference was a landmark event for the risk professional community. In Aboitiz Group, around 50 delegates composed of some members of the Board of Directors, Risk Managers and Senior Executives attended.

 

On March 29, 2017, AEV Group Risk Management, in coordination with AEV Governance and Compliance team, organized an Executive Briefing for the Board and Directors and Senior Executives of the Group, with more than 80 participants. The briefing covered three topics such as The 2017 Top Global Risks: World Economic Forum, Millennial Mindset – Risk and Opportunity in the Workforce, and Cyber Security. The participants were also given an opportunity to raise their concerns during the Q&A portion of the program.

 

On August 31, 2018, AEV Group Risk Management, in coordination with AEV Governance and Compliance team, organized 2018 Annual Corporate Governance Seminar for the Board of Directors and Senior Executives of the Group, with more than 60 participants. The briefing covered three topics such as Digital Disruption: Reshaping Leadership, Innovation and Risk; Cyber Risk; and Discussion on the Asia-Pacific Risk Landscape 2018. The participants were also given an opportunity to raise their concerns during the Q&A portion of the program.

Attendance at Board & Board Committee Meetings

Board directors are expected to serve with diligence. In 2018, the AEV Board held 11meetings, both regular and special. Board committees usually meet at least twice a year, except for the Board Audit Committee that meets at least four times in a year.  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.

Rights of Shareholders

The rights of shareholders are of paramount importance in the AEV By-laws, Codes of Ethics, and Manuals.  The goal is to ensure the protection of shareholder interests and concerns through the free exercise of shareholder rights.  Among the rights of these 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 one-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.

 

The Aboitiz Group believes that the rights and interests of minority shareholders are aligned to those of the controlling shareholders, not only in terms of returns on their investments, but also in the sustainability of the Group’s businesses.  AEV ensures 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 to and timely resolution of shareholders’ queries and requests.  

Basic Shareholder Rights

Right to Receive Dividends

 

The right to receive dividends is a basic shareholder right. The Company promotes this basic shareholder right by adopting a clear and transparent dividend policy.

 

The Company maintains an annual cash dividend payment ratio of approximately one third of its consolidated net income from the preceding fiscal year, subject to the requirements of applicable laws and regulations and the absence of circumstances that may restrict the payment of cash dividends. This is disclosed in the Operational and Financial Information section of the Annual Report, in the Definitive Information Statement Report, CFO’s and disclosures on the Company’s website if changes are made. These circumstances could include major projects and developments requiring substantial cash expenditure or restrictions on cash dividend payments under its loan covenants. (Visit www.aboitiz.com for the Management’s Discussion and Analysis or Plan of Action in the Annual Report)

 

Every year, the Company pays 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 (5) years, the Company has paid the following dividends:

On March 7, 2019, the Company declared regular dividend in favor of shareholders of record as of March 21, 2019 payable on April 5, 2019 based on one-third of the net consolidated income for fiscal year ending December 31, 2018 under the existing dividend policy of the Company.

 

The Company has consistently paid its dividends within 30 business days from its declaration date pursuant to existing best practices.

 

Right to Participate in Fundamental Corporate Changes

 

The Company recognizes and upholds the importance of a genuine exercise of shareholders’ rights as granted by the Corporation Code of the Philippines, by other related laws and by its corporate covenants under the Company’s Articles of Incorporation, By-Laws and the Company’s Manual on Corporate Governance. One important corporate governance practice followed by the Company is an assurance that shareholders enjoy all the rights granted by the Corporation Code of the Philippines. The Board and Management team ensure the promotion of these rights and have been mandated to institute remedial measures to swiftly address any violation or transgressions.

 

As a matter of policy, the Company encourages active participation from shareholders in corporate decisions, such as the amendments of the Company’s constitution, Articles of Incorporation and By-laws, authorization of additional shares and transfer of all or substantially all assets, which in effect results in the sale of the Company.

 

The Company calls for a special shareholders’ meeting or includes these proposed actions in the annual meeting if there are actions requiring shareholders’ approval. Prior to the meeting, the Company distributes to the shareholders entitled to participate in the meeting, the Information Statement which contains the details of the proposed actions to be approved by the shareholders. The agenda of the meeting also contains an explanation why the Company wishes to undertake these proposed actions.

 

At the ASM, the Board of Directors of the Company presents and submits 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 the receipt of the affirmative vote of shareholders representing at least 2/3 of the issued and outstanding capital stock of the Company will such action be considered as duly approved by the shareholders.

 

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 CD 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.

 

In 2018, 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 2018 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 2018 meeting of shareholders were uploaded to the Company’s website the day after the ASM or on May 22, 2018. 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

Transparent Ownership Structure

 

According to the share register kept by Stock Transfer Service, Inc., the Company’s stock and transfer agent, as of December 31, 2018, the Company had 8,921 shareholders. Aboitiz & Company, Inc. owned, as of the same period, 2,735,600,915 shares or 48.57% of the 5,632,792,557 the total outstanding common shares entitled to vote. Of the publicly-held shares, 23.37% are owned by institutions and/ or are nominee-registered (14.40% Filipino & 8.97% Foreign), i.e., held of record by banks, brokers and/ or nominees, such as the PCD Nominee Corporation. Moreover, the Company’s Directors and Officers owned 279,218,503 shares or 4.95% and the Company’s Affiliates owned 1,571,803 or 0.03% of the total outstanding shares.

 

Below is a general view of the Company’s shareholder composition:

Aboitiz & Company, Inc. is a private company held by 217 shareholders as of December 31, 2018. While strictly speaking it is not a “publicly-held company” within the definition of the Securities Regulation Code, it is effectively a widely-held company with a sizeable shareholder base requiring its own corporate governance rules.

 

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

 

The Company periodically submits to the PSE a public ownership report detailing the extent of ownership of controlling shareholders, including the shareholdings of their subsidiaries and affiliates, and that    of the Directors and Management. It submits to the PSE and PDEx a list of its top 100 shareholders every quarter. The Company also discloses its top 20 shareholders, including shareholders of record and beneficial owners owning more than five percent of the Company’s outstanding capital stock, and shareholdings of its Directors and Officers in the Company’s Information Statement, and sends this out to shareholders annually. The Company, however, has no control over outside shareholders who may choose to put their shares under nominee holding companies such as the PCD Nominee Corporation, and is thus unable to make any disclosure on details of that ownership.

 

As disclosed in the Company’s 2018 Definitive Information Statement, as of December 31, 2018 the identity of the beneficial owners of AEV owning 5% or more are as follows:

 

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, 2018:

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

Risk management plays its part in the achievement of the Aboitiz Group’s strategic objectives by creating a culture of measuring and managing risk.

 

Now on its third year of assessing the risk maturity of the Aboitiz Group, the Group’s average rating is at 3.9 on a scale of 1 -5. This puts the Group at the top 15% of all organizations that participate in the global Risk Maturity Index (RMI) assessment conducted by AON annually. The  2014 assessment was participated by 110 Aboitiz Group team leaders, including board members, C-Suite, key operating team leaders, and risk managers from 16 business units.


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