Aboitiz High Impact Governance
Governance at Aboitiz is strengthened by the synergistic partnership between the highly skilled and diverse Boards and Board Committees of AEV. This collaboration is reinforced by capable and responsible management teams, as well as empowered team members. In the face of a rapidly changing business landscape, this collaborative governance model equips Aboitiz with the adaptability to navigate challenges and pursue strategic growth directions.
Board of Directors
The Board of Directors plays a pivotal role in steering our Group’s corporate governance journey. Operating independently but working closely with management, each member is dedicated to collectively provide the Company with a strategic roadmap for long-term growth, competitiveness, and the establishment of a sustainable business that is poised to thrive for another century. The Board is responsible for articulating and reviewing the Company’s purpose, vision, mission, and strategies to achieve its objectives. They ensure that the strategic direction of the Company’s businesses is well-defined, properly managed, and aligned with the overarching strategic goals of the Aboitiz Group.
Comprising nine members from diverse professional backgrounds, including legal and finance professionals, engineers, former or current Chief Executive Officers/Chief Operating Officers, auditors, and accountants, the AEV Board of Directors brings a wealth of experience. Many members have held management positions in both the private and government sectors, and in multilateral agencies. The Board includes three Independent Directors, five Non-Executive Directors, and one Executive Director. The Chairman of the AEV Board, a Non-Executive Director, operates independently from management, focusing on ensuring the efficient conduct of board-related activities and the effective discharge of the duties and responsibilities of the AEV Board. The Lead Independent Director, a highly qualified professional familiar with the Company’s operations and the industries in which it operates, plays a crucial role in this regard.
Summary of Changes in the Board of Directors
As of December 31, 2023, the members of the AEV Board of Directors were the following:
Conduct and Attendance at Board and Board Committee Meetings
The AEV Board of Directors is expected to serve with the highest level of diligence. In 2022, the Company increased the quorum and voting requirements for the Board of Directors to two-thirds (2/3). The Board of Directors also increased its members’ attendance requirement from 50% to 75%. Failure to meet the attendance requirement is a ground for preventive suspension.
To ensure their availability, the schedule for regular Board and committee meetings for the upcoming year is approved and circulated to members before the start of the year. Directors are not only expected to attend meetings but also to actively participate by providing valuable professional counsel, strategic guidance, and constructive feedback.
Board and Board Committee meetings are conducted either in person or through a secure video-conferencing platform, allowing each member to interact and participate remotely. Meeting materials are disseminated through a secure digital platform at least five days prior to the meeting, maintaining the practice from previous years. Additionally, meeting protocols are regularly reviewed and refined to enhance the efficiency of virtual Board and committee meetings.
Commitment to the Corporate Mission, Vision, and Strategy
The directors of AEV recognize the critical importance of their role in leading and steering their respective companies toward profitable and sustainable growth. The Board’s primary responsibility is to represent and protect the interests of its shareholders—the owners of the business—and other key external stakeholders. Actively engaged in strategic business discussions, the directors provide invaluable insights during special strategy board meetings and gatherings with management teams.
Guided by the Aboitiz Group’s purpose, brand promise, mission, and vision, the Board members, along with key officers and heads of the Strategic Business Units (SBUs), participate in an Annual Board Retreat and Strategy Refresh. This event is essential for reviewing and aligning the corporate initiatives and strategic roadmaps of the Group’s core businesses with contemporary market and economic trends, both locally and globally. Beginning 2022, the AEV Board of Directors has included strategy discussions at every board meeting, ensuring continued strategic alignment despite the challenges of the global landscape.
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 roles and responsibilities of the members of the Board of Directors are outlined in the Company’s Manual on Corporate Governance and the Board Charter.
Board Independence
The Company acknowledges that Independent Directors play a crucial role in fostering accountability and transparency. By offering unbiased insights and challenging management decisions, they safeguard against conflicts of interest and ensure ethical operations. Their presence on the Board strengthens investor confidence and demonstrates the Company’s commitment to governance practices that prioritize shareholder value and stakeholder trust.
To enhance the independence of the Board, the Corporate Governance Manual mandates that the AEV Board of Directors must have at least three Independent Directors. These Independent Directors provide an impartial perspective, ensuring the best interests of the Company and all stakeholders are prioritized. Their independence must be clear to stakeholders, beneficiaries, and the public.
To qualify as independent, a Director must have no interests or relationships with the Company that could compromise their impartiality. Upon election or re-election, an Independent Director submits a letter of confirmation to the Corporate Secretary, affirming their lack of affiliations with the Company, management, or controlling shareholders. This certification is included in the Company’s Information Statement, distributed to shareholders for the Annual Shareholders’ Meeting (ASM) where directors are elected.
In 2023, the AEV Board comprised a majority of Non-Executive Directors, including three qualified Independent Directors and five Non-Executive Directors out of nine Board members. Additionally, the AEV Board appointed a Lead Independent Director to act as an intermediary between the Chairman and other directors when necessary. This role is pivotal in maintaining Board effectiveness by serving as a liaison between the Chairman and other directors, ensuring effective communication and mediation when needed.
Annual Executive Session of Independent Directors
In accordance with the Board Protocol, the Company ensures that its Independent Directors meet at least once a year for an Executive Session. Additionally, Independent Directors have the prerogative to meet periodically in executive sessions without the presence of executive directors or management, providing a platform for candid and unbiased discussions. These sessions are presided over by the Chairman of the Environmental, Social, and Corporate Governance (ESCG) Committee (now Sustainability, Governance, and Related Party Transactions (SGRPT) Committee).
Held every January of every year, the Independent Directors determine the agenda for these executive sessions, focusing on topics they deem pertinent. While these discussions are essential for in-depth deliberation, formal actions of the Board are reserved for official Board meetings. This structure allows Independent Directors to explore issues thoroughly and provide well-considered input during Board meetings.
The Executive Sessions of Independent Directors are a critical aspect of AEV’s commitment to robust corporate governance. These sessions enhance the Board’s effectiveness by fostering an environment where Independent Directors can freely discuss and address issues, ultimately contributing to the Company’s strategic direction and governance.
By upholding this practice, AEV demonstrates its dedication to maintaining transparency, accountability, and integrity within its leadership, reinforcing the trust and confidence of its shareholders and stakeholders.
Board Diversity
The diversity in professional and personal backgrounds of AEV Board members, encompassing age, ethnicity, culture, skills, competence, gender, knowledge, and expertise, is instrumental in ensuring a balanced deliberation and decision-making process. This diversity prevents any director or group of directors from dominating discussions, leading to well-rounded decisions that benefit from a wide array of perspectives. AEV leverages this diversity to formulate sound corporate strategies, driving the organization towards long-term success.
The annual selection process of directors aims to appoint a diverse mix of highly competent individuals with in-depth knowledge and experience in AEV’s core industries. Factors such as independent-mindedness, ethical behavior, and value contribution are carefully considered.
Recognizing that a sustainable enterprise transcends current leadership, the AEV Board appointed Ms. Ana Maria A. Delgado as Director in 2018. Ana represents a new generation of homegrown leaders, bringing fresh perspectives to the Board’s deliberations. She is the first of two women on AEV’s Board of Directors. In 2021, Ms. Joanne De Asis was nominated and elected as Independent Director, the second female Director of AEV, highlighting its commitment to diversity and inclusion.
Every year, the AEV Board conducts a review of its members’ profiles, aligning them with an ideal Board profile to determine their qualifications in relation to the Group’s long-term strategic direction. This initiative aims to identify areas for improvement, ensuring that the Board’s members possess complementary competencies and skill sets. Additionally, it assesses the qualifications of potential future candidates, enhancing the Board’s ability to adapt to evolving challenges and opportunities.
By prioritizing diversity and leadership renewal, the AEV Board demonstrates its commitment to governance practices that foster innovation, resilience, and sustainable growth, positioning the organization for continued success in the dynamic business landscape.
Term Limits of Independent Directors
AEV complies 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. At the same time, the Company recognizes and respects the inviolable statutory right of each shareholder to vote and be voted for as a director.
In 2023, all independent directors have tenure less than nine years since they were first elected.
Directorships in Other Listed Companies
The SGRPT Committee, acting as the Nomination Committee, selects qualified nominees for election as directors. One consideration is the number of directorships a nominee has in other corporations or organizations and the ability of the nominee director to diligently and effectively perform his or her duties and responsibilities.
Since 2022, AEV directors, including Independent Directors, are prohibited to sit in more than five publicly-listed companies (PLCs) outside the Aboitiz Group. In 2023, none of the AEV directors sat in more than five PLCs outside the Aboitiz Group.
Nomination, Selection, and Election Process
The Aboitiz Group is committed to a transparent process for the nomination, selection, and election of directors, which are fundamental elements of a well-functioning corporate governance system. AEV follows a formal and transparent procedure to ensure the protection of all shareholders’ interests. Any shareholder may nominate a director or independent director. The SGRPT Committee acts as the Nomination Committee, overseeing the selection of candidates for independent, executive, and non-executive director positions.
In identifying suitable candidates for directors, AEV employs professional search firms and external sources, including director databases and professional organizations in the Philippines and abroad. This comprehensive approach ensures that the pool of candidates is diverse and highly qualified.
Qualification and Evaluation
Members of the AEV Board follow the qualifications for directors outlined in the Revised Corporation Code, Securities and Regulation Code, its Implementing Rules and Regulations, related SEC issuances, and best practices in corporate governance. Annually, the AEV Board reviews the profiles of its current members against an ideal Board profile. This assessment ensures that directors possess the necessary qualifications aligned with the Group’s long-term strategic direction, reinforcing the Board selection process by ensuring directors have complementary competencies, skill sets, and capabilities to contribute to the Company’s success.
Nomination and Election Process
After rigorous screening, the SGRPT Committee submits the final list of director candidates to the Company’s Corporate Secretary. The profiles of each nominee are disclosed and included in the Information Statement distributed to shareholders in preparation for the ASM. This transparency allows shareholders to evaluate the background and qualifications of nominees before the ASM.
During the ASMs, AEV shareholders elect their representatives to the Board by voting in person, by proxy, or by voting in absentia. Proxy votes received by the Corporate Secretary before the ASM are validated by the Company’s Proxy Validation Committee, comprising the Chief Compliance Officer, the principal accounting officer, and the Group Internal Audit Head. AEV adheres to the “One-Share, One-Vote” rule, allowing any minority shareholder to influence Board composition through individual nominations and cumulative voting rights. This statutory right, granted by the Revised Corporation Code, ensures that all shareholders have a voice in the election process.
Directors serve a one-year term until their successors are elected at the next ASM, in accordance with the Revised Corporation Code, the Company’s by-laws, and relevant SEC guidelines. This process underscores AEV’s commitment to robust corporate governance and the continuous enhancement of its leadership framework.
BOARD COMMITTEES
The SUSTAINABILITY, GOVERNANCE, AND RELATED PARTY TRANSACTIONS (SGRPT) COMMITTEE (formerly the Environmental, Social, and Corporate Governance Committee) plays a pivotal role in spearheading the creation and oversight of a robust governance mechanism. This mechanism is specifically designed to champion sustainability practices, encompassing responsible environmental stewardship, meaningful social development, and the implementation of sound corporate governance principles. In addition to these core responsibilities, the SGRPT Committee also fulfills the essential functions of the Nomination and Remuneration Committees. In carrying out its duties and responsibilities, the SGRPT Committee is supported by Ex-Officio Members consisting of executive heads of relevant corporate services units such as compliance, human resources, sustainability, and external relations. These officers regularly attend committee meetings to act as resource persons. The Chairman of the SGRPT Committee is the Lead Independent Director.
Key Areas of Focus in 2023 (Sustainability and Governance)
Key Areas of Focus in 2023 (Related Party Transactions)
The AUDIT COMMITTEE represents the Board in discharging its responsibility related to audit matters for the Group. Independent Directors comprise the majority of the members of the Board Audit Committee, including its Chairman. The 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 each committee meeting. At the end of every Audit Committee meeting, Committee Members meet without the presence of any executives.
Key Areas of Focus in 2023
Sufficiency of Internal Control and Compliance System
The AEV Audit Committees assists the Board in fulfilling oversight responsibilities over the 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 2023, the President and Chief Executive Officer, Chief Financial Officer, and Internal Audit Head of AEV attested to the sufficiency of the Company’s internal control and compliance system.
Audit and Non-Audit Fees
In 2023, the Company reappointed accounting firm SyCip Gorres Velayo & Co. (SGV) as their respective independent external auditor. Ms. Jhoanna Feliza C. Go is the current audit partner in her second year after replacing Maria Veronica Andrea R. Pore in 2022. The Board Audit Committee reviews the performance of its external auditors. As a policy, the Board Audit Committees recommend to their respective Boards the choice of external auditor for the year. The committees also review the extent, nature, and fees for the services to be provided to ensure that the independence of the external auditors is preserved.
The following table sets out the aggregate fees paid by AEV and AboitizPower for professional fees rendered by SGV:
The RISK AND REPUTATION MANAGEMENT COMMITTEE exercises oversight functions over the Company’s enterprise risk management and reputation management, including their respective corporate brands and communication strategies. The committees ensure the establishment and maintenance of a robust risk management framework and the requisite supporting governance mechanism within their respective companies. In 2023, the Risk and Reputation Management Committee of AEV was composed of all the three Independent Directors, one Executive Director, and one Non-Executive Director who also acted as the Chairman of the Committee. The Chairman of the Risk and Reputation Management Committee of AEV is not the Chairman of the Board or any other Board Committees.
Key Areas of Focus in 2023
The EXECUTIVE COMMITTEE assists the Board in the management and oversight of the Company’s day-to-day operations and strategic decision–making during the intervening period between full Board meetings. The President and CEO of AEV is the committee chairman. Since the company’s Board of Directors met monthly in 2023, no Executive Committee meetings were held during the year.
The CYBER AND INFORMATION SECURITY COMMITTEE assists the AEV and AboitizPower Boards in providing the strategic direction, ensure the establishment of the company’s system of governance (processes, policies, controls and management) on all matters relating to information security and cybersecurity. In 2023, the AEV Cyber and Information Security Committee was composed of two Independent Directors and two Non-Executive Directors, including its Chairman.
Key Areas of Focus in 2023
