Corporate governance:
What the future holds
       The promulgation of the corporate governance codes and the training required for members of the board of directors of companies regulated by the BSP, SEC, IC and ERC has forever changed the character of corporate governance in the Philippines. It has clarified the role of the board of directors vis-à-vis that of management, resulting in more active and proactive boards. No longer will boards of directors be considered as mere “rubber-stamps” of management actions.
       However, people often ask how long these reforms will last. Is it simply a fad? Will the focus on good corporate governance decrease and slowly die down as the years go by? What is the future of corporate governance in the Philippines?
       The continuation of the corporate governance training program, observed supervision of the regulatory agencies, conversations with several directors, shareholders and stakeholders of various companies covered by the corporate governance regulations make me venture this forecast:
       1. The focus on corporate governance, the measures taken to have good corporate governance practices in companies covered by corporate governance regulations, will continue. Corporate governance is not a fad but an actual improvement in the manner by which companies are directed and controlled. Corporate governance will be institutionalized because: 1) best global practices dictate it; 2) it is necessary in a globalized and competitive economy; and 3) it truly contributes to the enhancement of shareholder value and contributes to the nation’s economic competitiveness.
       2. Corporate governance regulations will be encouraged, and may even be mandated, for small and medium-sized enterprises. This will happen because minority shareholders and other stakeholders will demand it for the protections of their interests. Likewise, since good corporate governance has been proven to enhance shareholder value and contribute to the nation’s economic competitiveness, it is in the interest of small- and medium-sized enterprises to adopt it.
       3. There will be an increasing number of family corporations that will employ formal family governance structures. Given the need to comply with corporate governance regulations, and a real desire to have good corporate governance, an increasing number of family corporations will have formal family governance structures with a family council, family assembly and/or advisory council.
       4. There will be increased independence in the relationship between the board of directors and management. This check and balance will come about as a natural consequence of the boards of directors doing their job as mandated by regulation and by global practices, by management adhering to its role as the implementer of the policies promulgated by the board, and by shareholders and other stakeholders demanding it, particularly for publicly listed companies.
       Regardless of the size of the company, the days of the “rubber-stamp” board will be, generally, a thing of the past.
       All of the preceding will generally mean better governance by the board of directors, and better management by the company’s managers. This all redounds to the benefit of the shareholders and other stakeholders, the public at large, and the nation as a whole.

       “Mirror Image” is a rotating column featuring writers from the DLSU Professional Schools Inc.
       Benjamin A.I. Espiritu is the chairman of the Business and Governance Department of the De La Salle-Professional Schools Inc. Graduate School of Business.