TitleSALIENT FEATURES OF THE GOCC GOVERNANCE ACT (R.A. 10149)

Comm. Rainier B. Butalid

9 October 2013

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Slide Title1. Size of the Philippine GOCC Sector

As of end-December 2012, there are 125 GOCCs under the GCG jurisdiction :

• 71 with Special Charters

• 54 registered under the SEC

2. GOCC Sector Profile

The 125 covered GOCCs have the following financial profile as of December 2012:

Total Assets : P5.134 Trillion or over US$125 Billion Total Liabilities : P2.805 Trillion Total Net Worth : P2.329 Trillion

Total Net Income : P224.144 Billion

GOCC SECTOR OVERVIEW

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3. Classification of the 125 covered GOCCs

Classification No. of GOCCs

Government Financial Institutions 33

Trade, Area Development and Tourism 29

Educational and Cultural 8

Gaming 2

Energy and Materials 15

Agriculture, Fisheries and Food 16

Utilities and Information-Communications 22

Total 125

GOCC SECTOR OVERVIEW

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Total Assets of the Government Corporate Sector (In Billion Php)

GOCC Sector As of Dec. 2012

Government Financial Institutions 2,834

Trade, Area Development and Tourism 247

Educational and Cultural 5

Gaming 48

Energy and Materials 1,506

Agriculture, Fisheries and Food 56

Utilities and Information-Communications 438

Total 5,134

GOCC SECTOR OVERVIEW

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• Significant number of GOCCs burdened by non-commercial functions and therefore needed government financial support

SUPPORT 2012 AMOUNT (IN BILLION PHP)

Subsidy 40.489

Equity 0.900

Net Lending 27.267

TOTAL 68.656

Source: Bureau of the Treasury (Amounts are exclusive of GOCCs outside the GCG’s coverage)

GOCC SECTOR OVERVIEW

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Slide TitleGOCC GOVERNANCE ACT OF 2011

AN ACT TO PROMOTE FINANCIAL VIABILITY AND FISCAL DISCIPLINE IN GOVERNMENT-OWNED OR –CONTROLLED CORPORATIONS AND TO STRENGTHEN THE ROLE OF THE STATE IN ITS GOVERNANCE AND MANAGEMENT TO MAKE THEM MORE RESPONSIVE TO THE NEEDS OF PUBLIC INTEREST AND FOR OTHER PURPOSES

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Slide TitleCOVERAGE

Applicable to all GOCCs, GICPs/GCEs, and government financial institutions, including their subsidiaries, but excluding:

(a) The Bangko Sentral ng Pilipinas;(b) State Universities and Colleges; (c) Cooperatives;(d) Local Water Districts;(e) Economic Zone Authorities; and (f) Research Institutions.

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Slide TitleTHRUSTS OF THE NEW PARADIGM

1. Directors and Officers of GOCCs as fiduciaries of the State

2. Standard of Extraordinary Diligence

3. One (1) Year Term; with Holdover

4. Clear accountability of the CEO/Management to the Governing Board

5. Uniform Compensation System for all GOCCs

6. Power to Restructure the GOCC Sector

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Slide TitleMANDATES & PROGRAMS

A. Rationalization of the Government Corporate Sector

B. Compensation and Position Classification System (CPCS)

C. Performance Evaluation Systems (Performance Scorecards)

D. Shortlisting of Prospective Appointive Directors in GOCCs

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Slide TitleRATIONALIZING THE GOCC SECTOR

The GCG has the power and function to ascertain whether a GOCC should be:

(a)Reorganized;

(b)Merged;

(c)Streamlined;

(d)Abolished; or

(e)Privatized

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Slide TitleRATIONALIZING THE GOCC SECTOR

(i) Implement the reorganization, merger or streamlining of the GOCC, unless otherwise directed by the President;

(ii) Recommend to the President the abolition or privatization of the GOCC, and upon approval of the President, implement such abolition or privatization.

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On GOCC Sector Rationalization

• Formally dissolved/liquidated 20 GOCCs in 2012

• Recommended for privatization 2 GOCCs

• Recommended for dissolution 15 GOCCs

• 25 GOCCs for dissolution by the end of 2013

• Number of GOCCs reduced from 145 in 2011 to 125 by the end of 2012 and will further be reduced to 100 by the end of 2013.

RATIONALIZING THE GOCC SECTOR

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Slide TitleCOMPENSATION AND POSITION CLASSIFICATION SYSTEM (CPCS)

• Shall apply to all officers and employees of GOCCs whether under the Salary Standardization Law or exempt therefrom.

• Any law to the contrary notwithstanding, no GOCC shall be exempt from the coverage of the CPCS.

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Slide TitleCOMPENSATION AND POSITION CLASSIFICATION SYSTEM (CPCS)

• The Charters of each GOCC to the contrary notwithstanding, the compensation, per diems, allowances and incentives of the members of the Board of Directors/Trustees of GOCCs shall be determined by the GCG.

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On the Development of a Compensation and Position Classification System (CPCS)

• Development underway with Towers Watson as the consultant;

• Objective is to provide a compensation system that is comparable to private sector that will allow GOCCs to attract the right talent;

COMPENSATION AND POSITION CLASSIFICATION SYSTEM (CPCS)

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Slide TitlePERFORMANCE EVALUATION SYSTEM

• Establish the performance evaluation systems which shall apply to all GOCCs.

• Performance Scorecards containing the following perspectives:

(a) Social Impact(b) Stakeholders (c) Finance(d) Internal Process(e) Learning & Growth

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Slide TitlePERFORMANCE EVALUATION SYSTEM

• The GCG may recommend to the President, incentives for certain position titles in consideration of the good performance of the GOCC.

• GCG Memo. Circ. 2013-02

“Performance Evaluation System for the GOCC Sector”

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On Performance Evaluation

• Entails the preparation by each GOCC of a Performance Scorecard;

• Ensures adherence to mandate, and alignment to the Philippine Development Plan and the President’s Social Contract;

• Development of Integrated Corporate Reporting System (ICRS) for the GOCC Sector underway.

PERFORMANCE EVALUATION SYSTEM

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Slide TitleSHORTLISTING

• An Appointive Director shall be appointed by the President of the Philippines from a shortlist prepared by the GCG.

• GCG Memo. Circ. 2012-05

“Fit and Proper Rule for Appointive Directors and CEOs of GOCCs”

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Slide TitleORGANIC DOCUMENTS

1. Ownership and Operations Manual for GOCCs

2. Code of Corporate Governance for GOCCs

3. The Fit and Proper Rule 

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Slide TitleORGANIC DOCUMENTS 1. Ownership and Operations Manual for GOCCs

a. Provides for the Governing Principles and Objectives of the State as an “Active Owner” of the GOCCs;

b. Defines the Role and Relationship of the State, its agencies and instrumentalities, vis-à-vis the GOCCs as “significant tools for national development”;

c. Provides for the roles and responsibilities of GOCCs and the Primacy of the Boards of Directors/Trustees in the governance of the GOCCs;

d. Provides Guidelines the in the Monitoring and Evaluation of the GOCCs and their Governing Boards;

e. Provides for the Policy Framework for Tasking GOCCs to Undertake Non-Commercial Activities.

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Slide TitleORGANIC DOCUMENTS

2. Code of Corporate Governance for GOCCs

a. The Role and Responsibilities of the Governing Boards, and the Individual Directors;

b. Disclosure and transparency requirements;

c. Code of Ethics of Directors and Officers;

d. Creation of Board committees and similar oversight bodies;

e. Providing for an Integrated Corporate Reporting System; and

f. CSR Statement and the Role of Stakeholders.

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Slide TitleORGANIC DOCUMENTS

3. Fit and Proper Rule

a. Primary mechanism through which the Commission ensures the integrity and competence of Directors/Trustees of GOCC Boards

b. Codification of tried and tested standards already implemented by other agencies, with the qualification that the highest standard shall apply in the event more than one apply in a given situation

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Slide TitleCOORDINATION WITH AGENCIES

Office of the Ombudsman

• All members of the Board, CEO, and officers of GOCCs shall be qualified by the Fit & Proper Rule

• Persons with derogatory records as certified by the Ombudsman shall be temporarily disqualified from appointment in a GOCC. (GCG Memo. Circ. No. 2012-05)

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Slide TitleCOORDINATION WITH AGENCIES

Commission on Audit (COA)

• Restitution by a member of the Board or Officer of a GOCC shall be made upon determination and report of the COA.

• The Chairman of the GCG may direct at any time a special COA audit of any GOCC.

• Permanent disqualification from appointment in a GOCC by virtue of a final and executory Notice of Disallowance.

• Directors and Officers Liability Insurance (DOLI)(GCG Memo. Circ. No. 2012-10)

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Slide TitleCOORDINATION WITH AGENCIES

Civil Service Commission (CSC)

• The CPCS shall consist of classes of positions grouped into such categories as the GCG may determine.

• Involves the allocation of proper position titles and salary grades.

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Slide TitleCOORDINATION WITH AGENCIES

Securities and Exchange Commission (SEC)

• The SEC shall not register the articles of incorporation and by-laws of a proposed GOCC or Related Corporation, unless the application for registration is accompanied by an endorsement from the GCG stating that the President has approved the same.

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1. Dividends remitted significantly higher; Number of GOCCs remitting also increased

2010 2011 2012 2013

GOCCs 25 35 39 38

GOOD GOVERNANCE GAINS

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2. Better delivery of social services

a. Civil Aviation Authority of the Philippines (CAAP) – effectively addressed aviation industry safety concerns resulting in the lifting of the EU ban on Philippine carriers on July 2013 (initially for PAL).

b. National Electrification Administration (NEA) – successfully implemented the Sitio Electrification Program (at present, already 77% energized).

c. National Housing Authority (NHA) – delivered the AFP/PNP Housing on time and within budget.

d. Philippine Health Insurance Corp. (PHIC) – increased enrollment rate to 81% of the population from only 62% in 2010; also introduced more health packages.

GOOD GOVERNANCE GAINS

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3. Improved financials

a. Metropolitan Waterworks and Sewerage System (MWSS)

b. GOCC Sector Net Income

(In P Millions) 2010 2011 2012

Net Income (Loss) (34) 333 1,980

Dividends / Other Remittances 0 150 345

GOCC Sector 2010 2011 2012Government Financial Institutions 125,212 133,834 161,991

Trade, Area Development and Tourism (1,981) 1,250 7,546

Educational and Cultural (329) (341) (186)Gaming 2,753 4,706 4,718 Energy and Materials 8,929 7,892 35,444 Agriculture, Fisheries and Food (22,789) (18,597) 1,917

Utilities, Information, Communications (1,960) (1,462) 12,714

TOTAL (P Billions) 109,834 127,282 224,144

GOOD GOVERNANCE GAINS

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3/F Citibank Center

Paseo de Roxas, Makati City, Philippines 1226

Tel No. (632) 328 2030 to 33

Fax No. (632) 328 2030 loc 204