Corporate Governance

 

Manual on Corporate Governance

 

Code of Conduct and Business Ethics

 

Annual Corporate Governance Report

 

Board Committees

The Board has established six (6) committees to help in discharging its duties and responsibilities. These committees derive their authority from and report directly to the Board. Their mandates and scopes of responsibilities are set forth in their respective Terms of Reference which are subject to review and update annually or when there are significant changes therein. The number and membership composition of committees could be increased or decreased by the Board as it deems appropriate and consistent with applicable laws or regulations specifically on the majority membership and chairmanship of independent directors in various committees. The standing committees of the Board are as follows:

 

Executive Committee

Chairperson: Nestor V. Tan

Members: Antonio N. Cotoco; Roberto E. Lapid; Teresita T. Sy; Walter C. Wassmer

Meetings:

The Executive Committee met fifty (50) times in 2019.
Nestor V. Tan 41/50
Antonio N. Cotoco 45/50
Roberto E. Lapid 42/50
Teresita T. Sy 43/50
Walter C. Wassmer 41/50
 

 

Functions:

  • Acts as the main approving body for Company exposures, particularly approval and confirmation up to its delegated authority of transactions such as but not limited to credit proposals, investment and acquisitions, credit-related issues, property-related proposals, technology-related projects or such other initiatives to enhance the Company’s operating and service delivery capabilities, and operating policies and/or manuals including amendments thereto as may be recommended by management.
  • Approves loans, lease and credit facilities; sale and lease of acquired assets; credit policies, write-offs, resolutions of remedial/problem accounts; leases and acquisitions of branch sites within its Board-delegated authority.

 

Audit Committee

Chairperson: Ma. Leonora V. De Jesus (Independent Director)

Members: Jesse H.T. Andres (Independent Director); Vicente S. Pérez, Jr. (Independent Director)

Meetings:

The Audit Committee met twelve (12) times in 2019.
Ma. Leonora V. De Jesus 12/12
Jesse H.T. Andres 12/12
Vicente S. Pérez, Jr. 10/12

 

The Audit Committee is empowered by the Board to oversee the financial reporting process, internal control and risk management systems, internal and external audit functions, and compliance with governance policies, applicable laws and regulations. Their oversight function covers the following areas:

 

Functions:

  • On financial reporting, the committee reviews the integrity of the reporting process to ensure the accuracy and reliability of financial statements and compliance with financial reporting standards and disclosure requirements set for listed companies.
  • On internal control and risk management, it monitors and evaluates the adequacy, soundness and effectiveness of the Company’s established internal control and risk management systems, policies and procedures including implementation across all units of the Company to provide reasonable assurance against fraud or other irregularities and material misstatement or loss.
  • On internal and external audit, it recommends the appointment, reappointment and removal of the external auditors, remuneration, approval of terms of audit engagement and payment of fees. It reviews non-audit work, if any, ensuring that it would not conflict with their duties as external auditors or may pose a threat to their independence. It approves the annual audit plan and reviews audit results including the BSP Report of Examination focusing on significant findings with financial impact and its resolution. It reviews the implementation of corrective actions to ensure that these are done in a timely manner to address deficiencies, non-compliance with policies, laws and regulations.
  • On compliance, it reviews and evaluates the effectiveness of the regulatory compliance framework and governance policies and practices of the Company to ensure that these are consistently applied and observed throughout the institution. In this context, the following were done during the year:

 

On financial reporting, the Board Audit Committee (BAC) reviewed and recommended for approval to the Board the quarterly unaudited and annual audited financial statements ensuring compliance with accounting standards and tax regulations.  On February 19, 2019, it endorsed for approval of the Board the audited financial statements as of December 31, 2018 including the Notes to the Financial Statements.  This was approved by the Board  and disclosed to the public on February 20, 2019, 51 days from the financial year-end following the best practice requirement of the ASEAN Corporate Governance Scorecard (ACGS).  It believes that the financial statements are fairly presented in conformity with the relevant financial reporting standards in all material aspects. The related internal controls on financial reporting process, compliance with accounting standards, more specifically the changes brought about by the adoption of the Philippine Financial Reporting Standards 9 and 16, were likewise reviewed.

 

In overseeing the internal audit function, it reviewed and approved the Internal Audit Charter and risk-based audit plan after a thorough review of its scope, audit methodology, risk assessment and rating processes, financial budget, manpower resources, as well as changes to the plan during the year.  It reviewed audit reports focusing on high and moderate risk findings relating to operational, financial and compliance controls including risk assessment systems with impact to financial, reputation and information security.  It regularly tracked the timely resolution of findings and asked for Management’s action plans on items that needed more time to be addressed. It ensured the Internal Audit’s independence and unfettered access to all records, properties and information to be able to fully carry out its function.  It also assessed the performance of the Chief Internal Auditor and key audit officers.  The Committee is satisfied that the internal audit function has adequate resources to perform its function effectively.

 

On external audit, it ensured the independence, qualification, and objectivity of the appointed external auditor, which is accredited by the BSP. It reviewed and discussed the content of the engagement letter, audit plan, scope of work, focus areas, composition of engagement team among others, prior to the commencement of audit work.  It comprehensively discussed the external audit reports, focusing on internal controls, risk management, governance and matters with financial impact particularly on the changes in accounting and reporting standards. It reviewed Management’s Letter as well as Management’s response and action taken on the external auditor’s findings and recommendations. 

 

On regulatory compliance, it reviewed and approved the annual plans and independent compliance testing roadmaps of the Compliance and Anti-Money Laundering (AML) units.  It endorsed for approval of the Board of Directors the revised Regulatory Compliance and Management Manual and Money Laundering Prevention Program Manual of the Company, which incorporates new and amended regulations as well as directives by the BSP in its examinations.  It monitored the progress and reviewed the results of the independent compliance and AML testing, timely submission of regulatory and prudential reports, compliance to mandatory ratios, as well as continuous improvement of the compliance and AML systems.  It discussed in detail the BSP Report of Examination including the results of regulatory examinations of the Company’s foreign subsidiaries and reviewed Management’s replies, thereby ensuring implementation of corrective actions.  It also reviewed legislation and regulatory compliance reports to ensure that the Company scrupulously complies with the relevant regulatory requirements. In 2019, the Committee reviewed the performance of the automated system being used by the Compliance Office for its AML function. It also discussed and assessed the Company’s guidelines on regulatory and AML emerging risks such as online gaming business and investment scams.

 

Reports on cases in operations, whistle blower accounts as well as non-loan related cases with impact to financials, internal controls, information systems and reputation were deliberated on focusing on risk assessment, legal handling, and fraud prevention.

 

As part of its commitment to excellent corporate governance, the Committee conducted a self-assessment for its 2019 performance based on its Terms of Reference. The BAC likewise evaluated the performance of Internal Audit, Compliance and AML Units and External Audit to ensure their effectiveness and achievement of objectives.

 

The BAC reports its evaluation of the effectiveness of the internal controls, financial reporting process, risk management systems and governance processes of the Company based on the report and unqualified opinion obtained from the External Auditor, the overall assurance provided by the Chief Internal Auditor and additional reports and information requested from Senior Management, and found that these are generally adequate across BDO Leasing and Finance Inc.

 

 

Corporate Governance Committee

Chairperson: Jesse H.T. Andres (Independent Director)

Members: Ma. Leonora V. De Jesus (Independent Director); Vincent S. Pérez, Jr (Independent Director)

Meetings:
The Corporate Governance Committee met five (5) times in 2019.
Jesse H.T. Andres 5/5
Leonora V. De Jesus 5/5
Vicente S. Pérez, Jr. 4/5

 

Functions:

  • Primarily tasked to assist the Board in formulating the governance policies and overseeing the implementation of the governance practices of the Company as well as its subsidiary.
  • Annually, it also conducts a performance evaluation of the Board of Directors, its committees, senior management, peer evaluation of directors, and a self-evaluation of its performance.
  • Provides an assessment of the outcome and reports to the Board the final results of the evaluation, including recommendations for improvement and areas to focus to enhance effectiveness.
  • Oversees the continuing education program for directors and key officers and proposes relevant trainings for them.

 

Risk Management Committee

Chairperson: Vicente S. Pérez, Jr. (Independent Director)

Members: Jesse H.T. Andres (Independent Director); Nestor V. Tan

Meetings:

The Risk Management Committee met four (4) times in 2019.
Vicente S. Pérez, Jr. 4/4
Jesse H.T. Andres 4/4
Nestor V. Tan 4/4
 

Functions:

  • Responsible for the development of the Company’s risk policies, sets the risk appetite and defines the appropriate strategies for identifying, quantifying, managing and controlling risk exposures including preventing and/or minimizing the impact of losses when they occur.
  • Oversees the implementation and review of the risk management plan on an integrated enterprise-wide basis, system of limits of management’s discretionary authority delegated by the Board and takes immediate corrective actions when breached. It is also responsible to reassess the continued relevance, comprehensiveness and effectiveness of the risk management plan and revise it when needed.
  • Works with the Audit Committee in certifying in the Annual Report the adequacy of the Company’s internal control and risk management systems.

In 2019, the Committee approved the enhancements to the Internal Credit Risk Rating System (ICRRS) for Corporate & Commercial Loans and Leases; results of the annual review of the Company’s risk management framework, policies and limits (as applicable), for market & liquidity risk, operational risk, social media risk; the priority critical processes and recovery sequence of systems in relation to the Company’s BCP; and the updated Information Security Strategic Plan (ISSP) and Information Security Program (ISP) in compliance with BSP Circular 982 on the Enhanced Guidelines on Information Security Risk Management.

 

 

Nominations Committee

Chairperson: Jesse H.T. Andres (Independent Director)

Members: Ma. Leonora V. De Jesus (Independent Director); Antonio N. Cotoco

Meetings:

The Committee had one (1) meeting during the year with all the members in attendance.
Jesse H.T. Andres 1/1
Antonio N. Cotoco 1/1
Ma. Leonora V. De Jesus 1/1

 

Functions:

  • Leads the process for identifying candidates for election and appointment of Directors and other positions requiring appointment by the Board of Directors, giving full consideration to succession planning and the leadership needs of the Company. In particular, this process includes the profiling of the skills and competencies of the currently serving directors, the gaps in skills and competencies identified and the search for candidates who are aligned with the Company’s directions to fill the gaps.
  • Makes recommendations to the Board on the composition and chairmanship of the various committees.
  • Keeps under review the structure, size and composition of the Board, including the balance of skills, knowledge and experience and the independence of the non-executive Directors, and makes recommendations to the Board with regard to any changes.

 
After reviewing the composition of the Board and Committees, it approved the nominations for the regular and independent directors on March 19, 2019 in accordance with the criteria set forth in the By-laws of BDOLF as well as pertinent regulations of the Bangko Sentral ng Pilipinas and the Securities and Exchange Commission. After due deliberations, it recommended to the Board the appointment, reappointment or election of nominees for Chairperson, Vice Chairperson, and membership in Board-level Committees, as well as the reappointment of Ms. Leonora V. De Jesus as the Lead Independent Director, and the appointment and/or reappointment of the Company’s corporate officers at the Company’s Organizational Board Meeting held on April 17, 2019. 

 

Related Party Transactions Committee

Chairperson: Jesse H.T. Andres (Independent Director)

Members: Ma. Leonora V. De Jesus (Independent Director); Jeci A. Lapus

Advisor: Antonio N. Cotoco

Meetings:

The Related Party Transactions Committee met ten (10) times in 2019.
Jesse H.T. Andres 10/10
Ma. Leonora V. De Jesus 10/10
Jeci A. Lapus 10/10

 

Functions:

  • Assists the Board in its oversight of the conduct of all Related Party Transactions (RPTs) to protect the interests of the Company and its stakeholders.
  • Ensures proper disclosure of all approved RPTs in accordance with applicable legal and regulatory requirements and confirmation by majority vote on the Annual Stockholders’ meeting the Company’s significant transactions with related parties.

As needed, the RPTC carefully reviews the material related party transactions being proposed by Management. The revision of the Company’s policy on related party transactions is one of its most significant accomplishments in 2019. The revised policy encapsulates the requirements of the Securities and Exchange Commission on the approval of related party transactions whose value exceed 10% of the Company’s assets. The policy ensures that material RPTs falling under the definition of the SEC shall require prior review of an independent external party and approval of at least 2/3 vote of the Board with a majority of the independent directors voting in favor of it.
 

Terms of Reference
 

Corporate Social Responsibility

Donated furniture, fixtures and equipment through SM Foundation for the following beneficiaries:

  • Bahay ni Maria (c/o BDO Leasing San Pablo branch)
  • Gawad Kalinga (c/o BDO Leasing Davao branch)
  • Gulong ng Palad (c/o BDO Leasing CDO branch)

Ultimately, the Bank through BDO Foundation Inc. aims to be a major catalyst in the creation of opportunities for the under-priviledged and in the country's socio-economic development.

 

Company Policies