The Philippines will shift to an international corporate governance scoring system that promotes transparency in publicly-listed companies in the economically bustling Southeast Asian region.

The ASEAN Corporate Governance Scorecard is a project developed by the Association of Southeast Asian Nations and funded by the Asian Development Bank.

It aims to protect the rights of shareholders and, said Philippine officials, its use would bolster the country's image among regional and foreign investors.

For the last seven years, Philippine companies have been screened by the non-stock, non-profit Institute of Corporate Directors (ICD), but will shift to the ASEAN Corporate Governance Scorecard this quarter, they added.

The scorecard, which is already being employed by ASEAN member-states Malaysia, Singapore, Thailand and Indonesia, promotes a more unified corporate ranking and assessment scheme that will showcase the bankability of companies to foreign investors.

Fellow ASEAN members Vietnam, Laos, Cambodia and Myanmar have yet to adopt the system.

The regional game

"What we need to do is to no longer play the Philippine game but the regional game," said ICD Chairman and former Finance Secretary Jesus Estanislao in an interview.

"We want to have the same standards which have been regarded as higher standards in [the] stock exchange, so now we are benchmarking on the higher standards," he added.

Estanislao is also the Philippine representative to the ASEAN Corporate Governance Group of Experts.

The ICD has worked in close partnership with other business, government, and civil society organizations to promote and uphold the practice of good corporate governance.

The ASEAN Scorecard supersedes the National Corporate Governance Scorecard implemented by the ICD.

This means that public companies — those that are listed on the Philippine Stock Exchange (PSE) — will now be screened using more than 190 questions on the areas of rights of shareholders, equitable treatment of shareholders, role of shareholders, disclosure and transparency and responsibilities of the board. The old scorecard only has 110 questions.

The first ASEAN Scorecard assessment in the Philippines will be done on October 25 and 26.
In the new scorecard, bonus points will be added to the companies who have applied best practices or practices that go beyond compliance. Penalty points will be imposed on firms that demonstrate poor governance.

Attracting investments

Having a scorecard or an assessment of listed firms is necessary, as most of the investments flows are global.

Investors, Estanislao said, "look for economies where they can trust.”

"So instead of attracting $10 to $12 billion a year, we should be attracting $25 to $30 billion a year," he said.

Having local firms with a solid track record would "absolutely" usher in the much-needed investments in the country, "especially now that we are just getting [on] the radar screen of any of the institutional investors," Estanislao said.

Institutional investors are large organizations, such as banks, finance companies, or insurance firms, which pool large sums of money and invest those sums in securities, real property and other investment assets.

They are by far the biggest participants in securities trading, and their share of the stock market volume has consistently grown over the years.

"Therefore they have to be comfortable with us — that, in fact, many of our companies...use corporate governance principles which are globally accepted," Estanislao said. — BM, GMA News