Challenges and Best Practices in Corporate Governance
Former Finance Secretary Jesus Estanislao once compared good corporate governance as keeping one’s house in order. Most people want well-run households, one that keeps a lid on expenses while keeping things neat and clean and takes care of the various needs of family members. In the business setting, a clean house is more attractive to prospective investors.
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Good corporate governance promotes transparency, accountability and responsibility. Corporate governance is not just about ethical conduct or being transparent and fair to stakeholders, it is also a means to improve a company’s performance, competitiveness and sustainability.
In the Philippines, compliance with corporate governance codes is still relatively low. It is probably an offshoot of the way most Asian economies do business, which is largely personal and based on connections—whether by family, affinity or friends. In addition, the adoption of good corporate governance practices is a function of a firm’s financial performance. In Singapore for example, a relatively developed economy, a recent report showed a widening gap between companies with strong and weak corporate governance policies.
But it is when crisis occurs when the defects in corporate governance are seen. Learning curves for the adoption of scorecards and best practices for corporate governance are a tad high, and maybe difficult for several companies to implement. Dr. Estanislao once said that his advocacy for companies in the Philippines to adopt good corporate governance standards is a slow burn. But someone has to do it, and progress must start as soon as possible so it can also blossom faster.