Title

1. Title SALIENT FEATURES OF THE GOCC GOVERNANCE ACT (R.A. 10149) Comm. Rainier B. Butalid 9 October 2013

2. GOCC SECTOR OVERVIEW Slide Title • 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 • 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

3. GOCC SECTOR OVERVIEW Slide Title • Classification of the 125 covered GOCCs

4. GOCC SECTOR OVERVIEW Slide Title • Total Assets of the Government Corporate Sector (In Billion Php)

5. GOCC SECTOR OVERVIEW Slide Title • Significant number of GOCCs burdened by non-commercial functions and therefore needed government financial support Source: Bureau of the Treasury (Amounts are exclusive of GOCCs outside the GCG’s coverage)

6. GOCC GOVERNANCE ACT OF 2011 Slide Title • 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

7. COVERAGE Slide Title • Applicable to all GOCCs, GICPs/GCEs, and government financial institutions, including their subsidiaries, but excluding: • The BangkoSentralngPilipinas; • State Universities and Colleges; • Cooperatives; • Local Water Districts; • Economic Zone Authorities; and • Research Institutions.

8. THRUSTS OF THE NEW PARADIGM Slide Title • Directors and Officers of GOCCs as fiduciaries of the State • Standard of Extraordinary Diligence • One (1) Year Term; with Holdover • Clear accountability of the CEO/Management to the Governing Board • Uniform Compensation System for all GOCCs • Power to Restructure the GOCC Sector

9. MANDATES & PROGRAMS Slide Title • Rationalization of the Government Corporate Sector • Compensation and Position Classification System (CPCS) • Performance Evaluation Systems (Performance Scorecards) • Shortlisting of Prospective Appointive Directors in GOCCs

10. RATIONALIZING THE GOCC SECTOR Slide Title • The GCG has the power and function to ascertain whether a GOCC should be: • Reorganized; • Merged; • Streamlined; • Abolished; or • Privatized

11. RATIONALIZING THE GOCC SECTOR Slide Title • Implement the reorganization, merger or streamlining of the GOCC, unless otherwise directed by the President; • Recommend to the President the abolition or privatization of the GOCC, and upon approval of the President, implement such abolition or privatization.

12. RATIONALIZING THE GOCC SECTOR Slide Title • 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.

13. COMPENSATION AND POSITION CLASSIFICATION SYSTEM (CPCS) Slide Title • 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.

14. COMPENSATION AND POSITION CLASSIFICATION SYSTEM (CPCS) Slide Title • 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.

15. COMPENSATION AND POSITION CLASSIFICATION SYSTEM (CPCS) Slide Title • 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;

16. PERFORMANCE EVALUATION SYSTEM Slide Title • 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

17. PERFORMANCE EVALUATION SYSTEM Slide Title • 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”

18. PERFORMANCE EVALUATION SYSTEM Slide Title • 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.

19. SHORTLISTING Slide Title • 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”

20. ORGANIC DOCUMENTS Slide Title • Ownership and Operations Manual for GOCCs • Code of Corporate Governance for GOCCs • The Fit and Proper Rule

21. ORGANIC DOCUMENTS Slide Title • Ownership and Operations Manual for GOCCs • Provides for the Governing Principles and Objectives of the State as an “Active Owner” of the GOCCs; • Defines the Role and Relationship of the State, its agencies and instrumentalities, vis-à-vis the GOCCs as “significant tools for national development”; • Provides for the roles and responsibilities of GOCCs and the Primacy of the Boards of Directors/Trustees in the governance of the GOCCs; • Provides Guidelines the in the Monitoring and Evaluation of the GOCCs and their Governing Boards; • Provides for the Policy Framework for Tasking GOCCs to Undertake Non-Commercial Activities.

22. ORGANIC DOCUMENTS Slide Title • Code of Corporate Governance for GOCCs • The Role and Responsibilities of the Governing Boards, and the Individual Directors; • Disclosure and transparency requirements; • Code of Ethics of Directors and Officers; • Creation of Board committees and similar oversight bodies; • Providing for an Integrated Corporate Reporting System; and • CSR Statement and the Role of Stakeholders.

23. ORGANIC DOCUMENTS Slide Title • Fit and Proper Rule • Primary mechanism through which the Commission ensures the integrity and competence of Directors/Trustees of GOCC Boards • 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

24. COORDINATION WITH AGENCIES Slide Title • 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)

25. COORDINATION WITH AGENCIES Slide Title • 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)

26. COORDINATION WITH AGENCIES Slide Title • 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.

27. COORDINATION WITH AGENCIES Slide Title • 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.

28. GOOD GOVERNANCE GAINS Slide Title • Dividends remitted significantly higher; Number of GOCCs remitting also increased

29. GOOD GOVERNANCE GAINS Slide Title • Better delivery of social services • 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). • National Electrification Administration (NEA) – successfully implemented the Sitio Electrification Program (at present, already 77% energized). • National Housing Authority (NHA) – delivered the AFP/PNP Housing on time and within budget. • Philippine Health Insurance Corp. (PHIC) – increased enrollment rate to 81% of the population from only 62% in 2010; also introduced more health packages.

30. GOOD GOVERNANCE GAINS Slide Title • 3. Improved financials • Metropolitan Waterworks and Sewerage System (MWSS) • GOCC Sector Net Income

31. Slide Title 3/FCitibank Center Paseo de Roxas, Makati City, Philippines 1226 Tel No. (632) 328 2030 to 33 Fax No. (632) 328 2030 loc 204