Aboitiz Power Corporation (AboitizPower or the Company) and its business units are aligned with the Aboitiz Groups’ inspired purpose which is “To drive change for a better world.” The Company’s vision “A Better Future” fuels its mission to provide reliable and ample power supply needed by the country; to ensure that supply of electricity is provided at a reasonable and competitive price, and with the least adverse effect on the environment and communities.
The Company has been constantly striving to be the best at operations, maintenance, capacity and supply optimization, as well as project execution, within policies and standards that promote cost efficiency and steady growth, and service levels intended to improve stakeholder engagement. AboitizPower continues to establish and implement important internal business processes for operational efficiency.
The balance mix of the Company’s portfolio of baseload, intermediate and peaking generating assets has given us a competitive and reliable platform to participate in this space as a market leader and allowed the Company to provide its customers with innovative and relevant solutions to better meet their needs.
As the Company grows, it continues to improve on previous achievements in corporate governance. In 2018, the Institute of Corporate Directors (ICD) recognized the Company as one of the top performing publicly-listed companies (PLCs) in the Philippines based on the ASEAN Corporate Governance Scorecard (ACGS).
The Group’s corporate governance framework is rooted in its core values and has been institutionalized in the Corporate Governance Manual (the Manual), Code of Ethics, and key company policies and protocols. These include policies on trading, sustainability, and on whistleblowing, as well as on the different Board Committee charters. These documents are frequently reviewed and updated to align with the best corporate governance practices. The Board of Directors oversee, monitor, and review the effectivity of the Company’s corporate governance framework.
In addition, the Manual, Code of Ethics, and other policies are continuously disseminated to all team members through various means – during the new hires orientation, HR seminars and trainings, and e-learning courses, among others. Team members also have ready access to these documents through the Group’s internal documents storage system (e-docs) and the Company website.
Governance Structure
Board of Directors
The Company believes that compliance with the principles of good governance begins with the Board of Directors. The Directors’ office is one of utmost trust and confidence. The Board of Directors is expected to act in the best interest of the Company in a manner characterized by transparency, accountability and fairness in the exercise of leadership in directing the Company towards a sustainable growth.
Directors are drawn from a pool of highly qualified professionals, each with their own subject matter expertise to contribute to the management and operations of the Group. Each Board has three independent directors and six independent-minded executive and non-executive members, all of whom come from diverse professional backgrounds. They are a mix of legal and finance professionals with management experience in the private and government sectors, as well as multilateral agencies.
The Chairman of the Board is a highly experienced, non-executive director who is not involved in the Group’s day-to-day operations. As such, he therefore remains focused on refining the Company’s long-term strategy.
Board Committees
The Company has five Board committees: Corporate Governance, Risk and Reputation Management, Audit, Related Party Transactions (RPT), and the Executive Committee. All three independent directors sit in these committees, except in the Executive Committee. Majority of the members of the Corporate Governance, Audit, and the RPT Committees are independent directors. Each committee oversees or implements an important aspect of the Company’s corporate governance framework and has its own charter, which can be viewed at the Company website.
Roles and Responsibilities of the Board of Directors
The Company believes that compliance with the principles of good governance begins with the Board of Directors. The Director’s office is one of utmost trust and confidence. The Board of Directors is expected to act in a fully informed basis, in good faith, with due diligence and care and act in the best interest of the Company in a manner characterized by transparency, accountability and fairness in the exercise of leadership in directing the Company’s sustainable growth. The Company’s Board responsibility is a recurring cycle as shown below:
The Board is actively engaged in discussions of strategic business issues and the directors are consulted for their invaluable inputs through the special strategy board meetings and gatherings with the management teams. The Board Corporate Governance Committee formalized these gatherings into an annual Board Retreat or strategy meetings in an atmosphere of relaxed, open and intellectual exchange.
As part of its director development program and to ensure that the members of the Board remain up to date with business and legal developments, the Board is provided with regular legal bulletins, and invited to economic and industry-specific briefings and strategy and management conferences within the Aboitiz Group. All directors, including the Independent Directors, actively participate in corporate governance seminars to further enhance their knowledge and expertise.
The Company’s By-Laws require that the quorum for valid board meetings is a majority of the members of the Board, in accordance with the with the Revised Corporation Code of the Philippines. As a matter of long standing Board practice, decisions of the Company’s Board are always made with the consensus or vote of all the Company’s independent directors, thus resulting in a unanimous vote of all directors of the Board.
As provided in the Company’s Board Protocol, the Company’s Independent Directors meet at least once a year for an Executive Session. The Independent Directors may also meet periodically in an executive session with no other Director or management present except for the Chairman of the Board Corporate Governance Committee who shall call for and preside the meeting. Topics for discussion during these executive sessions shall be determined by the Independent Directors, but actions of the Board generally should be taken separately during Board meetings. The Independent Directors met with the non- executive directors, including the Chairman of the Board Corporate Governance Committee, at Taguig City on November 19, 2019 for their informal discussion of issues.
For an effective Board, the Company takes serious consideration of the selection of the members of the Board. It believes that the nomination, selection and election of directors are fundamental elements of a well-functioning corporate governance system. The annual selection process is intended to appoint a diverse mix of highly competent directors and officers with in-depth knowledge and experience in the core industries or corporate management, financial expertise, audit and governance experiences. Other factors considered are independent-mindedness, ethical behavior and value contribution of each director. The Company follows a formal and transparent board nomination and election process to ensure the interests of all shareholders.
Directors are nominated by shareholders based on their expertise and professional backgrounds, track record, capacity for strategic thinking, and understanding of the Group’s businesses. Nominees for directors are submitted to the Board Corporate Governance Committee, to which the Nominations and Compensation Committee has been merged into. The committee ensures that there is diversity in the Board in terms of experience, profession, age and gender. All directors are elected at the annual shareholders’ meeting (ASM), by personal vote or by proxy. A Proxy Validation Committee validates all proxies prior to the ASM.
The Board of Directors conduct an annual performance assessment of the Board members and key officers. The Board members conduct a self assessment of their individual and collective performance, and also evaluate the performance of the CEO, the Internal Audit Head, Chief Risk and Reputation Officer, and the Compliance Officer.
The directors and key officers are valuated based on the following criteria: compliance with best governance practices and principles, participation and contribution to the Board and committee meetings, and assessment of performance against their duties and responsibilities as provided for in the Company’s Manual, Articles and By-Laws. Assessment results for the past three years are compared, and these are presented to the Board Environmental, Social and Corporate Governance Committee and to all Board members.
In 2020, the Board Assessments were conducted by an independent Third Party Board Evaluators, Good Governance Advocates and Practitioners of the Philippines, Inc. (GGAPP).
The Board Corporate Governance Committee ensures that the remuneration for directors and executives is consistent with the Company’s culture, strategy, and business policies. Remuneration rates are also maintained at a level sufficient to attract and retain directors and officers who are needed to successfully run the company.
AboitizPower ensures that it gives competitive remuneration to its directors and officers, and regularly benchmarks its compensation against another similar-sized Philippine-based companies through the market salary surveys.
The Company engages the services of independent remuneration consultants to determine the compensation, as well as any annual merit increases, for directors, officers, and team members. Factors such as inflation and consumer price index are taken into account to ensure that the compensation structure will sustain the Group’s competitiveness while also attracting and retaining the best talent. The results of the study are then presented and discussed during the Company’s first Board Corporate Governance Committee meeting for the year.
During its February 18, 2019 meeting, the Corporate Governance Committee approved the increase the directors’ monthly allowance from PHP180,000 to PHP200,000 for the Chairman, and from PHP120,000 to PHP150,000 for other directors. The committee also approved the increase in the per diem for every meeting attended as follows:
Other than the director’s per diem and monthly allowance, there are no other standard arrangements pursuant to which directors are compensated or to be compensated. Officers are rewarded based on their individual performance and on their ability to execute their duties and responsibilities effectively.
The Board of Directors do not participate in discussions or deliberations involving his/her own remuneration. Thus, all proposed changes in Board remuneration are approved by the shareholders and disclosed to the public in a timely manner through PSE and SEC disclosures and the Company’s Annual Report (SEC Form 17-A). The Company believes that the information provided in the disclosures provide sufficient information on director and executive remuneration, while maintaining the privacy of the individuals concerned in compliance with applicable laws and regulations.
Board of Directors
Board directors are expected to serve with diligence. During 2019, the Company had 7 board meetings, both regular and special meetings.
The Company discloses the number of board meetings and attendance details of each director through its Annual Report and Definitive Information Statement. The attendance is then reported to the Board Corporate Governance Committee by way of the Board Performance Report and to the SEC through the filing of the Integrated Annual Corporate Governance Report (I-ACGR).
The attendance of the Directors to the Company’s board meetings in 2019 was exemplary with an overall percentage of 91%. Summary of the attendance record can be seen below.
*Ex-Officio Members are non-voting members.
Board Committees
Board committees usually meet at least twice a year, except for the Board Audit Committee that meets at least two times in a year.
Members of the Board Committees are duly qualified elected directors of the Company’s Board of Directors as regular members and are assisted by key officers of the Company who sit on an ex-officio basis. These Board Committees hold meetings at least every quarter to ensure that sound strategies for the Company’s development are reviewed, monitored, executed and achieved.
In 2010, the Board decided that the functions of the Board Strategy Committee subsumed under the functions of the full Board membership. As as result, the Board regularly holds a special strategy meeting in addition to the strategy sessions at regular board meetings and the informal strategy meetings of the Directors.
The Board also folded in the Board Nominations and Compensation Committee to the Board Corporate Governance Committee. In 2012, the Board Corporate Governance Committee endorsed the creation of an expanded Board Risk Management Committee into a Board Risk and Reputation Management Committee. Membership of Independent Directors to both Board Corporate Governance Committee and Board Risk and Reputation Management Committee increased. The Related Party Transactions Committee is composed entirely of Independent Directors.
Summary of the attendance record of the Board committees can be seen below.
Board Audit Committee
Board Corporate Governance Committee
Board Risk and Reputation Management Committee
Board Related Party Transactions Committee
Board Executive Committee
The Company promotes a culture of ethical and values-based service, excellence and leadership. We believe that this corporate culture promotes the recognition for employees and officers of their duty to advance the Company’s interests and that of its stakeholders. No employee, officer or director may take advantage of their position or corporate property or information for personal gain.
Employees, officers or directors are prohibited from taking advantage of their position, from taking advantage of access to corporate property and proprietary information for personal gain. They are prohibited from appropriating for themselves, corporate opportunities for sales, purchases of products and services. It is the duty of each director, officer and employee to protect propriety and confidential information.
AboitizPower employees and officers are encouraged to promptly report any potential relationship, action or transaction that may give rise to a conflict of interest to the Human Resources Department or to the Compliance Officer. Directors are under the obligation to disclose any actual or potential conflict of interest to the Chairman of the Board, to the Corporate Secretary, and to the Compliance Officer.
All Directors are also required to abstain or inhibit themselves from any Board discussion or decision affecting their personal, business or professional interests. Legal proceedings involving Directors and Officers that could affect their ability and integrity to serve the Company are required to be disclosed to the Compliance Officer.
The Company adopted the Policy on Conflict of Interest in 2012 to set out the procedures that would ensure the integrity and transparency of all transactions between and among the Company or any of its subsidiaries, affiliates, associates, major shareholders, directors and officers. No issues relating to RPTs or conflict of interests have been raised in the past or in recent years.
The Board and Management of the Company believe that a commitment to proper disclosures and transparency of the businesses elicit the trust and confidence of stakeholders. The Aboitiz Group puts a high premium to its reputation and work at keeping this well-earned trust of stakeholders gained over the years. Pursuant to the Group’s commitment to transparency and accountability, the Company continues to improve its dedicated corporate governance web page on its website which can be accessed at https://aboitizpower.com/corporate-governance/governance-reports-and-scorecards/#previous-corporate-governance-reports .
The corporate website makes available to the public, copies of the annual corporate governance reports, annual reports, company disclosures, investor reports, organizational information, and Board and Board Committee membership, policies such as the Manual on Corporate Governance, Code of Ethics and Business Conduct, minutes of the ASM, Investor Relations Information, and other information relevant to stakeholders. The website serves as a resource center for stakeholders and the public. The Board Secretariat is also fully committed to ensuring full and accurate disclosures of information to shareholders, to the general public and all other stakeholders.
Transparent Ownership Structure
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Monitoring of Insiders’ Share Ownership
While the Company encourages stock ownership by employees, to ensure ethical conduct, the Company through its Governance and Compliance Team and Board Secretariat monitors the share ownership of directors, executives and management team through the regular SEC disclosures of beneficial ownership (SEC Form 23-B), and tracking of compliance of the Company’s Insider Trading Policy and Trading Blackout dates.
Identity of the Beneficial Owners Holding 5% or More Shares
The Company periodically submits to the PSE a public ownership report detailing the extent of ownership of controlling shareholders, including the shareholdings of their subsidiaries and affiliates, and that of the Directors and Management. It submits to the PSE a list of its top 100 shareholders every quarter. It also discloses its top twenty (20) shareholders, including shareholders of record and beneficial owners owning more than five percent (5%) of the Company’s outstanding capital stock, and shareholdings of its Directors and Officers in the Company’s Information Statement sent out to shareholders annually. The Company, however, has no control over outside shareholders who may choose to put their shares under nominee holding companies such as the PCD Nominee Corporation, and is thus unable to make any disclosure on details of that ownership.
Disclosure of Direct and Indirect Shareholders of Major / Substantial Shareholders
The Company periodically submits to the PSE a public ownership report detailing the extent of ownership of controlling shareholders, including the shareholdings of their subsidiaries and affiliates, and that of the Directors and Management. It submits to the PSE a list of its top 100 shareholders every quarter. It also discloses its top twenty (20) shareholders, including shareholders of record and beneficial owners owning more than five percent (5%) of the Company’s outstanding capital stock, and shareholdings of its Directors and Officers in the Company’s Information Statement sent out to shareholders annually. The Company, however, has no control over outside shareholders who may choose to put their shares under nominee holding companies such as the PCD Nominee Corporation, and is thus unable to make any disclosure on details of that ownership.
Disclosure of Direct and Indirect Shareholdings of Directors and Senior Management
The Company discloses beneficial ownership in the regular filings of Statement of Beneficial Ownership and in its Annual Corporate Governance Report to the SEC, including the trading of Company shares by its directors and key officers. Non-compliance with the policy may carry criminal and civil liabilities as well as reputational damage to the Company, the Board, the Management and the Office of the Chief Compliance Officer strictly enforce compliance with the Trading Policy.
Based on the Company’s Public Ownership Report which was filed with the SEC and PSE and subsequently posted in the Company’s website, below is the direct and indirect ownership of directors and senior management as of December 31, 2019:
Insider Trading Prohibition
Insider trading is strictly prohibited under the Code of Ethics and Business Conduct, the Manual, and the PSE and SEC Rules. The Company’s Manual on Corporate Governance prohibits every member of the Company from any misuse of inside information. All team members of the Company are mandated to exercise prudence in handling material non-public information in the course of their work and in relation to the trading or dealing with AboitizPower securities. The Company strictly enforces its trading blackout and insider trading policy to curtail opportunistic dealings in the Company’s shares. Any violations are required to be reported to the Board Corporate Governance Committee.
Reporting of Share Trades
While the Company encourages stock ownership by employees, to ensure ethical conduct, the Company through its Governance and Compliance Team and Board Secretariat, monitors the share ownership and share transfer of directors, executives, officers and management team through the regular SEC disclosures of beneficial ownership (SEC Form 23-B), and further monitor compliance through the implementation of the Company’s Insider Trading Policy and Trading Black-out dates.
The Company has an existing policy requiring the Board of Directors to inform the Office of the Corporate Secretary of transaction related to the purchase and disposal of Company shares within one business day from the date of the transaction. The Company discloses the direct and indirect (deemed) ownership or shareholdings of major and/or substantial shareholders and the details of the subsidiaries, associates, joint ventures and special purpose enterprises/vehicles. The Company’s Information Statement and Public Ownership Report regularly filed by the Company likewise show the direct and indirect ownership of the Company’s shareholders, which include its Board, the Management Team, and employees.
Mandatory seminars are conducted to impress upon and refresh all employees’ awareness and understanding of the Company’s Manual of Corporate Governance and Code of Ethics and Business Conduct, as well as the underlying principles of corporate governance and ethical behavior and conduct for the Company.
In 2011, the Board mandated a Corporate Governance Seminar for all employees. This was followed by a mandate in 2012 requiring all newly-hired employees to attend a new hires’ seminar and an annual Quality Focus seminar which includes an orientation on the Company’s Manual of Corporate Governance and Code of Ethics and Business Conduct.
In 2013, the Company launched its online Corporate Governance E-learning Course for all newly-hired employees. This was taken by all employees through a web-based portal with a standard test, the results of which are reported to management and the Board Corporate Governance Committee.
On July 24, 2014, in compliance with Memorandum Circular 20, Series of 2013 of the Securities and Exchange Commission and in partnership with the Institute of Corporate Directors, the Company held its Aboitiz Annual Corporate Governance Seminar at its principal office in Bonifacio Global City, Taguig City. This seminar was attended by the Company’s Board of Directors and key officers.
On March 25, 2015, the Company conducted its 2015 Aboitiz Annual Corporate Governance Seminar in Taguig City, which was attended by around forty directors and key officer. This seminar was again conducted in partnership with the Institute of Corporate Directors.
On March 28, 2016, the Company together with Aboitiz Equity Ventures, Inc.(AEV) conducted their first In-House Mandatory Corporate Governance Seminar in Shangri-La at the Fort, the Manila. The seminar was attended by over fifty participants composed of AEV and AboitizPower’s Directors and Key Officers.
On March 28, 2017, The Pan-Asia Risk and Insurance Management Association (PARIMA) held its first regional conference in Manila at the Shangri-La at the Fort Manila, Taguig City, Philippines. This year’s theme is ‘Sustainable, Resilient, & Intelligent Future,’ which aimed to strengthen and educate risk management professionals and key industry players in today’s rapidly changing risk landscape. With more than 270 participants, the PARIMA Manila Conference was a landmark event for the risk professional community (8 hrs). In Aboitiz Group, around 50 delegates composed of some members of the Board of Directors, Risk Managers and Senior Executives attended.
On March 29, 2017, AEV Group Risk Management, in coordination with AEV Governance and Compliance team, organized an Executive Briefing for the Board of Directors and Senior Executives of the Group, with more than 80 participants. The briefing covered three topics such as The 2017 Top Global Risks: World Economic Forum, Millennial Mindset – Risk and Opportunity in the Workforce, and Cyber Security (4 hrs.). The participants were also given an opportunity to raise their concerns during the Q&A portion of the program.
On August 31, 2018, AEV Group Risk Management, in coordination with AEV Governance and Compliance team, organized 2018 Annual Corporate Governance Seminar for the Board of Directors and Senior Executives of the Group, with more than 60 participants. The briefing covered three topics such as Digital Disruption: Reshaping Leadership, Innovation and Risk; Cyber Risk; and Discussion on the Asia-Pacific Risk Landscape 2018 (4 hrs.). The participants were also given an opportunity to raise their concerns during the Q&A portion of the program.
On September 9, 2019, the Board of Directors and Key Officers of Aboitiz Equity Ventures Inc. (“AEV”) have attended the 2019 In-House Corporate Governance Seminar conducted exclusively for the Aboitiz Group with more than 30 participants. The seminar was held last at the NAC Tower, Bonifacio GlobalCity, Taguig City. The seminar covered the following topics such as Winning in a World of Digital Dragons; ESG and Sustainability: Trends, Issues and Complexity in the ASEAN; and Data Privacy in a Changing World. The participants were also given an opportunity to raise their concerns during the Q&A portion of the program.
Risk management plays its part in the achievement of the Aboitiz Group’s strategic objectives by creating a culture of measuring and managing risk.
Now on its third year of assessing the risk maturity of the Aboitiz Group, the Group’s average rating is at 3.9 on a scale of 1 -5. This puts the Group at the top 15% of all organizations that participate in the global Risk Maturity Index (RMI) assessment conducted by AON annually. The 2014 assessment was participated by 110 Aboitiz Group team leaders, including board members, C-Suite, key operating team leaders, and risk managers from 16 business units.
See discussion of the Company’s risk management initiatives in the company’s Integrated Annual Report and Definitive Information Statement.