Board Meetings, Quorum and Attendance
At the onset of each year, the Board designates the days when it shall meet, at least six (6) times each calendar year.
Members of the Board should attend regular and special meetings of the Board in person or via teleconference or videoconference or by any other technological means allowed by the SEC.
Two-thirds (2/3) of the number of directors as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business.
In 2015, the Board had six regular meetings. The average attendance rate of members of the Board was 98 percent, with each member individually complying with the SEC’s minimum attendance requirement of 50 percent. The Executive Committee likewise convenes regularly in lieu of the Board.
2015 Board Meeting Schedule
Access to Information
Board materials are distributed to the Board of Directors at least five business days prior to the meeting.
The Corporate Secretary
The Corporate Secretary is Mr. Solomon H. Hermosura who assumed the position since April 2011 and has served as the General Counsel of the Company since April 2014. He is a Managing Director of Ayala Corporation and a member of its Management Committee since 2009 and the Ayala Group Management Committee since 2010. He is also the Group Head of Corporate Governance, General Counsel, Compliance Officer, and Corporate Secretary of Ayala Corporation. He is the CEO of Ayala Group Legal. He serves as Corporate Secretary of Globe Telecom, Inc., Manila Water Company, Inc., Integrated Micro-Electronics, Inc. and Ayala Foundation, Inc.; and a member of the Board of Directors of a number of companies in the Ayala group. He graduated valedictorian with Bachelor of Laws degree from San Beda College in 1986 and placed third in the 1986 Bar Examination. Ayala Land’s Corporate Secretary is trained in legal and company secretarial practices.
Board members have separate and independent access to the Corporate Secretary who oversees the adequate flow of information to other Board members prior to meetings and serves as an adviser to the directors on their responsibilities and obligations. Discussions during Board meetings are open, and independent views are encouraged and given due consideration. It is the duty of the Corporate Secretary, who is a citizen and a resident of the Philippines, to prepare and keep the minutes of all meetings of the Board and stockholders and attend to the correspondence and files of the Corporation; to sign, jointly with the President, all stock certificates; keep and fix the corporate seal; record all transfers of stock and cancellations and keep all stock certificates transferred; and keep a list in alphabetical order of all stockholders of the Corporation and of their residences and the shares owned by each.
The Corporate Secretary has the following functions:
i. Serve as an adviser to the directors on their responsibilities and obligations;
ii. Keep the minutes of meetings of the stockholders, the Board, the Executive Committee, and all other committees in a book or books kept for that purpose, and furnish copies thereof to the Chairman, the President and other members of the Board as appropriate;
iii. Keep in safe custody the seal of the Corporation and affix it to any instrument requiring the same;
iv. Have charge of the stock certificate book and such other books and papers as the Board may direct;
v. Attend to the giving and serving of notices of Board and shareholder meetings;
vi. Be fully informed and be part of the scheduling process of other activities of the Board;
vii. Prepare an annual schedule of board meetings and the regular agenda of meetings, and put the Board on notice of such agenda at every meeting;
viii. Oversee the adequate flow of information to the Board prior to meetings; and
ix. Ensure fulfillment of disclosure requirements to the Securities and Exchange Commission and the Philippine Stock Exchange.
The Corporate Secretary shall have such other responsibilities as the Board may impose upon him or her, including the facilitation of trainings for directors when necessary.
Selection/Appointment, Re-election, Disqualification, Removal, Reinstatement and Suspension
The directors shall be elected by the Corporation’s stockholders entitled to vote at their annual meeting in accordance with the By-laws and the rules of procedure for annual meeting of stockholders. Pursuant to the Corporation Code, any shareholder, including minority shareholders, shall have the right to nominate candidates to the Board. The list of names of the nominees to the Board, together with the written consent of the nominees, shall be filed and submitted to the Nomination Committee through the office of the Corporate Secretary at least thirty (30) business days prior to the date set for the annual meeting of stockholders wherein they will be elected.
For the election of directors, it is necessary for one-half plus one of the outstanding shares of stock to be present or represented. No person shall be elected nor be competent to hold the office of director unless at least one (1) share of stock of the Corporation shall stand in his name in the books of the Corporation at the time of his election.
The election of directors shall be by ballot and each stockholder may vote such number of shares he owns for as many persons as there are directors to be elected or he may cumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute his votes on the same principle among as many candidates as he may see fit, provided that the total number of votes cast by him shall not exceed the number of shares owned by him multiplied by the whole number of directors to be elected.
The Committee of Inspectors of Proxies and Ballots appointed by the Board shall supervise the election of directors. No candidate for the office of director maybe a member of the Committee. Directors shall hold office for the term of one (1) year or until their successors shall have been elected and qualified, in accordance with the By-Laws.
The Company institutes a plan of succession that formalizes the process of identifying, training and selection of successors in key positions in the Corporation. The Board of Directors prioritizes senior officers from within the organization. Strong candidates are usually given expanded roles for a few years prior to assuming a higher post. In the event that the Board opts to hire externally, the Human Resource Department and accredited executive search firms are tasked to source potential candidates.
Board Independence and Conflict of Interest
It is the responsibility of each director to promote the best interest of the Corporation. Therefore, in making decisions, the directors should only pursue the interest of the Corporation, and must not consider their own personal advantage. Each director shall disclose any conflict of interest, annually through the Ayala Land Disclosure Form. A director with any material conflict of interest that has been determined to be permanent in nature shall be disqualified from the Board.
Notwithstanding the precautions set by the annual disclosure of conflict of interest, each director is required to abstain from participating in the discussion of, and from voting on, any matter where he is in conflict of interest at any point during the course of his service.
In line with the insider trading policy of the Corporation, each director is required to notify the Board at least one day before dealing in the shares of stock in the Corporation. No person shall qualify or be eligible for nomination or election to the Board of if he is engaged in any business which competes with or is antagonistic to that of the Corporation in accordance with the Corporation’s By-laws.
At least once a year, the non-executive directors meet without any executives present. Directors shall keep confidential all the information contained in the confidential reports or discussions for a period of at least two years. They shall also ensure that all persons who have access to the same information on their behalf shall likewise comply with this rule.
The personal interest of directors, key officers and employees should never prevail over the interest of the Company. If an actual or potential conflict of interest should arise on the part of directors, it should be fully disclosed and the concerned director should not participate in the decision-making. If a director has an interest in a matter under consideration by the board, then the director should not participate in those discussions and the board should follow any further appropriate processes. Individual directors should be conscious of shareholder and public perceptions and seek to avoid situations where there might be an appearance of conflict of interest.
The Ayala Land Internal Audit has aligned the policies on conflict of interest of Ayala Land with the subsidiaries and affiliates to facilitate a group-wide implementation. The amended group-wide policy will continue to require strict compliance by all employees to file their Annual Business Interests and Related Party Disclosure forms with their respective Human Resources Division which will then be submitted for consolidation and filing. IAD will then review the disclosures and conduct audit to check compliance.
Each director of the Corporation shall be entitled to receive from the Corporation, pursuant to a resolution of the Board of Directors, fees and other compensation for his services as director. The Board of Directors shall have the sole authority to determine the amount, form and structure of the fees and other compensation of directors. In no case shall the total yearly compensation of directors exceed one percent (1 percent) of the net income before income tax of the Corporation during the preceding year.
Independent directors are not entitled to receive options, performance shares, and bonuses except pursuant to a resolution approved by stockholders owning at least a majority of outstanding capital stock.
The total compensation paid to the CEO and key officers of management is disclosed in the Definitive Information Statement sent to all shareholders. The total annual compensation reported includes the basic salary and other variable pay, such as performance-based cash bonuses and the exercise of previously granted Employee Stock Option Plans or the current ESOWN, if any.
Non-executive directors receive remuneration consisting of a fixed annual retainer fee of Php1,000,000 and a fixed per diem of Php200,000 for each regular Board meeting attended. There were a total of six regular Board meetings in 2015. In addition, non-executive directors are also entitled to a per diem of Php100,000 per Board Committee meeting attended. The remuneration of non-executive directors was approved and ratified during the 2016 Annual Stockholders’ Meeting.
None of the directors, in his or her personal capacity, has been contracted and compensated by the Company for services other than those provided as a director.
2015 Director Compensation
The Ayala Land Group Internal Audit, headed by Mr. Leovigildo D. Abot as Vice President and Chief Audit Executive, reports to the Audit Committee of the Board. The Ayala Land Group Internal Audit provides independent and objective assurance and advisory services to the Company. Through the Audit Committee, the Ayala Land Group Internal Audit assists the Board in the discharge of its duties and responsibilities as provided for in the SEC’s 2009 Revised Code of Corporate Governance.
The Ayala Land Group Internal Audit executed its audit activities for 2014 in accordance with the risk-based, process-focused audit approach. This approach is in accordance with the Institute of Internal Auditors’ International Standards for the Professional Practice of Internal Auditing and likewise complies with the SEC’s 2009 Revised Code of Corporate Governance.
The Company continues to improve the internal audit function by benchmarking against best practices. For example, Ayala Land Group Internal Audit is implementing Control Self Assessments (CSA) as regular audit projects in some business units using facilitated discussions and questionnaires (hybrid approach). CSA is a process through which internal control effectiveness is examined and assessed by the audit client (i.e. process owners) and validated by Internal Audit. The objective is to provide reasonable assurance that all business objectives of business units will be met through the process owners’ assessment of how well things work at their end. Overall, we believe that the process resulted in more efficient and effective business processes through improved internal controls and increased employee morale.
Other internal audit best practices adopted by Ayala Land Group Internal Audit include Assurance Mapping and Data Analytics. Assurance Mapping is critical in determining priority audit projects during audit planning phase. Ayala Land Group Internal Audit has also completed the pilot roll out of “Continuous Auditing” by establishing a Data Analytics Unit. Aside from increased assurance (i.e., reviewing 100 percent of critical transactions/data instead of samples), Data Analytics also allow collection of data, audit evidence and indicators from IT systems (SAP and non-SAP), processes, transactions and controls on a frequent, repeatable and sustainable basis.
Diversity, Skills and Competencies
The Board encourages the selection of a mix of competent directors, each of whom can add value and contribute independent judgment in the formulation of sound corporate strategies and policies. In the selection of candidates for the Board, the objectives set by the Board for its composition are to be seriously considered, as well as the required knowledge, abilities and experience needed to successfully manage the Corporation. Careful attention is given to ensure that there is independence and diversity, and appropriate representation of women in the Board.
The Board, as a group, possesses the necessary knowledge, skills and competencies and experience in general business, industry, legal, and finance required to properly perform its duties with each director capable of adding value and rendering independent judgment in relation to the formulation of sound corporate policies.
The Board regularly reviews its composition, taking into account the evolving requirements of the Corporation, and best practices in corporate governance.
Development and Training
Ayala Land encourages all Board members to attend orientation programs and continuous professional education programs.
New directors are given an orientation program to ensure that they are properly equipped with all the Company information required for them to fulfill their respective roles as members of the Board. Typically, a presentation about Ayala Land’s operations, business performance and financial results is provided followed by an optional tour of Ayala Land’s various business segments and projects.
All Directors are likewise encouraged to attend seminars and trainings on Corporate Governance. In 2014, all Board members have undergone training in corporate governance and have been certified by the Institute of Corporate Directors (ICD) and Securities and Exchange Commission (SEC).
ICD is a professional organization that is based in the Philippines and is accredited by the Philippine SEC and the PSE. ICD works closely with the Organization for Economic Cooperation and Development (OECD), the Global Corporate Governance Forum, and the International Corporate Governance Network and is committed to promoting world-class corporate governance principles in the East Asia region. ICD releases an annual survey based on an independently verified “scorecard” rating of corporate governance for publicly listed companies in the Philippines. Ayala Land topped the ICD Corporate Governance ratings in 2010 with a score of 99 percent and was given a Platinum award for garnering Gold awards (with a score of at least 95 percent) for three consecutive years.
The average score of the 214 companies in the 2010 survey was 77 percent.
In 2012, ICD decided to fully adopt the ASEAN Corporate Governance Scorecard in preparation for the economic integration by 2015. This move aims to further enhance local corporate governance standards to ensure that Philippine listed firms remain at par with the rest of the region.
After its initial run conducted in 2013, which included 252 publicly-listed companies, Ayala Land registered a score of 79.6 percent, topping the average score of 51 percent across all listed entities and also beating the average rating of the property sector, composed of 38 listed corporations, at 48.4 percent.
In 2014, Ayala Land further improved its score to 88.4 percent mainly driven by improvement in corporate governance measures. The Company is determined to continuously improve its corporate governance practices in 2015, with the introduction of key governance
In 2015, Ayala Land ranked as one of the Top 3 publicly-listed companies in the country and one of the Top 50 publicly-listed companies in the ASEAN region in corporate governance practices based on the ASEAN Corporate Governance Scorecard or ACGS.
One of the tools used by the Board to monitor and improve its performance is an annual self-assessment exercise. This is administered in the form of a formal questionnaire that is answered by each member of the Board and where they rate their individual performance and that of the Board as a whole. The results are compiled by the Compliance Officer and submitted back to the Board for discussion and appropriate action through the Corporate Secretary. This self-assessment survey covers four broad areas of Board performance: Fulfillment of the Board’s Key Responsibilities, Quality of the Board–Management Relationship, Effectiveness of Board Processes and Meetings, and the Performance of Individual Board Members. The self-assessment survey questions are reviewed regularly and administered every May (after the Annual Stockholders’ Meeting).
The Board also conducts its annual assessment of the President and CEO. In 2013, a self-evaluation survey of the various Board committees was likewise introduced, consistent with the format and process implemented for the Board performance review.