QuestionsQuestions (Republic Act No. 10149)
The short title is the “GOCC Governance Act of 2011.” Its policy is to promote financial viability and fiscal discipline in GOCCs by ensuring prudent use of government assets, centralized monitoring, transparent and accountable governance, periodic disclosure and evaluation, professionalism, reasonable remuneration, and a clear separation between regulatory and proprietary activities.
A GOCC is an agency organized as a stock or nonstock corporation vested with functions relating to public needs, owned by the Government of the Republic of the Philippines directly or through its instrumentalities at least a majority of outstanding capital stock (for stock corporations). For purposes of the Act, it includes GICP/GCE and GFIs as defined in the Act.
Covered: all GOCCs, GICPs/GCEs, and GFIs, including their subsidiaries. Excluded: BSP, state universities and colleges, cooperatives, local water districts, economic zone authorities, and research institutions. For economic zone authorities and research institutions, the President appoints one-third (1/3) of board members from the list submitted by the GCG.
The Governance Commission for Government-Owned or -Controlled Corporations (GCG) is a central advisory, monitoring, and oversight body attached to the Office of the President. It has authority to formulate, implement, and coordinate policies for GOCC governance.
Among others: the GOCC’s functions are no longer relevant/consistent with national development policy; duplication or overlap with another government agency; failure to produce desired outcomes or cost inefficiency/non-generation of adequate social, physical, economic returns; dormancy/nonoperation; activities best carried out by the private sector; or need for consolidation under a holding company due to functional overlap.
The GCG classifies GOCCs into (1) Developmental/Social Corporations, (2) Proprietary Commercial Corporations, (3) Government Financial/Investment/Trust Institutions, (4) Corporations with Regulatory Functions, and (5) Others as may be classified. The classification guides how the GCG exercises its powers under the Act.
Within 180 days, the GCG must adopt an ownership and operations manual and government corporate governance standards. It must include objectives of state ownership; roles of national government; modes of ownership implementation; guidelines for monitoring GOCC operations (strategy maps, charter statements, performance commitments); disclosure/transparency requirements; code of ethics of directors/officers; board committees; integrated corporate reporting; statement of social responsibilities; and other matters the GCG deems proper.
The GCG must establish performance evaluation systems and performance scorecards. These apply generally and vary by GOCC classification, using set performance criteria, targets, and weights to measure fiscal-year performance and achieve “breakthrough results.”
Appointive Directors are appointed by the President from a shortlist prepared by the GCG. The GCG must create search committees, apply Fit and Proper Rule and other qualifications, and ensure the shortlist exceeds the number to be appointed by at least 50%. If the President does not appoint anyone from the shortlist, the President asks for additional nominees.
The Fit and Proper Rule is the standard to determine whether a director/trustee or CEO is qualified, including integrity, experience, education, training, and competence. It is determined by the GCG in consultation/coordination with relevant government agencies and approved by the President.
Appointive Directors have a one (1)-year term unless removed for cause. They continue until a successor is appointed. Reappointment requires nomination by the GCG, which is allowed only if the director obtains a performance score of above average or equivalent/higher in the immediately preceding year based on performance criteria.
The CEO (or highest-ranking officer in the charter) is elected annually by the Board from among its ranks, and the CEO is subject to the disciplinary powers of the Board, which may remove the CEO for cause.
They must act in the best interest of the GOCC with utmost good faith; act with utmost and undivided loyalty; exercise due care/extraordinary diligence/skill/good faith; avoid conflicts of interest and declare interests before the Board; apply sound business principles to ensure financial soundness; and elect/employ only fit and proper officers.
Restitution is required upon COA determination that GOCC properties/monies were possessed without authority, or profits were earned in violation of fiduciary duty, or per diems/allowances/incentives exceed statutory limits. If restitution is not made within 30 days after written demand, after trial and final judgment, the offender faces imprisonment of one (1) year and a fine equivalent to twice the amount restituted, and may be disqualified to hold public office at the court’s discretion.
All GOCCs must maintain a website with unrestricted public access and post: latest annual audited financial and performance report (within 30 days from receipt), audited financial statements for the last five years, quarterly/annual reports and trial balance, current operating budget, complete compensation package of board members and officers, local and foreign borrowings, performance scorecards and strategy maps, government subsidies and net lending, all government-guaranteed borrowings, and other information required by the GCG.
At minimum, the 30 GOCCs with the highest total assets are subject to periodic special audits by COA, to verify completeness and compliance of accounting records with generally accepted accounting practices and that financial statements fairly and comprehensively present financial position and results of operations. Additionally, the GCG Chairman may direct a special COA audit of any other GOCC for specific purposes or as authorized by law.
Creation: the government agency must submit its proposal to the GCG for review and recommendation to the President, and SEC shall not register the articles/bylaws unless accompanied by GCG endorsement stating the President’s approval. Acquisition: a proposal to purchase a corporation or acquire controlling interest must be submitted to the GCG for review and approval of the President.