Constitutional and statutory basis
- The Executive Order anchors its governance mandate on the constitutional rule that a public office is a public trust, requiring accountability, integrity, loyalty, and modest living (Section 1, Article XI of the 1987 Constitution).
- The Executive Order is guided by the public conduct mandate in Republic Act No. 6713 (The Code of Conduct and Ethical Standards for Public Officials and Employees) requiring public interest over personal interest and efficient, effective, honest, and economical use of government resources to avoid wastage.
- The Executive Order cites Section 17, Article VII of the 1987 Constitution, recognizing the President’s control over executive departments, bureaus, and offices.
- The Executive Order uses these principles to justify presidential control to rationalize GOCC board/trustee compensation (WHEREAS clauses).
Policy and purpose for rationalization
- The Executive Order requires that rationalization of GOCC board/trustee compensation be anchored on State policy considerations (Section 1).
- The policy includes promoting transparency, accountability, and prudence in government spending (Section 1(a)).
- The policy aims to enable GOCCs to perform developmental, social, commercial, proprietary, and regulatory functions and respond to demands for effective and efficient public services, contributing to national development (Section 1(b)).
- The policy includes strengthening GOCC governance and management by attracting highly qualified and competent individuals (Section 1(c)).
- The policy includes improving monitoring, supervision, and evaluation of GOCC management and operations (Section 1(d)).
- The policy mandates standardization and rationalization of compensation so it is reasonable, justifiable, and appropriate to prevent abuses in granting salaries, per diems, allowances, bonuses, incentives, and other benefits (Section 1(e)).
Core definitions and covered persons/entities
- GOCC means an agency organized as a stock or non-stock corporation with functions relating to public needs (governmental or proprietary) and owned by the Government directly or through instrumentalities, wholly or—where applicable—at least 51% of capital stock for stock corporations (Section 2(a)).
- Chartered GOCC means a GOCC, including a GFI, created and vested with corporate functions by a special law (Section 2(b)).
- Non-chartered GOCC means a GOCC organized and operating under Batas Pambansa Bilang 68 (The Corporation Code of the Philippines) (Section 2(c)).
- GFI means a financial institution where the Government directly or indirectly owns majority of the capital stock and that is registered with or directly supervised by the Bangko Sentral ng Pilipinas (Section 2(d)).
- Subsidiary means a corporation more than 50% of voting stock of which is owned or controlled directly or indirectly through intermediaries by a GOCC (Section 2(e)).
- Ex-Officio Board Member means an individual who sits as a member of the Board of Directors/Trustees by virtue of holding another office, without further appointment (Section 2(f)).
- Authorized Alternate/Representative means an individual officially designated by an Ex-Officio Board member to exercise powers and perform functions in the event of absence or incapacity when allowed by law (Section 2(g)).
- Appointive or Elective Board Member means an individual who sits or acts by virtue of appointment or election to such position (Section 2(h)).
- Per Diems means compensation granted for attendance in meetings (Section 2(i)).
- Salaries, Allowances, Bonuses, and Benefits means any amount paid to board members other than per diems and performance-based incentives (Section 2(j)).
- Annual Retainer Fees means an annual lump sum amount paid for services rendered (Section 2(k)).
- Performance-based Incentives means rewards in cash or in kind for exceeding performance targets (Section 2(l)).
- Reimbursable Expenses means actual and reasonable expenses incurred in performance of official functions that may be legally reimbursed (Section 2(m)).
- Stock Plans refers to stock options, outright stock, restricted stock, and deferred stock (Section 2(n)).
Coverage rules and exclusions
- The Executive Order applies to members of the Board of Directors/Trustees of all GOCCs—whether with or without charter and regardless of classification—and to all their subsidiaries, but it excludes the Bangko Sentral ng Pilipinas (Section 4(a)).
- The Executive Order does not apply to the Bangko Sentral ng Pilipinas (Section 4(a)).
- The Executive Order applies to representatives of GOCCs in the boards of private corporations where the GOCCs have investments (Section 4(b)).
- Members of the Board of Directors/Trustees of Local Water Districts are subject to the same policies and principles, with separate rules to be issued for classification and compensation (Section 5).
- The Executive Order governs compensation of board members in the covered GOCCs and their related board representation structures through the stated compliance and structure rules (Sections 4, 7, 8, and 13).
GOCC classification for compensation caps
- GOCCs are classified for maximum allowable compensation based on assets and revenues (Section 6).
- Classification thresholds are:
- A: Assets > 100 Billion and Revenues > 10 Billion
- B: Assets > 25 Billion and < 100 Billion and Revenues > 2.5 Billion and < 10 Billion
- C: Assets > 5 Billion and < 25 Billion and Revenues > 500 million and < 2.5 Billion
- D: Assets > 1 Billion and < 5 Billion and Revenues > 100 million and < 500 million
- E: Assets < 1 Billion and Revenues < 100 million (Section 6(a)).
- Asset determination uses the prior year’s audited balance sheet (Section 6(b)).
- Revenue determination uses the average of the prior three years’ audited income statements (Section 6(c)).
- A GOCC must meet both the asset and revenue criteria (Section 6(c)).
- Changes in classification are reviewed, evaluated, and recommended by the Department of Finance, subject to approval by the President (Section 6(e)).
- Additional considerations may be given for financial performance, industry, and strategic positioning (Section 6(d)).
Compensation structure and detailed limits
- Board compensation is governed by principles and rules, and it must be subject to approval of the President (Section 3(b)(5)).
- Ex-Officio board members (including authorized alternates/representatives) who are Department Secretaries, Undersecretaries, Assistant Secretaries and other government officials are not entitled to additional compensation for services as such (Section 7(a)).
- Appointive or Elective board members may receive compensation under the Executive Order unless prohibited by law or Charter (Section 7(b)).
- Compensation granted to Ex-Officio board members of subsidiaries or private corporations where a GOCC has investments accrues to the GOCC represented (Section 7(c)).
- Compensation granted to Appointive or Elective board members representing a GOCC in a private corporation where the GOCC has investments shall not exceed the allowable compensation of board members of the represented GOCC; any excess must accrue and be remitted to the GOCC represented within fifteen (15) days (Section 7(d)).
What compensation may and may not include
- Compensation is allowed in the form of per diems, subject to the limits in Sections 9 and 10 (Section 8(a)).
- Performance-based incentives may be allowed and must follow the limits and mechanics under Section 11 (Section 8(b)).
- Annual Retainer Fees and Stock Plans are not allowed (Section 8(c)).
- Salaries, Allowances, Benefits, and other Bonuses are not allowed unless specifically authorized by law or Charter and approved by the President (Section 8(d)).
- The total of allowed compensation components and per diems must not exceed the limits in Sections 9 and 10 (Section 8(d)).
Maximum per diems: regular and special meetings
- The maximum per diem per Regular or Special Board meeting actually attended is based on GOCC size and must not exceed the maximum annual amounts stated in the schedule (Section 9(a)).
- Increases from current per diem rates take effect only upon approval by the President (Section 9(a)).
- The per meeting and per year caps are:
- A: PHP 40,000 per meeting; PHP 960,000 per year
- B: PHP 20,000 per meeting; PHP 480,000 per year
- C: PHP 15,000 per meeting; PHP 360,000 per year
- D: PHP 10,000 per meeting; PHP 240,000 per year
- E: PHP 5,000 per meeting; PHP 120,000 per year (Section 9(a)(2)).
- The board chairperson may receive not more than 20% of the amount set for members of the Board of Directors/Trustees (Section 9(b)).
Maximum per diems: committee meetings
- The maximum per diem per Committee meeting actually attended is based on GOCC size and is at most sixty percent (60%) of the amount set per Board meeting, subject to maximum annual amounts in the schedule (Section 10(a)).
- Increases in per diem rates take effect only upon approval by the President (Section 10(a)).
- The committee meeting caps are:
- A: PHP 24,000 per meeting; PHP 576,000 per year
- B: PHP 12,000 per meeting; PHP 288,000 per year
- C: PHP 9,000 per meeting; PHP 216,000 per year
- D: PHP 6,000 per meeting; PHP 144,000 per year
- E: PHP 3,000 per meeting; PHP 72,000 per year (Section 10(a)).
Performance-based incentives
- The maximum Performance-Based Incentives payable is based on GOCC size and must not exceed a reasonable percentage of a board member’s actual annual per diems received (Section 11(a)).
- Actual incentive amounts must be based on metrics agreed upon by the Board of Directors/Trustees and the supervising department, endorsed by the Department of Finance and the Department of Budget and Management, and are subject to approval by the President (Section 11(a)).
- A rating system must be used to assess GOCC performance, using metrics that clearly identify when targets have been met or exceeded (Section 11(b)).
- Performance-based incentives may be paid only if the GOCC has complied with its statutory obligations (Section 11(b)).
Reimbursable expenses and conditions
- All necessary expenses for board members to attend meetings and discharge official duties must be paid directly by the GOCC (Section 12(a)).
- If advances are necessary only due to the exigency of service and receipts are submitted, reimbursable items are limited to (Section 12(a)):
- transportation expenses going to and from the place of meetings
- travel expenses during official travel
- communication expenses
- meals during business meetings
- Reimbursement is subject to budgeting, accounting, and auditing rules and regulations (Section 12(a)).
Compliance requirements, clarifications, and penalties
- Chartered GOCC boards must comply with the Executive Order provisions to govern compensation and reimbursable expenses for their members (Section 13(a)).
- Non-charted GOCC boards (including all subsidiaries) must pass board resolutions adopting or reiterating the Executive Order provisions to govern compensation and reimbursable expenses for their members (Section 13(b)).
- Non-compliance with any Executive Order provision constitutes insubordination or neglect of duty and constitutes other administrative offenses as may be warranted, to be dealt with accordingly (Section 14).
- Upon COA determination and report that a board member received any amount or property beyond what is allowed or received anything that accrues to the GOCC represented, the board member must immediately return the same to the concerned GOCC (Section 15(a)).
- Clarification requests must be directed to the Task Force on Corporate Compensation and must be in writing (Section 16(a)).
Separability, repealing, and effectivity
- If any section or provision is declared invalid, the remaining sections or provisions continue in full force and effect (Section 17).
- All inconsistent orders, circulars, issuances, board resolutions, rules and regulations, or parts thereof, are repealed or modified accordingly; provisions not repealed or modified remain effective and enforceable as part of the Executive Order (Section 18).
- The Executive Order takes effect immediately upon publication in a newspaper of general circulation (Section 19).