CORPORATE GOVERNANCE

As a responsible corporate citizen, First Gen is aware of the importance of good corporate governance as an effective and powerful tool to help push the Company towards achieving long term success and assuring its sustained competitiveness in the energy industry. First Gen has thus put a premium on strict compliance with corporate governance regulations and ensures that the company and its people move relentlessly towards improving its corporate governance structures to comply with and even go beyond global best practices.

Our Directors and Board Committees

The board of directors of the Company is composed of individuals of proven competence and integrity. They are the persons responsible for managing and driving the corporate governance structures of First Gen. The board has the responsibility of guiding the Company towards fulfilling its economic targets and governance aspirations. Assisting the board in this endeavor are the members of the Company’s management who help steer First Gen and its people in the right direction.

The Company’s directors and officers keep themselves abreast of the latest standards in corporate governance. All of the Company’s directors and key officers regularly participate in corporate governance seminars to further enhance their knowledge and understanding of governance structures, roles and responsibilities. With such valuable knowledge at hand, First Gen’s directors and officers have the ability to craft plans, projects and processes which help the Company attain its financial goals and governance ambitions.

The board of directors of First Gen consists of nine members, including three Independent Directors, each of whom is elected by the Company’s qualified stockholders during the annual general meeting held every 2nd Wednesday of May of each year. Independent Directors Tony Tan Caktiong, Jaime I. Ayala, and Cielito F. Habito have neither interest nor relationship with First Gen that may hinder their independence from the Company or its management, or interfere with their exercise of independent judgment in carrying out their responsibilities.

With an eye on further improving its governance structures and fully acknowledging independent judgment as a powerful driver of good corporate governance, the Company took the bold step of increasing the number of independent directors with the election of Dr. Cielito F. Habito on May 11, 2016. With the election of Dr. Habito, one-third of the Company’s board of directors is now composed of independent directors.

Pursuant to the Company’s Manual on Corporate Governance and in compliance with the principles of good corporate governance, the members of the board have also been selected members of the following standing committees: the Nomination and Governance Committee, the Compensation and Remuneration Committee, the Audit Committee, and the Risk Management Committee.

The Nomination and Governance Committee is composed of at least three members, one of whom shall be an Independent Director. It is presently composed of Chairman Federico R. Lopez, Director Richard B. Tantoco, and Independent Director Tony Tan Caktiong.

Under The Nomination and Governance Committee Charter, the committee exercises the principal function of selecting directors and evaluating their qualifications as shall be consistent with the By-laws and Manual on Corporate Governance. The committee makes sure that a board election will result in a mix of proficient directors, each of whom will be able to add value and bring prudent judgment to the board of directors. It is also tasked to review the structure, size, and composition of the board and make appropriate recommendations thereto. It shall likewise review with the board, on an annual basis or as may be needed, the appropriate skills, characteristics, and training required by the directors.

The committee also holds the responsibility of reviewing and evaluating the qualifications of persons nominated for positions that require board approval. It likewise has the duty to assess the effectiveness of the board’s processes and procedures in the election or replacement of directors. It also reviews the recommendations of the Compliance Officer in relation to the Manual on Corporate Governance, as well as other corporate governance rules and regulations.

The Compensation and Remuneration Committee is composed of the Chairman of the Board and two members, one of whom shall be an Independent Director. The chairman of the committee is Independent Director Tony Tan Caktiong, and its members are Directors Federico R. Lopez and Peter D. Garrucho Jr.

Pursuant to the Compensation and Remuneration Committee Charter, the committee has the principal function of studying and recommending an appropriate compensation and/or reward system. It shall exercise powers and functions over the compensation and remuneration of the corporate officers other than the Chairman, whose compensation and remuneration shall be determined by the President and two directors, one of whom shall be an Independent Director. The committee shall establish a policy on remuneration of directors and officers to ensure that their compensation is consistent with the Company’s culture, strategy, and the business environment in which it operates. Further, it is tasked to review the Company’s human resources development or personnel handbook, in order to strengthen provisions on conflict of interest, policies on salaries and benefits, and directives on promotion and career advancement.

The Audit Committee is composed of four members, three of whom are Independent Directors, with the fourth member being a non-executive director. The committee is headed by Independent Director Jaime I. Ayala, with Director Peter D. Garrucho, Jr. and Independent Directors Tony Tan Caktiong and Cielito F. Habito and as members.

Under the provisions of The Audit Committee Charter, the committee’s primary function is to assist the board of directors in fulfilling its oversight responsibilities for financial reporting, internal control systems, internal audit activities, compliance with key regulatory requirements, and enforcement of the Corporate Code of Conduct.

Among the Audit Committee’s other functions are monitoring and evaluating the Company’s internal control systems which include the Company’s financial reporting control and information technology security. The Committee likewise recommends the appointment of the Company’s external auditor and ensures that the Company has an effective internal auditing system. To this end, the Committee is in charge of reviewing reports of the Company’s internal and external auditors and taking corrective action when necessary. The Committee is likewise tasked to review any unusual or complex transaction, and the accuracy of disclosures of material information, including subsequent events and related party transactions.

The Risk Management Committee was created by the board of directors in March 2010. The Risk Management Committee Charter provides that the committee shall be composed of at least three members from the board of directors. In May 2013, the board of directors decided to elect an additional director to sit on the committee, bringing its current board membership to four directors. Independent Directors comprise 50 percent of the committee’s membership.

The committee is chaired by Director Peter D. Garrucho, Jr., with Director Francis Giles B. Puno and Independent Directors Jaime I. Ayala and Cielito F. Habito as members.

The committee assists the board of directors in its oversight responsibility over management’s activities in managing physical, financial, operational, labor, legal, security, environmental, and other risks of the Company. It plays a vital oversight role and serves as an important liaison to the board. Under its charter, the committee shall have the duty and responsibility to provide guidance to management through the establishment of the Company’s risk management philosophy and risk appetite. It shall likewise approve the Company’s risk management policy and processes and any revision thereto. The Committee shall also communicate to key stakeholders the status of strategic and critical risks and require periodic reports from management, to confirm that the risk management system of the Company is operating correctly and consistently with its objectives.

 

Our Governance Initiatives

To maintain its high standards of corporate governance, First Gen continues to implement its Enterprise Risk Management (ERM) system across all departments and levels of the organization and in every phase of the Company’s business activities. The objective of the ERM system is to establish a corporate risk management system that provides the board of directors, management and all employees with a clear roadmap for identifying risks, avoiding pitfalls, and seizing opportunities to grow stakeholder value.

To continuously strengthen its corporate governance practices, the Company implements policies on Anti-Bribery and Corruption, Conflict of Interest, Corporate Social Responsibility, Insider Trading, Whistleblowing, and Related Party Transactions. The policies aim to ensure stakeholder protection as well as foster a culture of responsibility in the Company.

With the goal of providing consistent quality services and products to its stakeholders, First Gen ensures that it complies with international standards for its management systems. In previous years, the Company was certified compliant with the requirements under ISO 9001:2000 and ISO 9001:2008. In 2017, the Company was certified compliant under the latest version of international standards for management systems – ISO 9001:2015.

To further ensure compliance with the principles and policies of good corporate governance, Vice President and Investor Relations Head Valerie Y. Dy Sun serves as the Company’s Compliance Officer. Ms. Dy Sun is responsible for monitoring compliance by the Company with the Manual on Corporate Governance and the rules and regulations of regulatory agencies, including reporting the occurrence of any violation, reporting such violation to the board, recommending the imposition of appropriate disciplinary actions on the responsible parties, and adopting measures to prevent a repetition of the violation; appearing before the SEC when summoned on matters relating to the Manual on Corporate Governance; and, if any deviations are found, explaining the reasons for such deviation; and recommending to the board the review of the Manual on Corporate Governance.

First Gen has long recognized corporate governance as a necessary component of sound business management. As such, the Company, through its board of directors and senior management, continues to search for ways and means to further improve its corporate governance structures. In line with this aspiration, the Company regularly reviews its existing policies and programs with the intention of further elevating the level of accountability of the Company’s directors, officers, and employees. Efforts to enhance and develop the Company’s corporate governance structures have resulted in amendments to the Company’s By-laws and Manual on Corporate Governance, and approval and implementation of significant policies which will provide greater protection to the company’s stakeholders, and enhance organizational responsibility.

Today, more than ever, First Gen is determined to play a very significant role in the rapidly changing energy industry. First Gen is the only large energy industry in the Philippines which has bravely and unequivocally closed its doors to coal-fired power plants. As the Company grows, it will continue to make strategic choices judiciously and boldly, and improve its corporate governance initiatives in keeping with its commitment to excellence.