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Corporate Governance.
GOVERNANCE AND LEADERSHIP TEAM.
Corporate Governance Structure.
Amidst these unprecedented times, AC Energy Corporation adopted a resilient stance in its corporate governance system. Cognizant that stakeholder needs have drastically changed over the period, the Company has been flexible in its approach in ensuring that stakeholder interests are fundamental considerations in the Company’s oversight and decision processes, on top of compliance with requirements, standards, and best practices.
AC Energy Corporation affirms that adherence to good corporate governance principles is essential for the achievement of its strategic goals. We believe in doing business with integrity and in full compliance with laws and regulations. At the core of our Company are four corporate values: integrity, long-term vision, empowering leadership, and commitment to national development.
The Company’s Corporate Governance System is a combination of its clear organizational structure, guided by an active Board and its Committees, visionary management, strong core values and adequate policies and controls.
The Company’s governance framework is constantly evolving to align with best practices and to satisfy the changing expectations of regulators, investors, and other stakeholders brought about by the move towards greater ASEAN integration. Through continuously evaluating and improving our governance structures, systems, and procedures, we can ensure proper and adequate controls are in place to sustain the business.
AC Energy Corporation complies with the Code of Corporate Governance for PubliclyListed Companies set forth by the Securities and Exchange Commission (SEC), supported by an attestation from the company’s Chief Executive Officer (CEO) and Chief Audit Executive (CAE) in 2020.
Board of Directors.
Board Committees ■ Executive Committee ■ Corporate Governance and Nomination Committee ■ Audit Committee ■ Board Risk Management and Related Party Transactions Committee ■ Personnel and Compensation Committee.
Chairman.
President and CEO.
Strategic Business Units, Functional Units and Subsidiaries ■ Strategic Management ■ Finance ■ Organizational Development ■ Compensation and Benefits.
Management Committees.
Corporate Secretary.
Compliance Officer.
Chief Audit Executive.
Chief Risk Officer.
AC ENERGY CORPORATION 2020 INTEGRATED REPORT Enabling Sustainable Recovery 48 47.
MESSAGE INTRODUCTION GOVERNANCE ANNEXES CREATING VALUE 2020 HIGHLIGHTS
Chairman and Vice Chairman Fernando Zobel de Ayala, Chairman, and Jaime Augusto Zobel de Ayala, Vice-Chairman, assumed their respective positions on July 23, 2019. The positions of Chairman of the Board and CEO are held by different persons. This enables the Board to maintain independent reviews and quality discussions at meetings.
Role of the Chairman and Vice-Chairman The Chairman leads the Board by promoting active engagement and open discussion among the directors. The Chairman presides at all meetings of the Board and of the stockholders, exercise the powers given to him in the By-Laws, and perform the duties enumerated under the Corporate Governance Code as well as such other responsibilities as the Board may impose upon him. The Chairman also guides senior management on its strategic actions on the business. In the absence of the Chairman, the Vice-Chairman succeeds the duties of the Chairman.
Lead Independent Director To promote good relationships and functions of the Board, the Company appointed Sherisa P. Nuesa a s its Lead Independent Director at its organizational meeting on April 21, 2020.
Role of the Lead Independent Director When needed, the Lead Independent Director acts as an intermediate between the Chairman of the Board and the other directors, convenes and leads the periodic meetings of the nonexecutive directors with the external auditor and heads of internal audit, compliance and risk management, and contributes to the performance evaluation of the Chairman of the Board.
Non-Executive and Independent Directors As of December 31, 2020, more than 70% of the Board membership is composed of non-executive and independent directors of which five are independent and five are non-executive directors. The independent directors do not have interest or relationship with the Company that may hinder their independence, or which could reasonably be perceived to interfere with the exercise of their independent judgment while carrying out their responsibilities as directors.
A limit of nine years has been set by the Company for its independent directors in accordance with the rules laid out by the SEC. As of 2020, none of the independent directors have served the Company for more than nine years, reckoned from 2012, in compliance with SEC Memorandum Circular No. 9, series of 2011. Furthermore, none of the directors or senior management have worked for AC Energy Corporation’s external auditing firm within the three years immediately preceding the date of their election or appointment.
Role of the Non-Executive and Independent Directors (NEID) The role of the NEID is to exercise independent judgment, ensure the continuing soundness, effectiveness and adequacy of the Company’s control environment, and act in the best interest of the Company, the stockholders and the stakeholders considering transparency, accountability and fairness in all activities.
Board Structure and Process.
Key Roles and Responsibilities The Board’s roles and responsibilities as stated in its Charter include establishing the vision, strategies, and policies of the Company, and a system to monitor, evaluate and improve management’s performance. Also, in exercising its powers and duties, the Board always considers the best interest of the Company, its shareholders, and other stakeholders.
The Board consistently reviews and ensures the adequacy of the Company’s internal control mechanisms and risk management process for good governance, and the proper implementation of the Code of Conduct and Ethics. The Board reviews and affirms the true and fair representation of the annual financial statements, as it did for the financial statements for fiscal year 2020.
Board Composition The Board is comprised of qualified and dedicated directors with a diverse mix of expertise, experience, skills, and backgrounds to guide management in carrying out its responsibilities. The structure, size, and composition of the Board are reviewed and monitored by the Corporate Governance and Nomination Committee.
There is also an appropriate mix of non-executive, independent, and executive directors from a wide variety of backgrounds: • Each director is elected by the shareholders annually and serves a term of one year. • More than 70 percent of the Board is composed of non-executive and independent directors. • None of the independent directors own more than two percent of the Company’s outstanding capital stock.
2020 Board of Directors Designation Year Appointed (No. of years in the Board) Expertise.
Fernando M. Zobel de Ayala Non-Executive, Chairman 2019 (2) General management, real estate, utilities, arts and culture.
Jaime Augusto M. Zobel de Ayala Non-Executive, Vice-Chairman 2019 (2) General management, strategy and finance.
John Eric T. Francia Executive, President & CEO 2019 (2) General management, strategy, utilities, energy.
Gerardo C. Ablaza, Jr. Non-Executive 2019 (2) General management, utilities.
Jose Rene Gregory D. Almendras Non-Executive 2019 (2) General management, utilities, banking, sustainability, energy.
John Philip S. Orbeta Non-Executive 2019 (2) General management, strategic human resources.
Sherisa P. Nuesa Non-Executive, Lead Independent 2019 (2) General management, finance and accounting, utilities, real estate.
Ma. Aurora Geotina-Garcia Non-Executive, Independent 2019 (2) Finance and accounting, capital markets.
Mario Antonio V. Paner Non-Executive, Independent 2020 (1) Banking, capital markets, and treasury.
Consuelo D. Garcia Non-Executive, Independent 2019 (2) Finance and accounting, banking, capital markets.
Melinda L. Ocampo Non-Executive, Independent 2019 (2) Energy systems and regulations.
The profile of each director can be found in the Board of Directors section of this report on pages 65 to 72.
We ensure an independent minority representation in the Board and the exercise by minority shareholders of their rights, including the right to cumulative voting in the election of directors and appraisal right.
GOVERNANCE AND LEADERSHIP TEAM.
AC ENERGY CORPORATION 2020 INTEGRATED REPORT Enabling Sustainable Recovery 50 49.
MESSAGE INTRODUCTION GOVERNANCE ANNEXES CREATING VALUE 2020 HIGHLIGHTS
Board Performance The Board is devoted to carry out its duties and responsibilities and commits enough time for their meetings. The presence of at least two-thirds of the number of directors, as fixed in the Articles of Incorporation, constitutes a quorum for the transaction of business. The Board held four (4) regular, one (1) special, and one (1) organizational meetings in 2020.
The annual calendar of activities for the Board and Committees are established and approved at the start of the year. The Board is supported by the Corporate Secretary who monitors the Board activities and ensures materials are available at least three days in advance of the scheduled meeting allowing the Board to make informed decisions.
Performance Assessment The Board commits to a formal assessment process to review and evaluate the performance of the Board, its Committees, and its individual members. The purpose of the assessment is to measure the effectiveness of the Company’s governance practices and identify areas for improvement; and to adopt new methodologies towards further strengthening the company’s corporate governance standards.
In 2020, AON was appointed as the independent consultant to assist in the board assessment exercise.
Each of the directors was requested to complete a self-assessment form which includes Board evaluation categories such as: (1) board composition, (2) roles and functions, (3) information management, (3) representation of shareholders and environment, social and governance (ESG) factors, (4) managing Company’s performance, (5) senior executive’s performance management and succession planning, (6) director development and management, (7) risk management and internal control, and (8) overall perception.
The results of the self-assessment survey, including the comments of the directors, were compiled by the Corporate Secretary and reported during the Board meeting immediately following the completion of the survey.
Corporate Secretary In the discharge of his duties as the Corporate Secretary, Atty. Solomon M. Hermosura plays a significant role in supporting the Board fulfill its responsibilities. Among his responsibilities include assisting the Chairman in preparing the Board meeting agenda, maintaining Board minutes and records, facilitating director trainings, and updating directors with relevant statutory and regulatory changes. He is an expert on legal and regulatory requirements and is well-informed on relevant developments through lectures to graduating law students and in various public fora.
Training of Directors It is AC Energy Corporation’s policy that all its directors attend at least a four-hour annual continuing training program on corporate governance. All new directors must take at the minimum an eight-hour orientation program on the company’s strategy, business and structure, vision and mission, Governance Codes and Policies, Articles, By-Laws, Corporate Governance Manual, Board and Committee Charters, SEC-mandated topics on governance and other subjects needed in the performance of their duties and responsibilities.
To remain relevant in a global environment with increasing competitiveness, Ayala facilitates an annual group-wide Corporate Governance and Risk Management Summit which has been held since 2014. The summit serves as a continuing education program for the Board, CEOs, and senior management, and at the same time promotes the importance of strengthening our corporate governance structures. On November 10, 2020, the group held its virtual Integrated Corporate Governance, Risk Management and Sustainability Summit with the theme “The Board’s Agenda: The Business of Building Back Better” that revolved around the Board roles and skills for the ‘new normal’ and navigation of the complexity and obstacles of the market in times of the pandemic.
Director Compensation Total director remuneration or changes thereto are recommended by the Personnel and Compensation Committee to the Board and are approved by the stockholders at the annual stockholders’ meeting to ensure these are consistent with the Company’s culture, strategy, control environment, and aligned with the long-term interests of the Company and its stakeholders.
Independent Directors’ Remuneration On July 23, 2019, upon the recommendation of the Committee, the Board approved a resolution fixing the current remuneration of IDs. The power of fixing the fees was delegated by the stockholders to the Board as provided for in the Amended By-laws.
The existing remuneration framework for the IDs adopted by the Company consists of attendance fees. Executive Directors and other directors who are not independent directors do not receive attendance fees.
In 2020, the following IDs received gross remuneration as follows:
None of the IDs receive compensation from AC Energy Corporation for services other than those provided as a director. They are not entitled to stock options and performance bonuses from the Company.
Board Comittees The Board Committees assist the Board in the discharge of its functions, in aid of good governance, and are governed by their rights and responsibilities as defined in their Charters duly approved by the Board.
Executive Committee The Executive Committee acts on such specific matters within the competence of the Board as may from time to time be delegated to it in accordance with the By-Laws. The Committee is composed of not less than three (3) but not more than five (5) members and designates from among the members of the Committee a Chairman and a Vice Chairman.
The Committee deliberated, reviewed and approved the following transactions in 2020: 1. The entry by the Company into: (a) hedging instruments with Macquarie Bank Limited to cover the Company’s oil and diesel requirements, and (b) a guarantee fee arrangement with AC Energy, Inc. ("ACEI") in exchange for ACEI guaranteeing the Company’s payment obligations under such hedging instruments.
2. The conduct the Company’s annual stockholders’ meeting (the “2020 ASM”) scheduled on 20 April 2020 at 9:00 AM via remote communication in lieu of an in-person meeting, and to allow the participation of stockholders and other stakeholders in the 2020 ASM 3. The issuance of 16,685,800,533 Shares to ACEI at ₱2.97 per share in exchange for 100% of ACEI’s shares of stock in Presage. Presage is ACEI’s subsidiary, which owns its international business and investments.
4. The issuance of 16,685,800,533 Shares to ACEI at ₱2.97 per share in exchange for 100% of ACEI’s shares of stock in Presage. Presage is ACEI’s subsidiary, which owns its international business and investments.
5. The appointment of Sycip Gorres Velayo & Co. as the Company’s Independent Validator for its 2020 Annual Stockholders’ Meeting scheduled on 20 April 2020.
6. The filing of the following documents to the Energy Regulatory Commission (the “ERC”) in accordance with Article 2.12 of the Business Separation Guidelines: (a) The Accounting Separation Statements based on 2018 Audited Financial Statements; (b) The Auditor’s Report on those Accounting Separation Statements prepared; (c) The Management Responsibility Statement; (d) The General Information Sheet; and (e) The BSUP Compliance Report.
7. The Company’s investment of up to ₱2.2 billion into its subsidiaries, namely, Bataan Solar Energy, Inc. (“Bataan Solar”) and Giga Ace 4, Inc. (“Giga Ace 4”) 8. The Company’s Quarterly Report (SEC Form 17Q) for the Second Quarter of 2020, and to authorize its release to the Securities and Exchange Commission and the Philippine Stock Exchange on or before August 12, 2020.
Independent Directors Board and Committee Meetings Attendance Fees.
Melinda L. Ocampo ₱ 620,000.00.
Ma. Aurora D. Geotina-Garcia ₱ 660,000.00.
Consuelo D. Garcia ₱ 640,000.00.
Mario Antonio V. Paner ₱ 600,000.00.
Sherisa P. Nuesa ₱ 580,000.00.
TOTAL ₱ 3,100,000.
GOVERNANCE AND LEADERSHIP TEAM.
AC ENERGY CORPORATION 2020 INTEGRATED REPORT Enabling Sustainable Recovery 52 51.
MESSAGE INTRODUCTION GOVERNANCE ANNEXES CREATING VALUE 2020 HIGHLIGHTS
The Executive Committee had five (5) meetings in 2020.
Corporate Governance and Nomination Committee The Corporate Governance and Nomination Committee has three independent directors, including the Chairman. The Committee makes sure that good corporate governance principles and practices are compiled with by the Company. This includes the adoption of a Board process in the nomination, election, or replacement of Board members and the review of the succession plans for members of the Board and senior executives. The Board composition is reviewed regularly to allow the Board to exercise effective decision-making powers and meet the needs of the Company.
The Committee’s accomplishments in 2020 are as follows: 1. Received the nominees for director of the Company, evaluated their qualifications and endorsed qualified nominees for nomination to the Board for the year 2020.
2. Approved and endorsed to the Board the revised Charter of the Corporate Governance and Nomination Committee.
3. Approved and endorsed to the Board the revised Charter of the Board of Directors.
4. Approved and endorsed to the Board the proposed revisions to the Code of Conduct and Ethics.
5. Approved and endorsed to the Board the Charter of the Executive Committee.
6. Approved and endorsed to the Board the Whistleblower Policy.
7. Approved and endorsed to the Board the revisions to the Corporate Governance Manual.
8. Reviewed, discussed, and endorsed to the Board for discussion the Board, Board Committees, and Individual Effectiveness Evaluation Report by AON Consulting.
The Committee had five (5) meetings in 2020, during which the Chairman and members were all present. Board and Board Committee Membership Stockholders, Board, Board Committee Meetings, and Directors' Attendance for the year ended December 31, 2020.