2. Overview
The CG Scorecard
The Process for the CG Scorecard Initiative
The Coverage
- Commercial and Universal Banks
The Questionnaire and Weights Used
Over - All results
Summary and Recommendations
3. The CG Scorecard
A Corporate Governance (CG) Scorecard is already
available for Publicly-Listed Companies (PLCs) since
2005.
The CGSC has become a joint undertaking involving ICD,
SEC and PSE since 2007.
It has become a useful tool for raising the standards of
compliance with CG rules and regulations
4. The CG Scorecard
Does observance of good corporate governance
practices matter; and does it make a difference in the
share price of corporations listed on the exchange?
The answer is a straightforward “yes”.
An econometric study that the PSE commissioned clearly
shows that high CG scores relate positively with firm
valuation.
5. The CG Scorecard for Commercial Banks
Commercial Banks
- commercial banks provide the predominant bulk of external
corporate finance in the Philippines
- corporations in the Philippines do rely much more---and
predominantly so---on commercial banks for their external
finance than on the stock exchange
Therefore:
There is a felt demand from the CG reform advocates in the
Philippines such as the Fellows of ICD for a more specific
focus on commercial banks.
6. The CG Scorecard for Commercial Banks
The Questionnaire
Initiated with the Bangko Sentral ng Pilipinas (BSP)
BSP has tapped ICD as its institutional partner in this
specialized CG undertaking
At the 2008 annual Woking Session in Palawan, a group of
ICD Fellows with the participation of the BSP Officers was
organized and agreed to prepare a preliminary
questionnaire that would be the basis of such a specialized
CG Scorecard.
Approved by the BSP Governor and the Monetary Board in
July 2009
7. The Process
Self rating
Validation process
Analysis of Scores
“Person on the Street”
approach takes the side of an ordinary investor, with no
special access to any privileged information.
8. Validation Process
Self Rating
Validator A and B
Evaluator A Evaluator B
UA & P 5th year
Management Students
Evaluator C
Validator C
ICD Project Director Institute of Internal
(Identification of Auditors (IIA-P)
Issues)
members
ICD Fellows
(Issue Resolution)
9. Results
Number of
Participants
7 Commercial Banks
13 Universal Banks
Out of 20 Banks Encouraged to Participate: All
Responded
100% PARTICIPATION
10. Results
List of Covered Banks
Universal Banks Commercial Banks
1 Allied Banking Corporation Asia United Bank
2 Banco De Oro Unibank 1 Corporation
3 Bank of the Philippine Islands
2 Bank of Commerce
4 China Banking Corporation
5 Development Bank of the Philippines 3 BDO Private Bank
6 Land Bank ofBank and Trust
Metropolitan the Phil. East West Banking
7 Company 4 Corporation
8 Philippine National Bank 5 Export and Industry Bank
9 Philippine Trust Company
Rizal Commercial Banking
Philippine Bank of
10 Corporation
6 Communication
11 Security Bank Corporation
12 Union Bank of the Philippines 7 Philippine Veterans Bank
13 United Coconut Planters Bank
11. The CG Scorecard for Banks
Weights Used in the Questionnaire
OECD Principles For PLCs For Banks
I. Rights of Shareholders 20% 15%
II. Equitable Treatment of 20% 10%
Shareholders
III. Role of Stakeholders 10% 10%
IV. Control Environment and ----- 20%
Processes
V. Disclosure & Transparency 25% 20%
VI. Board Responsibilities 25% 25%
12. Results
Aggregate Score for Commercial and Universal Banks
Universal and Commercial Banks Aggregate Score
Commercial Banks 76 %
Universal Banks 88% 84%
2008 CG Scorecard for PLCs Aggregate Score
Publicly-Listed Companies 72%
13. Results
Per Category Scores
Universal and Commercial Banks AVERAG
Categories Weight E
I The Right of Shareholders 15% 82%
II Equitable Treatment of Shareholders 10% 86%
III The Role of Stakeholders in CG 10% 82%
IV Control Environment and Processes 20% 89%
V Disclosure and Transparency 20% 83%
VI Board Responsibility 25% 83%
TOTAL 100% 84%
15. Results
Lowest and Highest
Universal & Commercial Banks Difference
Highest 96%
33
Lowest 63%
Top 3 and Bottom
3
Universal & Commercial Banks Difference
Top 3 94%
28
Bottom 3 66%
16. Results
Lowest and Highest
Universal Banks Difference
Highest 96%
29
Lowest 67%
Top 3 and Bottom
3
Universal Banks Difference
Top 3 94%
15
Bottom 3 79%
17. Results
Per Category Scores
Universal Banks
AVERA
Categories Weight GE
I The Right of Shareholders 15% 87%
Equitable Treatment of
II Shareholders 10% 90%
III The Role of Stakeholders in CG 10% 87%
Control Environment and
IV Processes 20% 91%
V Disclosure and Transparency 20% 86%
VI Board Responsibility 25% 86%
TOTAL 100% 88%
18. Results
Lowest and Highest
Commercial Banks Difference
Highest 90%
27
Lowest 63%
Top 3 and Bottom
3
Commercial Banks Difference
Top 3 85%
15
Bottom 3 70%
19. Results
Per Category Scores
Commercial Banks AVERA
Categories Weight GE
I The Right Treatment of
Equitable of Shareholders 15% 73%
II Shareholders 10% 80%
III The Role of Stakeholders in CG
Control Environment and 10% 70%
IV Processes 20% 86%
V Disclosure and Transparency 20% 75%
VI Board Responsibility 25% 76%
TOTAL 100% 76%
20. Summary and Recommendations
1. The objective of having a benchmark result, we now have:
1. The average score for all universal and other commercial
banks
b. The average score for all universal banks separately from the
average score for the other commercial banks.
c. The “per category scores” for the 6 CG categories included in
the CG scorecard questionnaire.
d. The difference between the average scores of the three top-
rated and the three lowest-rated for both Universal and
Commercial Banks.
21. Summary and Recommendations
2. While all the figures reported as averages for all universal
and other commercial banks are available as benchmarks for
the corresponding figures for individual banks, we believe that
at this stage, it is productive and proper to release ONLY the
average figures as benchmarks.
3. As in the case of the PLCs, we recommend that a sufficient
period of time should be allowed for universal and commercial
banks to improve their CG scores and raise their standards of
compliance.
