Union Bank of the Philippines remains steadfast in upholding good corporate governance towards achieving its corporate vision and business goals in a manner consistent with Smart Banking and its attributes of being Relevant, Expert and Challenging Conventions. The governance structure of the Bank is discussed hereunder. The Bank has a well-structured and efficient Board of Directors (the Board) providing it with the right leadership, strategic oversight and control environment. The Board propels the Bank towards its ultimate goal of maximizing long term value for shareholders while also taking into account the interest of its stakeholders.
A combination of core competencies makes up the membership of Board. As a body, the Board demonstrates integrity and adherence with the principles of good governance and accountability to ensure a high standard of governance and oversight. Individually, members have a spread of skills and experiences that works correspondingly with each other. Each member also carries independence of character. This kind of structure and composition enables the Board to fulfill its duties and responsibilities which are provided in the Bank’s By-Laws and Manual on Corporate Governance (CG Manual).
The Bank is committed to have diversity in membership in the Board. Subject to the qualifications and disqualifications set forth in the Bank’s CG Manual, there exists no discrimination against gender and age in the nomination of the members of the Board.
The Board is composed of fifteen (15) members, including three (3) independent directors (ID), ten (10) non-executive directors (NED), and two (2) executive directors (ED). Profiles of the members of the Board are provided in the Bank’s Annual Report (SEC Form 17-A) and Definitive Information Statement (SEC Form 20- IS).
The Bank has a Nomination Sub-Committee that pre-screens the qualifications of, and prepares a final list of all candidates for its Board and key officers. Screening policies and parameters are set in place enabling the Committee to effectively review the qualifications of the nominees for regular and independent directors. After the nomination, the Nominations Sub-Committee prepares a final list of candidates that contains all the information about all the nominees for directors, as required by law and shall be made available to the appropriate government agency in-charge of monitoring compliance and to all stockholders through the filing and distribution of the Information Statement or in such other reports where the law or regulations require the Bank to submit. The name of the person or group of persons who recommended the nomination of directors shall be identified in such report including any relationship with the nominee. Only nominees whose names appear on the final list of candidates shall be eligible for election. No other nominations shall be entertained after the final list of candidates shall have been prepared. No further nominations shall be entertained or allowed on the floor during the actual stockholders’/memberships’ meeting. The members of the Board comply with the fit and proper rule of the Bangko Sentral ng Pilipinas (BSP). Every election, Board members attest that they have all the qualifications required of a director and do not possess any of the disqualifications specified in the Manual of Regulations for Banks (MORB) of the BSP. The Board members hold office for one (1) year or until their successors are elected and qualified in accordance with the Bank’s By-Laws. Members are apprised of their general and specific duties and responsibilities as directors prescribed by the MORB and are required to certify that they fully understand the same.
For 2014, the independent directors of the Bank’s Board were retired Supreme Court Chief Justice Reynato S. Puno, Mr. Carlos T. Raymond, Jr. and Mr. Francisco S.A. Sandejas. The Bank defines an independent director as a person holding no interests or relationships with the bank that may hinder his independence from the bank or management or will interfere with the exercise of independent judgment in carrying out his responsibilities as a director. He should comply with all the qualifications required of an independent director and should not possess any of the disqualifications therefore as provided in the Securities Regulation Code (SRC) and the MORB; and has not withheld nor suppressed any information material to his qualification or disqualification as an independent director.
As provided in the Bank’s By-Laws, Board meetings are held every fourth Friday of the month or as necessary. Annual schedule of meetings is set for approval of the Board before the start of calendar year. Schedule of board and committee meetings for 2015 was presented to, and approved by the Board during its December 19, 2014 meeting. Discussions and deliberations during Board meetings are open and independent views are given due respect and consideration. The Bank recognizes Board members who have religiously attended Board meetings. The Board held fourteen (14) meetings from January 2014 to December 2014.
|Board of Directors Meeting Attendance|
|Justo A. Ortiz (Chairman)||100|
|Jon Ramon M. Aboitiz (Vice Chairman)||92.86|
|Vicente R. Ayllon (Vice Chairman)||64.29|
|Victor B. Valdepeñas||100|
|Erramon I. Aboitiz||92.86|
|Stephen G. Paradies||78.57|
|Juan Antonio E. Bernad||85.71|
|Mayo Jose B. Ongsingco||92.86|
|Emilio S. De Quiros, Jr.||85.71|
|Eliza Bettina R. Antonino||92.86|
|Sabin M. Aboitiz||78.57|
|Luis Miguel O. Aboitiz*||100|
|Carlos B. Raymond, Jr. (ID)||100|
|Reynato S. Puno (ID)||92.86|
|Francisco S. A. Sandejas (ID)*||100|
|* Director of the Bank from May 23, 2014.|
|ANNUAL STOCKHOLDERS MEETING|
|(May 23, 2014)|
|Justo A. Ortiz (Chairman)|
|Jon Ramon M. Aboitiz (Vice Chairman)|
|Stephen G. Paradies|
|Victor B. Valdepeñas|
|Erramon I. Aboitiz|
|Iker Markel M. Aboitiz|
|Juan Antonio E. Bernad|
|Mayo Jose B. Ongsingco|
|Emilio S. De Quiros, Jr.|
|Eliza Bettina R. Antonino|
|Sabin M. Aboitiz|
|Carlos B. Raymond, Jr. (ID)|
|Reynato S. Puno (ID)|
The Corporate Governance Committee is responsible for making recommendations to the Board regarding required trainings and continuing education of directors. All members of the Board have attended a one and a half day corporate governance orientation seminar for bank directors at BSP-accredited institutions in compliance with the requirements of the MORB. These include extensive discussion on topics involving audit, risk and governance, financial stewardship and accountability. They also undergo orientation on the Bank’s businesses as soon as they assume their positions. Representatives from key segments of the Bank present their respective business to newly elected directors. Continuing education is also provided which include training by the Bank and by outside service providers.
In October 29, 2014, in compliance with SEC Memorandum Circular No. 20 Series of 2013, the members of the Board of Directors of the Bank attended a three-hour corporate governance refresher course from an accredited provider of the SEC.
The Board evaluates their effectiveness in carrying out their roles and responsibilities by accomplishing self-assessment forms. The assessment aims to ensure that directors are aware of how well they are fulfilling their responsibilities as individual members and as part of the collegial board. It assists them in determining their strengths and weaknesses enabling them to formulate steps to resolve concerns.
The Compliance and Corporate Governance Office (CCGO) presents the proposed form to the Corporate Governance Committee, which in turn, endorses the same for approval of the Board. The self assessment allows the members of the Board members to assess themselves as a body an individually. The form is composed of varying statements based on the roles, functions and responsibilities of the Board found under the Bank’s Manual of Corporate Governance, the SEC Corporate Governance Self-Rating Form and Revised Code of Corporate Governance, the Organization for Economic Co-operation and Development (OECD) Policy Brief on Corporate Governance of Banks in Asia, and the Basel Committee on Banking Supervision’s Corporate Governance Guideline.
The self rating form is divided into two parts. For the first part, each director is asked to rate (whether fair, excellent or needs improvement) his or her level of fulfillment to each duty as an individual member of the Board. The director is also asked for his or her comments on or observation for every duty specified in the form. The second part is answered by each director as part of the Board, acting as a collegial body. For each statement relating to the responsibilities of the Board, he or she will be asked to choose from the responses, i.e. (1) Strongly Agree, (2) Agree, (3) Disagree, (4) Strongly Disagree, (5) Undecided.
The Board self-assessment is conducted annually and the results are discussed by the Corporate Governance Committee prior to its submission and communication to the Board. The Corporate Governance Committee oversees the conduct of assessment of the Board and its Committees.
The Board, through its Compensation and Remuneration Committee, also conducts an annual performance review of the Bank’s Chairman/CEO and President/COO. The review consists of an assessment of the Chairman/CEO and President/COO’s leadership in the attainment of the Bank’s strategic initiatives. The review includes key results on the Bank’s financials, operational efficiencies, innovations, customer franchise and brand growth, people development and engagement, compliance and governance.
To assist the Board in competently acting upon its responsibilities, it established ten (10) committees, namely, the Executive Committee, the Risk Management Committee, the Market Risk Committee, the Operations Risk Management Committee, the Audit Committee, the Trust Committee, the Technology Steering Committee, the Corporate Governance Committee, the Nominations Sub-Committee, and the Compensation & Remunerations Sub-Committee. The members of these committees also conduct periodic assessment of their specific committees’ performance.
Their composition and functions are summarized below.
The Executive Committee is composed of seven (7) members of the Board. It acts and exercises such functions and powers which are reserved for the Board during intervals between Board meetings, except the power to initiate reversals of, or departure from fundamental policies, procedures and guidelines prescribed by the Board itself, and subject to such restrictions as the Board may determine. All matters passed and acted upon by the Executive Committee are reported to the Board of Directors and subject to revision and alterations by the Board provided that no rights or third person are affected thereby.
The Committee held thirty-eight (38) meetings from January 2014 to December 2014.
Risk Management Committee
The Risk Management Committee consists of seven (7) members of the Board of Directors who possess varied range of knowledge and expertise concerning the Bank’s risk exposures, its management and/or avoidance. The Committee develops appropriate strategies for preventing the occurrence of risk events and minimizing losses when these do happen. It oversees the Bank’s risk management system to ensure that it remains effective, authority limits are observed, and immediate corrective actions are taken whenever limits are breached or risk events occur.
The Committee also develops and implements a written plan defining the strategies for managing and controlling the major risks. The Committee held twelve (12) meetings from January 2014 to December 2014.
Market Risk Committee
The Market Risk Committee is composed of the Chairman of the Board of Directors, the President and four (4) other members of the Board. The Committee sets policies and standards for market risk identification and analysis measurement, monitoring and control. The Committee’s specific duties include, among others, management and reporting of market risk; ensuring that the market risk management process satisfies corporate policy; review of the Treasury Portfolio (including contingent accounts) every meeting and recommendation of valuation reserves, as necessary; review and endorsement of Treasury Risk Limits for Board approval; endorsement of Treasury-Related Product Programs and Manuals for approval of the Board of Directors; approval of models and systems used to calculate market risk; and promotion of continuous development of market risk programs and infrastructure.
The Committee held twelve (12) meetings from January 2014 to December 2014.
Operations Risk Management Committee
The Operations Risk Management Committee is composed of five (5) members of the Board and two (2) members from Senior Management. The Committee covers, among others, (1) the adequacy of the Bank’s policies, procedures, organization and resources for preventing, or limiting unexpected loss due to deficiencies in information systems; business, operational and management processes; employees skills and supervision, equipment and internal controls; (2) periodic or special risk assessments conducted in various businesses and operating units of the Bank to proactively uncover operational risks that can result to actual loss or damage; (3) results of internal audits, BSP examinations and investigation of administrative cases that highlight trends indicative of present or emerging exposures to specific operational risks; (4) risk assessment of major information systems to be implemented in the Bank; (5) regulatory compliance issues, whether currently existing or anticipated to arise as a result of new regulations; and (6) business continuity strategies, plans and procedures.
The Committee held four (4) meetings from January 2014 to December 2014.
The Audit Committee is composed of five (5) members who are experts in accounting, auditing, or related financial management matters. The committee is composed a majority of non-executive directors and two (2) independent directors including the Chairman. The Committee members’ skills, qualifications, and experience are appropriate for them to perform their duties as laid down by the Board. (For profiles of the members, please see the Bank’s Annual Report submitted to SEC in SEC Form 17-A, pages 27-30.)
The Committee serves as principal agent of the Board in ensuring the independence of the Bank’s external auditors and the internal audit function, the integrity of management, and the adequacy of disclosures and reporting to stockholders. It also oversees the Bank’s financial reporting process on behalf of the Board. It assists the Board in fulfilling its fiduciary responsibilities as to accounting policies, reporting practices and the sufficiency of auditing relative thereto, and regulatory compliance. The Committee is empowered to independently review the integrity of the Bank’s financial reporting and oversee the independence of the external auditors.
Moreover, the Committee oversees senior management in establishing and maintaining an adequate, effective and efficient internal control system. It ensures that the systems and processes of the Bank are designed to provide assurance in areas including reporting, monitoring compliance with laws,regulations and internal policies, efficiency and effectiveness of operations, and safeguarding of assets.
The Bank’s Audit Committee has the primary responsibility to recommend the appointment, re-appointment and removal of external auditors, subject to approval by the Board of Directors and confirmation of the stockholders. The Internal Audit Division, which reports directly to the Audit Committee, provides independent and objective assurance and advisory services to the Bank.
The Committee held fifteen (15) meetings from January 2014 to December 2014. The accomplishments provided by the Committee demonstrated the efficiency that comes along the fiduciary relationship it holds with the BOD.
In 2014, the Committee approved external audit activities including the Year-End Audit Results, the 2013 Audited Financial Statements of the Bank and the 2014 Audit Plan. It likewise supervised the internal audit activities thru approval and review of the 2014 Annual Audit Plan and the Internal Audit Division’s accomplishments and annual/interim reports. The Committee also engaged the services of SGV & Co. to conduct external quality assessment on Internal Audit Division.
The Trust Committee is composed of five (5) members: three (3) of whom are members of the Board, the President, and the Trust Officer. No member of the Audit Committee sits concurrently as a member of the Trust Committee in compliance with Sec. X 406.1 of the MORB.
The Trust Committee acts within the sphere of authority as may be provided in the Bank’s By-Laws, and/or as may be delegated by the Board such as, but not limited to: the acceptance and closing of trust and other fiduciary accounts; the initial review of assets placed under the trustee’s fiduciary custody; the investment, reinvestment, and disposition of funds or properties; and the review of trust and other fiduciary accounts at least once every twelve (12) months to determine the advisability of retaining or disposing of the trust or fiduciary assets, and/or whether the account is being managed in accordance with the instrument creating the trust or other fiduciary relationship.
The Committee held twelve (12) meetings from January 2014 to December 2014.
Technology Steering Committee
The Technology Steering Committee is composed of seven (7) members, including two members of the Board. It is responsible in overseeing the overall information technology (IT) strategy of the Bank and to ensure its alignment with the Bank’s business strategies and objectives. In addition, the Committee monitors the IT performance, status of major projects and other significant issues.
The Committee, originally a management committee, was transformed into a board committee in November 2013. The Committee held twelve (12) meetings from January 2014 to December 2014.
Corporate Governance Committee
The Board is primarily assisted by the Corporate Governance Committee in fulfilling its corporate governance responsibilities. The Committee recommends governance policies to the Board based on the regulations of the BSP, the SEC, the Philippine Stock Exchange (PSE), as well as those which are internationally recognized as industry best practices. It serves as the primary resource for the Board to study and evaluate itself, as a body, and its Committees’ structure, policies and practices with the objective of raising the bar for the Bank’s corporate governance. The specific duties of the Committee include, among others, making recommendations to the Board regarding continuing education of directors and overseeing the periodic performance evaluation of the Board, its Committees and senior management. It has two sub-committees, namely, the Nominations Sub-Committee and the Compensation and Remuneration Sub-Committee.
The Committee has seven (7) members of the Board, two (2) of whom are Independent Directors, including the chairman, and one belonging to the Bank’s senior management. The Committee annually evaluates the governance state of the Bank by using as benchmark various metrics, such as the PSE’s Corporate Governance Guidelines Disclosure, the ASEAN Corporate Governance Scorecard, which is based on the governance principles of the Organization of Economic Cooperation and Development (OECD), and other relevant governance metrics.
The Committee held five (5) meetings from January 2014 to December 2014 and discussed, among others, the preliminary results of the examination by the BSP for the year 2014, regulatory updates and industry best practices on governance such as the PSE’s Corporate Governance Guidelines, the SEC’s requirement of accomplishing Annual Corporate Governance Report, and the ASEAN Corporate Governances Scorecard.
The Nominations Sub-Committee is comprised of seven (7) members of the Board, one of whom is an Independent Director, and one non-voting member in the person of the Human Resources Director. The Nominations Sub-Committee is responsible for reviewing the qualifications of and screening candidates for the Board and key officers of the Bank. It oversees the implementation of programs for identifying, retaining and developing critical officers and the succession plan for various units in the organization.
The Committee held one (1) meeting from January 2014 to December 2014.
Compensation and Remuneration Sub-Committee
The Compensation and Remuneration Sub-Committee is composed of seven (7) members of the Board, with the Chairman who is an Independent Director. It is responsible for overseeing implementation of the programs for salaries and benefits of senior management and Directors, as may be applicable. It monitors adequacy, effectiveness and consistency of compensation program vis-à-vis corporate philosophy and strategy.
The Committee held five (5) meetings from January 2014 to December 2014.
The Bank’s Corporate Secretary plays a pivotal role in assisting the Board in the performance of its duties. In all the activities of the Board, the Corporate Secretary ensures that Board policies and procedures are observed. The Board has separate and independent access to the Corporate Secretary who, among others, oversees the adequate flow of information to the Board prior to and during meetings, and serves as an adviser to the Directors on their responsibilities and obligations.
Atty. Fe B. Macalino is the Bank’s Corporate Secretary. Her profile is provided in SEC Form 17-A.