Board Matters

Meralco is headed by a competent, working Board of Directors that fosters the long- term success of the Company and sustains its competitiveness and profitability in a manner consistent with its corporate objectives and the long- term best interests of its shareholders and other stakeholders. The Board of Directors reviews and approves major projects, policy decisions, annual budgets, major investment funding, and major restructuring of core businesses on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the company.

Board Charter

The Board of Directors is guided by its Charter which was approved on May 29, 2018. Supplemented by the Company’s Revised Manual of Corporate Governance, By-laws and respective Board Committee Charters, the Board Charter formalizes and clearly states the roles, responsibilities and accountabilities of the Board and its individual members in carrying out their fiduciary role.

The duties and responsibilities of the Board, its Chairman and individual directors are listed in Sections 4, 4.3, 4.6 and 7.3 of Article 1 of the Revised Manual of Corporate Governance as well as in the Board Charter.

Board Charter	763 KB	Download PDF
Duties and Responsibilities	43.70 KB	Download PDF

Board Independence

The Company complies with Rule 38 of the Implementing Rules of the SRC on the qualifications, nomination and election of independent directors. Each elected independent director has no business or other relationship with Meralco that could, or could reasonably be perceived to, materially interfere with the exercise of his independent judgment in carrying out his responsibilities as a director. Furthermore, the Company has no shareholder agreements, by-laws provisions, or other arrangements that constrain the directors' ability to vote independently.

The Chairman of the Board and the President and CEO

To further strengthen the Board’s independence, the position of the Chairman of the Board is separated from the President and CEO. Each position has distinct and separate duties and responsibilities in accordance with Meralco’s amended By-Laws and Revised Manual of Corporate Governance. The Chairman of the Board is Manuel V. Pangilinan, while the President and CEO is Mr. Oscar S. Reyes.

Independent Directors

Independent director means a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director in any corporation that meets the requirements of Section 17.2 of the Securities Regulation Code.

Sections 2.1, 2.2 and 2.3 of the Board Charter delineates the qualifications and disqualifications of an independent director.

As a rule, independent directors may serve for a maximum of nine consecutive years reckoned from 2012, making sure however that the shareholders’ legal right to vote and be voted directors remains inviolable. If the company wants to retain an independent director who has served for nine consecutive years, the Board should provide meritorious justification and advise the shareholders of such justification during the annual shareholders’ meeting.

Lead Independent Director

Section 4.4 of the Company’s Revised Manual of Corporate Governance provides that the Board shall consider designating a lead director among the independent directors if the Chairman of the Board is not independent and if the positions of the Chairman of the Board and Chief Executive Officer are held by one person.

On December 18, 2017, the appointment of a Senior or Lead Independent Director was endorsed to, and approved by, the Board of Directors. The Board appointed Independent Director (ID) Ret. Chief Justice Artemio V. Panganiban as the Lead Independent Director to perform the following functions:

To serve an intermediary between the Chairman and the other directors when necessary;
To convenes and chair meeting of the non-executive directors; and
To contribute to the performance evaluation of the Chairman, as required.

The Lead Independent Director will not, however, act as Chairman in the absence of the Chairman, the same having been delegated to the Vice-Chairman.

Board Diversity

In line with the Company’s commitment to the principles of good corporate governance, the Board Diversity Policy was issued to ensure that the Board has an appropriate mix of expertise, experience, independence, and skills that would encourage critical discussion and promote a balanced decision in the attainment of the Company’s strategic objectives and sustainable development.

Accordingly, the members of the Board of Directors shall be selected from a broad pool of qualified nominees. In order to achieve a diverse board, varied aspects are to be considered, including, but not limited to: academic, professional and business background, age, gender, and other regulatory requirements. The final composition of the board shall be grounded on merit and potential contribution of the selected directors to the Company.

To measure the level of diversity in the Company’s Board of Directors and its progress based on the Company’s strategic objectives, CGO developed the following Board Diversity Matrix for 2017 and 2018:

Election of Directors

The Board adopts a formal and transparent board nomination and election policy that includes how it accepts nominations from minority shareholders and reviews nominated candidates.

In accordance with the provisions of the Company’s By-Laws and Revised Manual of Corporate Governance, the Corporation Code of the Philippines and the SRC, nominees for board directorship go through a nomination and screening process, taking in consideration the qualifications and disqualifications provided in the Board Charter.

The Company uses professional search firms or other external sources of candidates (such as director databases set up by director or shareholder bodies) when searching for candidates to the board of directors/commissioners such as the Institute of Corporate Directors (ICD) to search for candidates to the Board of Directors. One of the Company’s directors, who is also the President & CEO, Mr. Oscar S. Reyes is a Fellow of the ICD. The Company’s Corporate Secretary, Atty. Simeon Ken R. Ferrer is also an ICD Fellow. These candidates would be skilled in core competencies such as strategic planning, business expertise, and industry knowledge. The final list of nominees is determined after pre-screening and evaluation. The shareholders will then elect the directors during the Annual Stockholders Meeting held every last Tuesday of May.

Upon appointment, the Company sends out a formal letter setting out the Director’s roles and responsibilities and the new Director will then attend various briefings with Management as seen on Annual Report. They serve for a period of one year and until their successors are qualified and elected.

Nomination and Election Policy	46.35 KB	Download PDF
Qualifications and Disqualifications of Directors	40.80 KB	Download PDF

Orientation and Continuing Education Programs

The Board of Directors ensures that the Company complies with all relevant laws, regulations, and endeavor to adopt best business practices and to keep it abreast with the latest developments in corporate governance regulatory landscape and best practices, implements a policy on orientation and continuing training for all directors and key officers, including an annual CG training with SEC-Accredited providers, in accordance with the Board Charter.

Orientation Programs

The Company has an established orientation program for every new director to ensure their practical understanding of business in general, and of Meralco in particular. Each newly elected director is provided with a director’s kit which contains policies and other information pertaining to his duties and obligations as a director provided under existing laws and regulations. An in-house orientation program, incorporating briefings from the corporate and regulatory units, is arranged for any new director to better familiarize himself with the Company’s businesses, stakeholders, regulatory environment, and governance practices. Contents of this program are discussed in the downloadable file below.

Orientation Program for New Directors	46.35 KB	Download PDF

Continuing Education

The Company has a policy that encourages directors to attend annual continuing training programs. The Company believes that its directors must keep abreast with the latest developments in business, corporate governance best practices, laws and regulations, and other relevant matters that help them function effectively in the Board and in their respective committees in order to direct the Company to achieve its mission, vision and goals.

In pursuit of this ideal, the Company, together with the MVP Group of Companies, regularly conducts in-house corporate governance enhancement sessions for its Directors, Key Officers and Middle Managers. Accordingly and pursuant to the requirements of the Company’s MCG, the ERC Resolution No. 1, Series of 2004, and the SEC Memo Circular No. 20, Series of 2013, the Directors, together with the Senior Management, attended the 12th Annual Corporate Governance Enhancement Session on September 7, 2017, entitled “Charting the Digital Age, its Risks and Strategies, through Governance, and a Responsive Corporate Culture.”

Meralco Directors, Officers and Employees ensure that they are updated on the most recent corporate governance trends and best practices through participating in seminars and trainings.

Corporate Governance Seminar of the Board of Directors:

Director	Seminar
Manuel V. Pangilinan	Download PDF
Lance Y. Gokongwei	Download PDF
Oscar S. Reyes	Download PDF
Ray C. Espinosa	Download PDF
James L. Go	Download PDF
John L. Gokongwei, Jr.	Download PDF
Anabelle L. Chua	Download PDF
Jose Ma. K. Lim	Download PDF
Elpidio L. Ibańez	Download PDF
Artemio V. Panganiban	Download PDF
Pedro E. Roxas	Download PDF

Board Meetings

The Board holds monthly meetings and special Board meetings, if so required, with agenda that include updates by the Chairman of the Board and the Board committees, reports on financial performance by the Chief Finance Officer or CFO, and operational performance by the President and CEO, the Senior Executive Vice President and Chief Operating Officer, or COO, among other major issues of Meralco.

The Board has separate and independent access to the Corporate Secretary, who oversees the adequate flow of information to the Board prior to meetings and advises directors about their duties. During Board meetings, discussions are open and independent views are given due consideration.

The Board jointly plans meeting dates before the beginning of every year, with at least twelve meetings a year. The Board, as part of the agenda of its meeting on November 28, 2017, approved the schedule of 2018 Board meetings.

A first meeting of the Board of Directors, for organization, is immediately conducted after their election, of which meeting no notice shall be required. Thereafter, regular meetings may be held at such time and in such places, and upon such notice, if any, as the Board of Directors may by resolution prescribe.

Special meetings of the Board may be called by the Chairman or by written request of any two directors, upon at least one (1) day’s notice of the time and place of holding the same, given personally or by letter, telegram or telephone.

Meetings may be held at any time and place without notice if all the directors are present or of those not present waive notice in writing before or after the meeting

The Corporate Secretary and the Assistant Corporate Secretary shall assist the Board and the board committees in the conduct of their meetings, including preparing an annual schedule of Board and committee meetings and the annual board calendar, and assisting the chairs of the Board and its committees to set agendas for those meetings.

Members of the Board or Board Committees are informed, in accordance with the by-laws, of the agenda of their meetings, at least five working days in advance, and are provided with accurate information that will enable them to arrive at intelligent decisions on matters that require their approval.

The Board likewise observes the pertinent guidelines set in SEC Memorandum Circular No. 15, Series of 2001 in the conduct of Board meetings through teleconferencing or videoconferencing.

Board Meeting Through Teleconferencing or Videoconferencing	66 KB	Download PDF

In 2018, there were thirteen (13) Board meetings and each director has attended at least 92% of these meetings.

In 2018, the Company’s non-executive directors met two (2) times without the presence of the executive director, Mr. Oscar S. Reyes. The agenda in these meetings were the Management’s reports, corporate governance directions, reports of the internal and external auditors, and the performance assessment of the President and CEO.

The following table shows the participation of the Board in the ASM, Organizational Meeting and its regular meetings:

2018 ASM and Board Meeting Attendance
Director	Designation	May 29, 2018		Board Meetings
Director	Designation	Annual General Meeting	Organizational Meeting
Manuel V. Pangilinan¹	Chairman	Present	Present	12/13
Lance Y. Gokongwei	Director	Present	Present	13/13
Oscar S. Reyes	Director	Present	Present	13/13
Ray C. Espinosa²	Director	Present	Present	12/13
James L. Go	Director	Present	Present	13/13
John L. Gokongwei Jr.	Director	Absent	Present	12/13
Anabelle L. Chua	Director	Present	Present	13/13
Jose Ma. K. Lim³	Director	Present	Present	13/13
Manuel M. Lopez⁴	Director	Present	Present	6/6
Elpidio L. Ibañez⁵	Director	Present	Present	7/7
Artemio V. Panganiban⁶	Independent Director	Present	Present	13/13
Pedro E. Roxas⁷	Independent Director	Present	Present	13/13
¹ Chairman of Executive and RLDC
² Chairman of Finance Committee
³Chairman of Risk Management Committee
⁴End of term as director in May 2018 ⁵Elected during the 2018 ASM
⁶Chairman of AuditCom ⁷Chairman of Nom&Gov and Related Party Transactions Committee

2018 Board Committee Meeting Attendance
Member	FinCom	AuditCom	RMC	RPT Comm	Nom&Gov	RLDC
Manuel V. Pangilinan	n/a	n/a	n/a	n/a	n/a	4/4
Lance Y. Gokongwei	n/a	5/9	1/2	1/1	2/5	2/4
Oscar S. Reyes	n/a	n/a	n/a	n/a	n/a	n/a
Ray C. Espinosa	11/12	n/a	n/a	n/a	n/a	n/a
James L. Go	12/12	8/9	2/2	0/1	4/5	n/a
John L. Gokongwei Jr.	12/12	n/a	n/a	n/a	n/a	n/a
Jose Ma. K. Lim	n/a	8/9	2/2	1/1	5/5	n/a
Anabelle L. Chua	2/2	9/9	2/2	1/1	5/5	n/a
Manuel M. Lopez¹	5/5	n/a	n/a	n/a	n/a	n/a
Elpidio L. Ibañez¹	7/7	n/a	n/a	n/a	n/a	n/a
Pedro E. Roxas²	10/12	9/9	2/2	1/1	5/5	4/4
Artemio V. Panganiban²	n/a	9/9	2/2	1/1	n/a	n/a
¹Mr. Elpidio L. Ibañez replaced Amb. Manuel M. Lopez as member of the FinCom effective June 1, 2018
²Independent Director

Board Remuneration

The Board ensures that the remuneration of directors and officers is consistent with the Company’s culture, strategy, and the business environment in which it operates and aligned with the long-term interest of the Company.

Directors, as such, do not receive any compensation unless approved by the stockholders or provided in the By-Laws of the Company. No director participates in the approval of his compensation. However, the Board may, from time to time, approve a reasonable per diem that a director may receive for attendance in Board and Board Committee meetings.

The Company’s directors receive a per diem allowance for their attendance in the Board and Board Committee meetings. Each director is entitled to a per diem allowance of PhP120,000 for every board meeting attended and PhP20,000 for every committee meeting.

DETAILS OF 2018 BOARD REMUNERATION (IN PhP)

	Remuneration for ASM and Board Meetings Attended in 2018	Remuneration for Committee Meetings Attended in 2018	TOTAL
EXECUTIVE DIRECTOR
Oscar S. Reyes	1,820,000	−	1,820,000
EXECUTIVE DIRECTOR	1,820,000	−	1,820,000
NON-EXECUTIVE DIRECTOR
Manuel V. Pangilinan	1,680,000	96,000	1,776,000
Lance Y. Gokongwei	1,820,000	264,000	2,084,000
Ray C. Espinosa	1,680,000	264,000	1,944,000
Manuel M. Lopez	840,000	120,000	960,000
John L. Gokongwei, Jr.	1,820,000	288,000	2,108,000
Jose Ma. K. Lim	1,820,000	456,000	2,276,000
James L. Go	1,820,000	624,000	2,444,000
Elpidio L. Ibañez	980,000	168,000	1,148,000
Anabelle L. Chua	1,820,000	696,000	2,516,000
TOTAL NON-EXECUTIVE DIRECTORS	14,280,000	2,976,000	17,256,000
INDEPENDENT DIRECTORS
Pedro E. Roxas	1,540,000	744,000	2,284,000
Artemio V. Panganiban	1,820,000	288,000	2,108,000
TOTAL INDEPENDENT DIRECTORS	3,360,000	1,032,000	4,392,000
GRAND TOTAL	19,460,000	4,008,000	23,468,000

For the President and CEO, and Management, the framework takes into account all aspects of executive remuneration including salaries, allowances, bonuses, and benefits in kind. The framework is benchmarked against pay and employment conditions within the industry and it links rewards to corporate and individual performance. The Board ensures that the remuneration of its members and key officers is aligned with the long-term interest of the Company. Directors do not participate in discussions or deliberations involving their own remuneration.

Board Performance

The Board recognizes the importance of a regular performance assessment, individually and collectively as part of their accountability. Assessments were done to evaluate their specific and overall performance for the past calendar year. The assessment of their 2018 Board, Board committee and CEO performance commenced on February 26, 2019. Partial results thereof were then presented to the Nom&Gov Committee. Complete results of the 2018 Board and Committee Performance Assessment were then presented on April 1, 2019 to the Board through the Nom&Gov.

The Board evaluated their individual and collective performances regarding the Board and its committees' structures, processes and responsibilities. The assessment likewise identified the training and skills development program needed by the Board. The Board also reviewed the 2018 performance of the President & CEO based on his leadership, working relations with the Board, Management, and communication.

Four (4) assessment instruments with corresponding evaluation criteria were accomplished by the directors:

Board Self-Assessment - each director assessed the board performance as a whole and their individual performance on the following categories:

a) Board structure and qualifications

b) Board duties and responsibilities

c) Duties and responsibilities as an individual director

General Board Committee Performance Assessment – each director assessed the overall performance of the following committees, based on the provisions of the Board Committee Charters.
Board Committee Self-Assessment – each committee member assessed his committee’s performance vis-à-vis the respective charters and SEC’s Guidelines for the Assessment of the Performance of Audit Committee of Companies Listed on the Exchange
President & CEO Performance Assessment – each director assessed the President & CEO’s leadership, working relations with the Board, communication and working relations with Management.

Board Self-Assessment	160.77 KB	Download PDF
Board Committee Self-Assessment	721.4 KB	Download PDF
President and CEO Performance Assessment	157.78 KB	Download PDF
General Board Committee Performance Assessment	457.69 KB	Download PDF

The submissions were then assessed based on the following scale:

Scale	Category
1	Not at all Satisfied; Poor (NS)
2	Slightly Satisfied; Needs improvement (SS)
3	Satisfied; Meets requirements (S)
4	Moderately Satisfied; Exceeds requirements (MS)
5	Very Satisfied; Outstanding (VS)

Under the Company’s Manual of Corporate Governance, the assessment may be supported by an external facilitator which can be any independent third party such as, but not limited to, a consulting firm, academic institution or professional organization appointed by the Board. An external facilitator has been engaged to support the 2018 Annual Board Evaluation.

External Board Evaluation Facilitator

In 2018, Meralco engaged Good Governance Advocates and Practitioners of the Philippines (GGAPP) as its external facilitator to assist in the conduct of its Annual Board Evaluation. GGAPP is an association of professionals from various publicly listed companies, the public sector and other organizations, who share the common objectives of promoting a culture of good governance, contributing in raising standards of governance, advancing governance awareness and study, and developing proficiency in governance among advocates and practitioners.

Succession Planning

Together with the Board, the Nomination and Governance Committee (Nom&Gov) is responsible for recommending a succession planning program for its members while the Remuneration and Leadership Development Committee (RLDC) is responsible for overall guidance and direction on succession planning and leadership development of the President and CEO and Senior Management. The Committee, working closely with the head of Human Resources (HR), drives the strategy for succession planning, leadership development, and talent management. The HR head develops and implements the processes and the tools to ensure robust pools of succession candidates for the President and CEO, senior management, middle management and first line management.

Retirement

The Board adopts a policy on the retirement for directors and key officers. The Remuneration and Leadership Development Committee assists the Board in the development of the Company’s overall performance management, compensation, retirement and leadership development policies and programs based on the Company-approved philosophy and budget.

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Measurable Objectives	2018 Board Composition	Description	2017 Board Composition	Description
Gender Diversity	√	Mix of Male and Female Directors	√	Mix of Male and Female Directors
Racial Diversity	√	Mix of Racial or Ethnic Backgrounds	√	Mix of Racial or Ethnic Backgrounds
Age Diversity	√	Age ranges from 50 to 90 years old	√	Age ranges from 50 to 90 years old
Board Tenure	√	Tenure ranges from 1 to 10 years	√	Tenure ranges from 1 to 10 years
Expertise
E.1. Industry Expertise	√	Mix of directors siting as members of the BOD in Energy, Electric Retail and Power Generation companies	√	Mix of directors siting as members of the BOD in Energy, Electric Retail and Power Generation companies
E.2. Management or Operations	√	Mix of directors sitting as members of BOD or officers of electric supply, energy, power generation, retail, banking, telecommunications, realty, media, medical, insurance and other companies	√	Mix of directors sitting as members of BOD or officers of electric supply, energy, power generation, retail, banking, telecommunications, realty, media, medical, insurance and other companies
E.3. Financial, Audit, or Risk Management Expertise	√	Mix of directors acting as Chief Risk Management Officer, Member of Philippine Disaster and Risk Foundation, or members of Financial, Audit, or Risk Management committees of other companies	√	Mix of directors acting as Chief Risk Management Officer, Member of Philippine Disaster and Risk Foundation, or members of Financial, Audit, or Risk Management committees of other companies
E.4. Legal or Regulatory Expertise	√	Mix of directors who are lawyers, or with Regulatory Management background, a Former Chief Justice of the Supreme Court of the Philippines, Former Chairperson of the Presidential Electoral Tribunal, Judicial and Bar Council and Philippine Judicial Academy	√	Mix of directors who are lawyers, or with Regulatory Management background, a Former Chief Justice of the Supreme Court of the Philippines, Former Chairperson of the Presidential Electoral Tribunal, Judicial and Bar Council and Philippine Judicial Academy
E.5. Corporate Governance	√	Director with membership in Shareholders Association of the Philippines, Fellowship in ICD, Former Governor of Philippine Stock Exchange,	√	Director with membership in Shareholders Association of the Philippines, Fellowship in ICD, Former Governor of Philippine Stock Exchange,
E.6. Technology or Digital Media Expertise	√	Mix of directors who are likewise directors, advisors or consultants of media, technology or telecommunications companies	√	Mix of directors who are likewise directors, advisors or consultants of media, technology or telecommunications companies
E.7. Retail, Sales or Marketing Expertise	√	Mix of directors who are likewise directors, advisors or consultants of media, telecommunications, banking, telecommunications, realty, media, medical, insurance and retail companies	√	Mix of directors who are likewise directors, advisors or consultants of media, telecommunications, banking, telecommunications, realty, media, medical, insurance and retail companies
Professional, Academic or Advocacy Background or Affiliations
F.1. Academic Institutions	√	Mix of directors who have degrees in Finance and Commerce, Business Management, or who are member of Board of Overseers, Board of Trustees of colleges or business schools, or graduate of International Management Development Program	√	Mix of directors who have degrees in Finance and Commerce, Business Management, or who are member of Board of Overseers, Board of Trustees of colleges or business schools, or graduate of International Management Development Program
F.2. Advocacy Groups or Foundations	√	Directors with membership in environmental and socio-civic advocacy groups and foundations	√	Directors with membership in environmental and socio-civic advocacy groups and foundations
F.3. Professional Organizations	√	Directors with membership in Integrated Bar, Philippine Bar Association, and Inter-Pacific Bar Association, Philippine Stock Exchange	√	Directors with membership in Integrated Bar, Philippine Bar Association, and Inter-Pacific Bar Association, Philippine Stock Exchange

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