Whistleblower protection to boost governance

By Maria Nerissa Quino and Debra Magallon Estero

PUTTING up a whistleblower protection system in business will help ensure good corporate governance in the country.

According to statistics presented by Juan Carlos B. Robles, a certified public accountant both in the United States and the Philippines, 40 percent of the fraud detected in Philippine companies was due to tips of the people known as whistleblowers working within the company.

The presence of a whistleblower protection system is an indicator that the company is trying to practice good governance,
said Robles.

He enumerated the presence of a code of ethics, strong internal audit and control functions, and performance evaluation systems as some of the best practices for corporate governance.

It is also important to have a strong compliance program to regulations and laws, he said.

Robles also mentioned that there is a need for a continuous training on good governance to be given to employees, especially since board members and senior management have to be familiar with corporate governance.

Patron model

In the Philippine setting, most businesses are owner-driven, and some follow a patron model in the selection of board members.

In the patron model, the board is composed of “influential people,” who primarily conduct work outside the company “to come up with connections.”

Although it does not necessarily follow that if the company is owner-driven, fraud is prevalent, there is a possibility that fraud may happen since the monitoring system in these companies is sometimes “loose,” said Wendell Ganhinhin, Punongbayan and Araullo (P&A) Cebu branch manager.

This is unlike in the United States, where institutional investors, and pension and hedge funds like the banks drive the companies for strict compliance on good corporate governance.

Penalties

Robles said there should also be strict imposition of penalties for non-compliance of regulations and laws in the country.

The Philippine Securities and Exchange Commission (SEC) is “trying to be at par” with other international standards on penalizing non-compliant institutions, he said.

Enhancing value

SEC defines corporate governance as a system whereby shareholders, creditors and other stakeholders of a corporation ensure that management enhances the value of the corporation as it competes in an increasingly global market place.

“Good corporate governance establishes competitive advantage, optimizes the cost of managing risks and improves business performance,” Robles added.

P&A, a firm that provides value-added services to clients through a team of audit, tax and business professionals, is conducting a five-day seminar called “The Primary Shift: Repositioning Internal Audit Activities to Add More Value to Your Enterprise.”

The seminar started yesterday in Cebu Parklane International Hotel.

This is P&A’s first intensive seminar in the city open to companies’ chief executive officers, senior management, audit committee, board members, chief audit executives, internal audit managers and staffs.

The seminar is about equipping the companies’ officials and important personnel with knowledge on how to identify, prevent and solve business risks.

Robles, also a P&A partner, defined risk as a possibility that something good or bad may happen while trying to accomplish something. It prevents the company from attaining its goals, thus, weakening corporate governance.

P&A will also tackle during the seminar some key points in running a company such as enterprise-wide risk management, internal audit’s responsibilities, code of ethics and international standards for the professional practice of inte rnal auditing.

P&A is the Philippine member firm within Grant Thornton International, one of the world’s leading organizations of independently owned and managed accounting and consulting firms.

(As published in Sun Star Cebu, 6 May 2008.)