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Globe 2012 annual report
corporate governance
Management Commitments
Globe Telecom management continually commits to high standards of disclosure, transparency and accountability. The
management established the sustainability policy and reviews its adequacy at the highest level periodically and allocated
resources to ensure effective implementation. The practice of sustainability reporting was implemented as a means to provide
fair, accurate and meaningful assessment of its overall performance on triple bottom line (viz. Economic, Environment and
Social) responsibility to its stakeholders including investors.
As for the investor community, the Company practices regular disclosure of financial results. Quarterly financial results are
immediately disclosed after the approval by the Board to Philippines Stock Exchange (PSE) and Securities and Exchange
Commission (SEC). Quarterly and yearend financial statements and detailed management’s discussion and analysis are
filed within forty five (45) and one hundred and five (105) calendar days respectively from the end of financial period. The
Company’s financial reporting disclosures are in compliance with the PSE and SEC requisites. These reports are made
available to the analysts after disclosure and posting on the Company’s website.
Any market sensitive information such as dividend declaration is also disclosed to the SEC and PSE and then released
through various modes of communication.
To ensure compliance with regulatory requirements and
assess the appropriateness of the existing Charter for
enabling good corporate governance, the Committee
also reviews and assesses the adequacy of its Charter
annually, seeking Board approval for any amendments. The
most recent Charter review was done in July 2012, with
amendments on Audit Committee’s Performance Evaluation
in compliance with SEC Memo Circular No. 4 (Series of
2012), approved by the Board in August 2012.
The Committee conducts an annual assessment of its
performance to benchmark its practices against the
expectations set out in the approved Charter, and to ensure
that it continues to fulfill its responsibilities in accordance
with global best practices and in compliance with the Manual
of Corporate Governance and other relevant regulatory
requirements. The results of the self-assessment and any
ensuing action plans formulated to improve the Committee’s
performance are reported to the Board.
Internal Audit
The Committee meets with the internal auditors, and
discusses the results of their audits, ensuring that
management is taking appropriate corrective actions in
a timely manner, including addressing internal controls,
regulatory and compliance issues. The Committee also
receives periodic reports on the status of internal audit
activities, key performance indicators’ accomplishments, and
quality assurance and improvement programs.
Globe IA governs its internal audit activities in conformance
with the Institute of Internal Auditor’s Code of Ethics, and the
Company’s Code of Conduct. In 2007, the group subjected
its activities to an external Quality Assurance Review (QAR)
which resulted in a “Generally Conforms” rating, the highest
rating that can be achieved in the QAR process, confirming
that internal audit activities are conducted in conformance
with the International Standards for the Professional
Practice of Internal Auditing (the “Standards”). In December
2012, Globe IA started its preparation for another round of
QAR in 2013 to ensure continuous conformance with the
“Standards”.
FUNCTIONS OF AUDIT
Audit Committee
The Audit Committee’s roles and responsibilities are defined
clearly in the Audit Committee Charter approved by the
Board. The Committee supports the corporate governance
of the Company by fulfilling its oversight responsibility
relating to: a) the integrity of the financial statements and
the financial reporting process and principles; b) internal
controls; c) the qualifications, independence, remuneration
and performance of the independent auditors; d) staffing,
focus, scope, performance, and effectiveness of the internal
audit function; e) risk management; and f) compliance with
legal, regulatory, and corporate governance requirements.
Management however has primary responsibility for financial
statements and reporting process, internal controls, legal and
regulatory compliance, and risk management.
The Committee is composed of three members, one of
whom is an independent director. The independent director
chairs the Audit Committee. All members of the Audit
Committee are appointed by the Board.
The Committee ensures tenders for independent audit
services are conducted, reviews audit fees, and recommends
the appointment and fees of the independent auditors to
the Board. The Board, in turn, submits the appointment
of the independent auditors and their fees for approval of
the shareholders at the ASM. The amount of audit fees is
disclosed in this Annual Report.
The Audit Committee also approves the work plan of the
Globe Internal Audit Division, as well as the overall scope
and work plan of the independent auditors. The Audit
Committee meets at least once every quarter and invites
non-members, including the President and CEO, Chief
Financial Officer, independent and internal auditors, and
other key persons involved in Company governance, to
attend meetings where necessary. During these meetings:
• The Committee reviews the financial statements and
all related disclosures and reports certified by the Chief
Financial Officer, and released to the public and/or
submitted to the SEC for compliance with both the internal
financial management handbook and pertinent accounting
standards, including regulatory requirements. The
Committee, after its review of the quarterly unaudited and
annual audited consolidated financial statements of Globe
Telecom, Inc. and Subsidiaries, endorses these to the
Board for approval.
• The Committee meets with the internal and independent
auditors, and discusses the results of their audits, ensuring
that management is taking appropriate corrective actions in
a timely manner, including addressing internal controls and
compliance issues.
• The Committee reviews the performance and recommends
the appointment, retention or discharge of the independent
auditors, including the fixing of their remuneration, to the full
Board. On an annual basis, the Committee also assesses
the independent auditor’s qualifications, skills, resources,
effectiveness and independence. The Committee also
reviews and approves the proportion of audit and non-audit
work both in relation to their significance to the auditor
and in relation to the Company’s total expenditure on
consultancy, to ensure that non-audit work will not be in
conflict with the audit functions of the independent auditor.
• The Committee reviews the plans, activities, staffing, and
organizational structure and assesses the effectiveness of
the internal audit function.
• The Committee provides oversight of financial reporting
and operational risks, specifically on financial statements,
internal controls, legal or regulatory compliance, corporate
governance, risk management and fraud risks. The
Committee also reviews the results of management’s
annual risk assessment exercise.
The Audit Committee reports after each meeting and
provides a copy of the minutes of its meetings to the Board.
(Also see Annual Report of the Audit Committee to the Board
of Directors on page 132 of this Annual Report).
It is the policy of Globe Telecom to establish and support
an Internal Audit function as a fundamental part of its
corporate governance practices. Internal Audit is a service,
providing an independent, objective assurance and
consulting function within Globe Telecom, and sharing the
organization’s common goal of creating and enhancing
value for its stakeholders, through a systematic approach
in evaluating the effectiveness of the Company’s risk
management, internal control and governance processes.
In addition, Globe Internal Audit (IA) assists and supports
Management in developing, instilling, and nurturing a Risk
and Control Self-Assessment (RCSA) environment at Globe
Telecom. The Audit Committee regards its relationship
with Internal Audit as having a vital role in supporting the
Committee in the effective discharge of its oversight role and
responsibilities.
Globe IA performs its auditing functions faithfully by
maintaining independence from management and controlling
shareholders as it reports functionally to the Board, through
the Audit Committee, and administratively, to the President
and CEO.
Internal Audit maintains, reviews, and assesses the
adequacy of its Charter annually to ensure compliance with
regulatory requirements and appropriateness for enabling
good corporate governance. Any amendments to the Charter
are submitted to the Audit Committee and the Board for
approval.
Globe IA adopts a risk-based audit approach in developing
its annual work plan, re-assessed quarterly to consider
emerging risks and the changing dynamics of the
telecommunications industry. The Audit Committee reviews
and approves the annual work plan and all deviations, and
ensures that internal audit examinations cover at least
the evaluation of adequacy and effectiveness of controls
encompassing the Company’s governance, operations,
information systems, reliability and integrity of financial
and operational information, effectiveness and efficiency of
operations, safeguarding of assets, and compliance with
laws, rules, and regulations. The Audit Committee also
ensures that audit resources are adequately allocated to and
focused on the areas of highest risk.
Geared towards excellence, Globe Internal Audit provides
for continuing professional and personal development for all
auditors through its Learning Ladder Framework to equip
them in the conduct of reviews, with focus on acquiring
expertise on Globe Telecom’s business processes, network
and IT systems, internal controls, new accounting and
auditing standards, and regulatory updates.
External Audit
The Company engages the services of independent auditors
to conduct an audit and obtain reasonable assurance on
whether the financial statements and relevant disclosures are
free from material misstatements. The independent auditors
are directly responsible to the Audit Committee in helping
ensure the integrity of the Company’s financial statements
and reporting process.
It is the practice of the Company every three (3) years to
tender bid for the external audit services of independent
auditors. The most recent tender bid process was conducted
in Q4/2012. Also, the Company conducts on an annual basis
an independent auditor’s performance appraisal. From the
results, the Audit Committee evaluates and proposes to the
Board for endorsement and approval of the shareholder, the
appointment of the independent auditors. The endorsement
is submitted to the shareholders for approval at the ASM.
The representatives of the independent auditors are
expected to be present at the ASM and have the opportunity
to make a statement on the Company’s financial statements
and results of operations if they desire to do so. The auditors
are also expected to be available to respond to appropriate
questions during the meeting.
SyCip, Gorres, Velayo & Company (SGV & Co.), a member
firm of Ernst and Young (EY), is the appointed independent
auditors for Globe Telecom, Inc., and its subsidiaries. In
accordance with regulations issued by the SEC, the audit
partner principally handling the Company’s account is rotated
every five (5) years or sooner. The most recent rotation
occurred in 2011.
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