MANILA, Philippines — Once a socio-economic enterprise gets a score of 95% or higher in the compliance corporate governance scorecard, it can begin taking all the other necessary steps that can bring it to the next and final phase of the governance pathway. This is the institutionalization phase, which signals a full commitment to adopting the advances in governance best practices such that breakthrough results can be sustained into the future.

What additional steps should the enterprise take so as to bring it beyond the proficiency phase and into this last phase?

The steps related to the governance dimension include the following:

a) Independent directors represent at least 40% of the total membership of the Board of Directors. Moreover, they take their mandated place in the Board Committees, particularly in the Audit Committee and the Risk Management Committee. They should also have been certified through their successful completion of the Professional Directors’ Program.

b) The Board sets up a fully functioning accountability system, which uses performance scorecards down to the individual level in order to secure systemic alignment of initiatives and undertakings throughout the enterprise. It also sees to it that the linkage between operations – particularly those connected with human resource, systems and internal processes, marketing, and finance – and the strategic objectives and priorities in the strategy map is clear and strong.

c) The Board adopts a code of social responsibility and makes regular public disclosure following triple bottom line reporting practices.

The steps related to the family or controlling interest dimension are the following:

a) The Family Council is formalized and it ratifies the Family Charter as the Family Constitution. It periodically refines and updates the family strategy map, which includes the family’s strategic priorities concerning the socio-economic enterprise, where it has a controlling interest. It may set up an Advisory Board, which is made up of select, trusted advisers with wide and rich experience: it taps this Board for strategic guidance concerning family investments and the management of family assets. It may also set up a Family Office, which is charged with the administrative responsibilities of making equitable provision for the legitimate needs of all family members.  It is advisable for a few members of the family to become Fellows of ICD.

b) The family adopts its own code of ethics and sets up a mechanism to secure effective compliance with all its provisions.

The steps related to the management dimension include the following:

a) Management undertakes regular performance evaluation of each operating unit and each individual in the socio-economic enterprise through personal governance scorecards, which highlight the commitments to high performance levels: these commitments are assessed using pre-agreed performance metrics.

b) Management connects all operating systems within the enterprise with the demands and requirements of effective strategy execution. Due account has to be taken of the targets set in the enterprise performance scorecards.

c) Management implements a governance culture program, designed to instil core governance values in all enterprise personnel as they go about discharging their ordinary day-to-day duties and responsibilities.

It must be emphasized that taking all these steps associated with the institutionalization phase does not take out firm guarantees that over time, breakthrough results can be sustained. However, the probability that performance can be maintained at an impressively high level rises along with these steps. Of greater significance, however, is the prospect that opens up for the legacy of the founding patriarch to be embellished and enriched such that it touches many more lives in incredibly positive ways.