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San Miguel Corporation is committed to the highest standards of corporate governance. Good governance is key in effective decision making and in delivering on corporate strategies that generate shareholder value and safeguard the long-term interests of shareholders.

As a responsible corporate citizen, the Company has in place efficient policies and programs to ensure that we always do what is right when it comes to conducting the everyday business of the Company.

Our Board of Directors, led by our Chairman, Mr. Eduardo M. Cojuangco, Jr., believes in conducting our business affairs in a fair and transparent manner and in maintaining the highest ethical standards in all the business dealings of the Company.

Shareholders’ Rights

The Company recognizes that the most cogent proof of good corporate governance is that which is visible to the eyes of its investors.

Voting rights

Each common share in the name of the shareholder entitles such shareholder to one vote, which may be exercised in person or by proxy at shareholders’ meetings, including the Annual General Stockholders’ Meeting (AGSM). Common shareholders have the right to elect, remove, and replace directors, as well as vote on certain corporate acts specified in the Corporation Code.

Preferred Shareholders have the right to vote on matters involving certain corporate acts specified in the Corporation Code. They enjoy certain preferences over holders of common shares in terms of dividends and in the event of liquidation of the Company.

Pre-emptive rights

Under the Company’s amended articles of incorporation, as approved by the shareholders in a meeting held on May 17, 2009, and as approved by the Securities and Exchange Commission (SEC), shareholders do not have pre-emptive rights to the issuance of shares relating to equity-linked debt or other securities, any class of preferred shares, shares in payment of a previously contracted debt, or shares in exchange for property needed for corporate purposes. This is to give the Company greater flexibility in raising additional capital, managing its financial alternatives, and issuing financing instruments.

On May 31, 2010, the shareholders of the Company approved to amend the articles of incorporation to deny pre-emptive rights to any issuance of common shares. Such amendment of the articles of incorporation was approved by the SEC on August 10, 2010.

Subject to certain conditions, shareholders also do not have pre-emptive rights to shares issued, sold or disposed of by the Company to its officers and/or employees pursuant to a duly approved stock option, stock purchase, stock subscription or similar plans.

Right to Information

Shareholders are provided, through the Investor Relations Group headed by Ms. Reyna-Beth De Guzman, disclosures, announcements, and, upon request, periodic reports filed with the SEC. All disclosures of the Company are likewise immediately available and downloadable at the Company’s website upon disclosure to the Philippine Stock Exchange (PSE).

Dividends

Shareholders are entitled to receive dividends as the Board, in its discretion, may declare from time to time. However, the Company is required, subject to certain exceptions under the law, to declare dividends when the retained earnings equal to or exceed its paid-up capital stock.

Cash dividends paid by the Board of Directors of the Parent Company amounted to P1.40 per common share both in 2017 and 2018.

Cash dividends paid by the Board of Directors of the Parent Company to the preferred shareholders in 2017 and 2018 are as follows:

	2017	2018
SSeries “1”	P4.22625000	P4.22625000
Series “2-A”	N/A	N/A
Series “2-B”	P5.71875000	P5.71875000
Series C”	P6.00000000	P6.00000000
Series “2-D”	P4.45732500	P4.45732500
Series “2-E”	P4.74412500	P4.74412500
Series “2-F”	P5.10540000	P5.10540000
Series “2-G”	P4.93447500	P4.93447500
Series “2-H”	P4.74165000	P4.74165000
Series “2-I”	P4.75162500	P4.75162500

Stakeholder Relations

San Miguel Corporation exercises transparency when dealing with shareholders, customers, employees, trade partners, creditors, and all other stakeholders. The Company ensures that these transactions adhere to fair business practices in order to establish long-term and mutually beneficial relationships.

Shareholder Meeting and Voting Procedures

Stockholders are informed at least 15 business days before the scheduled meeting of the date, time, and place of the validation of proxies. In 2018, Notices of the 2018 AGSM were sent to the stockholders on May 15, 2018, one month prior to the AGSM. Voting procedures on matters presented for approval of the stockholders in the AGSM are set out in the Definitive Information Statement distributed to all shareholders of the Company.

Shareholder and Investor Relations

San Miguel Corporation responds to information requests from the investing community and keeps shareholders informed through timely disclosures to the PSE and the SEC and through regular quarterly briefings, AGSMs, investor briefings and conferences, the Company’s website, and responses to email and telephone queries. The Company’s disclosures and other filings with the SEC and PSE are available for viewing and download at the Company’s website.

The Company, through the Investor Relations group under Corporate Finance, regularly holds briefings and meetings with investment and financial analysts.

Disclosure and Transparency

San Miguel Corporation adheres to a high level of standard in its corporate disclosure and adopts transparency with respect to the Company’s financial condition and state of corporate governance.

Ownership Structure

The top 20 shareholders of the Company, including the shareholdings of certain record and beneficial owners who own more than 5% of its capital stock, its directors and key officers, are disclosed annually in the Definitive Information Statement distributed to shareholders prior to the AGSM.

Financial Reporting

San Miguel Corporation provides the investing community with regular updates on operating and financial information through adequate and timely disclosures filed with the SEC and the PSE.

Consolidated audited financial statements are submitted to the SEC and the PSE on or before the prescribed period and are available to the shareholders prior to the AGSM.

San Miguel Corporation’s financial statements conform to Philippine Accounting Standards and Philippine Financial Reporting standards, which are all in compliance with International Accounting Standards.

Quarterly financial results, on the other hand, are released and are duly disclosed to the SEC and PSE in accordance with the prescribed rules. The results are also presented to financial and investment analysts through a quarterly analysts’ briefing. These disclosures are likewise posted on the Company’s corporate website.

In addition to compliance with structural reportorial requirements, the Company discloses in a timely manner market-sensitive information such as dividend declarations, joint ventures and acquisitions, and the sale and divestment of significant assets that materially affect the share price performance of the Company.

Securities Dealing

The Company has adopted a policy which regulates the acquisition and disposal of Company shares by its directors, officers, and employees, and the use and disclosure of price-sensitive information by such persons. Under the policy, directors, officers, and employees who have knowledge or are in possession of material non-public information are prohibited from dealing in the Company’s securities prior to disclosure of such information to the public. The policy likewise prescribes the periods before and after public disclosure of structured and non-structured reports—during which trading in the Company’s securities by persons who, by virtue of their functions and responsibilities, are considered to have knowledge or possession of material non‑public information—is not allowed.

Accountability and Audit

The Audit and Risk Oversight Committee has oversight functions with respect to the external and internal auditors. The role and responsibilities of the Audit and Risk Oversight Committee are clearly defined in the Company’s Manual on Corporate Governance and the Audit and Risk Oversight Committee Charter.

External Auditor

The accounting firm of R.G. Manabat & Co., accredited by the SEC, served as the Company’s external auditors for the fiscal years 2017 and 2018.

The external auditor is selected and appointed by the shareholders upon the recommendation of the Board and subject to rotation every five years or earlier, in accordance with SEC regulations. The external auditor’s main function is to facilitate the environment of good corporate governance, as reflected in the Company’s financial records and reports, through the conduct of an independent annual audit on the Company’s business, and rendition of an objective opinion on the reasonableness of such records and reports.

The external auditors attend the AGSM of the Company and respond to appropriate questions during the meeting. They also have the opportunity to make a statement if they so desire. In instances when the external auditor suspects fraud or error during its conduct of audit, they are required to disclose and express their findings on the matter.

The Company paid the external auditor Audit Fees amounting to P32 million and P11 million, respectively, in 2018 and 2017.

Internal Audit

Internal audit is carried out by the San Miguel Group Audit (SMGA) which helps the organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. SMGA directly reports to the Audit and Risk Oversight Committee.

SMGA is responsible for identifying and evaluating significant risk exposures and contributes to the improvement of risk management and control systems by assessing adequacy and effectiveness of controls covering the organization’s governance, operations, and information systems. By evaluating their effectiveness and efficiency, and by promoting continuous improvement, the group maintains effective controls of their responsibilities and functions.

The Board approved and adopted an Internal Audit Charter of the Company on March 16, 2017, in compliance with the requirements of the Securities and Exchange Commission.

Board of Directors

Compliance with the principles of good corporate governance starts with the Company’s Board of Directors. The Board is responsible for oversight of the business affairs and integrity of the Company; determination of the Company’s mission, longterm strategy, and objectives; the management of the Company’s risks through evaluation, and ensuring the adequacy of the Company’s internal controls and procedures.

It is the responsibility of the Board to foster and engender the long-term success of the Company and secure its sustained competitiveness in a manner consistent with its fiduciary responsibility, exercised in the best interest of the Company, its shareholders, and other stakeholders.

Composition

The Board consists of 15 members, each elected by the common stockholders during the AGSM. The Board members hold office for one year until their successors are duly elected and qualified in accordance with the amended by-laws of the Company.

The broad range of skills, expertise, and experience of the directors in the fields of management, economics, business, finance, accounting, and law, ensure comprehensive evaluation of, and sound judgment on, matters relevant to the Company’s businesses and related interests. The names, profiles, and shareholdings of each director are found in the Definitive Information Statement, distributed prior to the AGSM.

The Board of Directors and the senior management of the Company have all undergone the requisite training on corporate governance.

Independent and Non-Executive Directors

San Miguel Corporation has three (3) independent directors. Currently, of the 15 directors, Messrs. Reynaldo G. David, Chief Justice Reynato S. Puno and Margarito B. Teves sit as independent and non‑executive directors of the Company.

The Company defines an independent director as a person who, apart from his fees and shareholdings, has no business or relationship with the Corporation which could, or could reasonably be perceived to, materially interfere with the exercise of his independent judgment in carrying out his responsibilities as a director. An Independent Director submits to the Corporate Secretary a certification confirming that he possesses all the qualifications and none of the disqualifications of an Independent Director at the time of his election and/or re-election as an Independent Director.

The Company strictly complies with SEC Memorandum Circular No. 4, Series of 2017 on the term limits of independent directors.

A majority of the members of the Board of Directors of the Company are non-executive directors.

Chairman/CEO and President/COO

The Chairman of the Board and Chief Executive Officer is Mr. Eduardo M. Cojuangco, Jr. while Mr. Ramon S. Ang holds the position of Vice Chairman, President, and Chief Operating Officer. These positions are held by separate individuals with their respective roles clearly defined to ensure independence, accountability, and responsibility in the discharge of their duties. The Chairman/CEO and the President/COO attended the AGSM for 2018.

Board Performance

The Board holds regular meetings. To assist the directors in the discharge of their duties, each director is given access to the Corporate Secretary and Assistant Corporate Secretary, who serve as counsel to the board of directors and at the same time communicate with the Board, management, the Company’s shareholders, and the investing public.

In 2018, the Board held eight meetings. Set out below is the record of attendance of the directors at these meetings and at the AGSM.

Name of Directors	25 Jan	15 Mar	10 May	14 Jun*	9 Aug	13 Sep	13 Nov	6 Dec
Eduardo M. Cojuangco, Jr.	•	•	•	•	•	■	•	•
Ramon S. Ang	•	•	•	•	•	•	•	•
Leo S. Alvez	•	•	•	•	•	•	•	•
Aurora T. Calderon	•	•	•	•	•	■	•	•
Joselito D. Campos, Jr.	•	•	•	•	•	•	•	•
Menardo R. Jimenez	•	•	•	•	•	•	•	-
Estelito P. Mendoza	•	-	•	•	-	•	•	•
Alexander J. Poblador	•	•	•	•	•	•	•	•
Reynato S. Puno	•	•	•	•	•	-	•	•
Thomas A. Tan	•	•	•	•	•	•	•	•
Margarito B. Teves	•	•	•	•	•	•	•	•
Iñigo Zobel	•	•	-	•	■	•	■	•
Reynaldo G. David	•	•	•	•	•	•	•	•
Jose C. De Venecia, Jr.	•	•	-	•	•	•	-	-
Ramon F. Villavicencio1	N/A	N/A	•	•	•	•	•	•
Ferdinand K. Constantino2	•	N/A	N/A	N/A	N/A	N/A	N/A	N/A

Board Remuneration

The amended by-laws of the Company provides that the Board of Directors shall receive as compensation no more than 2% of the profits obtained during the year after deducting general expenses, remuneration to officers and employees, depreciation on buildings, machineries, transportation units, furniture, and other properties. Such compensation shall be apportioned among the directors in such manner as the Board deems proper. In 2010, the Board of Directors approved the increase in the per diems for each Board meeting attended by the members of the Board from P10,000 to P50,000, and from P10,000 to P20,000 for each committee meeting attended.

Directors who are executive officers of the Company are likewise granted stock options under the Company’s Long-Term Incentive Plan for Stock Options, which plan is administered by the Executive Compensation Committee.

Board Committees

To assist the Board in complying with the principles of good corporate governance, the Board created four committees.

Executive Committee. The Executive Committee is currently composed of six directors, which includes the Chairman of the Board and CEO, Vice-Chairman of the Board, President and COO. Mr. Eduardo M. Cojuangco, Jr. sits as Chairman of the Committee. The Committee acts within the power and authority granted upon it by the Board and is called upon when the Board is not in session to exercise the powers of the latter in the management of the Company—with the exception of the power to appoint any entity as general managers or management or technical consultants; to guarantee obligations of other corporations in which the Company has lawful interest; to appoint trustees who, for the benefit of the Company, may receive and retain such properties of the Company or entities in which it has interests; and to perform such acts as may be necessary to transfer ownership of such properties to trustees of the Company, and such other powers as may be specifically limited by the Board or by law.

The Executive Committee did not hold any meeting in 2018.

Corporate Governance Committeee. The Corporate Governance Committee is currently composed of six voting directors—three of whom are independent. Mr. Reynato S. Puno, an independent director, is the Chairman of the Committee.

The Corporate Governance Committee was constituted to aid the Board in the performance of its oversight responsibilities in the development and implementation of the corporate governance principles, policies, structures, and systems of the Corporation, and assist the Board in the performance of its corporate governance responsibilities.

In 2018, the Corporate Governance Committee held three meetings.

Audit and Risk Oversight Committee. The Audit Committee is currently composed of five members with three independent directors as members. Mr. Margarito B. Teves sits as Committee Chairman.

The Audit and Risk Oversight Committee performs oversight functions over the Company’s financial reporting, internal control system, internal and external audit processes, and compliance with applicable laws and regulations, as well as oversight over the company’s enterprise risk management system to ensure its functionality and effectiveness.

The Audit and Risk Oversight Committee held four meetings in 2018, wherein the Committee reviewed and approved, among others, the Company’s 2017 Consolidated Audited Financial Statements as reviewed by the external auditors, and the Company’s unaudited financial statements for the first to the third quarters of the year.

The Audit and Risk Oversight Committee has adopted an Audit and Risk Oversight Committee Charter in accordance with the prescribed audit committee charter of the Securities and Exchange Commission.

Related Party Transactions Committee. The Related Party Transactions Committee is composed of six members, two of whom are independent directors, including the Chairman, Mr. Reynaldo G. David.

The Related Party Transactions Committee reviews all material related party transactions of the Company. The Committee held one meeting in 2018.

Board Committee Members

The members of each Board Committee and their attendance at the Board Committee meetings in 2018 are set out in the table below. The Chairmen of each of the Board Committees attended the 2018 AGSM.

Audit and Risk Oversight Committee	Date of Meeting
	15 Mar	10 May	9 Aug	8 Nov
Margarito B. Teves (Chairman)	●	●	●	●
Estelito P. Mendoza	-	●	-	-
Ferdinand K. Constantino3	●	●	-	-
Reynaldo G. David	●	●	●	●
Reynato S. Puno	●	●	●	●
Leo S. Alvez4	-	-	●	●

Corporate Governance Committee	Date of Meeting
	25 Jan	15 Mar	14 Jun
Reynato S. Puno (Chairman)	●	●	●
Aurora T. Calderon	●	●	●
Ferdinand K. Constantino	●	●	●
Reynaldo G. David	●	●	●
Menardo R. Jimenez	●	●	●
Margarito B. Teves	●	●	●

Related Party Transactions	Committee Date of Meeting
	15 Mar
Reynaldo G. David (Chairman)	●
Leo S. Alvez	●
Joselito D. Campos, Jr.	●
Ferdinand K. Constantino	●
Alexander J. Poblador	●
Margarito B. Teves	●

Management

Management is primarily responsible for the day-to-day operations and business of the Company. The annual compensation of the Chairman/CEO and the top senior executives of the company are set out in the Definitive Information Statement distributed to shareholders.

Employee Relations

Employees are provided an Employee Handbook and Code of Ethics which contain the policies and guidelines for the duties and responsibilities of an employee of San Miguel Corporation.

Through internal newsletters and company e-mails all facilitated by the Human Resources Department and the Corporate Affairs Office, employees are updated on material developments within the organization.

Career advancement and developments are also provided by the Company through numerous training programs and seminars. The Company has also initiated activities centered on the safety, health and welfare of its employees. Benefits and privileges accruing to all regular employees are similarly discussed in the Employee Handbook.

Code of Ethics

The Company’s Code of Ethics sets out the fundamental standards of conduct and values consistent with the principles of good governance and business practices that shall guide and define the actions and decisions of the directors, officers, and employees of the company. The principles and standards prescribed in the Code of Ethics apply to all directors, senior managers, and employees of the Company

Procedures are well established for the communication and investigation of concerns regarding the company’s accounting, internal accounting controls, auditing, and financial reporting matters to the Audit and Risk Ove

Whistle-blowing policy

The Company has an established whistle-blowing policy aimed at encouraging employees to speak out and call the attention of Management to any suspected wrongdoing which is contrary to the principles of the Code of Ethics and violations of the Company’s rules and regulations.

The policy aims to protect the whistle-blower from retribution or retaliation, and provides a disincentive to passively allowing the commission of wrongful conduct.

These policies are available at the Company’s website.

Compliance Monitoring

The Compliance Officer, Atty. Virgilio S. Jacinto, is responsible for monitoring compliance by the Company with the provisions and requirements of good corporate governance.

On April 14, 2010, the Board Directors amended its Manual of Corporate Governance in compliance with the Revised Code of Corporate Governance issued by the Securities and Exchange Commission, under its Memorandum Circular No. 6, Series of 2009. On March 27, 2014, the Board of Directors approved further amendments to the Manual to reflect the requirements of the SEC on the annual training requirement of directors and key officers of the Company, and the requirements on the reporting of compliance with the Manual.

On May 10, 2017, the Board of Directors of the Company approved the adoption of a new Manual on Corporate Governance in compliance with SEC Memorandum Circular No. 19, Series of 2016.

Website

Up-to-date information on the Company’s corporate structure, products and services, results of business operations, financial statements, career opportunities, and other relevant information on the Company may be found at its website www.sanmiguel.com.ph.

Report of The Audit and Risk Oversight Committee

For the year ended December 31, 2018

The Audit and Risk Oversight Committee assists the Board of Directors in its corporate governance and oversight responsibilities in relation to financial reporting, risk management, internal controls and internal and external audit processes and methodologies. In fulfillment of these responsibilities, the Audit and Risk Oversight Committee performed the following in 2018:

• endorsed for approval by the stockholders, and the stockholders approved the appointment of R.G. Manabat & Co. CPAs (formerly Manabat Sanagustin & Co. CPAs) as the Company’s independent external auditors for 2018.
• reviewed and approved the terms of engagement of the external auditors, including the audit, audit‑related and any non-audit services provided by the external auditors to the Company and the fees for such services, and ensured that the same did not impair the external auditors’ independence and objectivity;
• reviewed and approved the scope of the audit and audit programs of the external auditor as well as the internal audit group of the Company, and have discussed the results of their audit processes and their findings and assessment of the Company’s internal controls and financial reporting systems;
• reviewed, discussed and recommended for approval of the Board of Directors the Company’s annual and quarterly consolidated financial statements, and the reports required to be submitted to regulatory agencies in connection with such consolidated financial statements, to ensure that the information contained in such statements and reports presents a true and balanced assessment of the Company’s position and condition and comply with the regulatory requirements of the Securities and Exchange Commission; and
• reviewed the effectiveness and sufficiency of the Company’s financial and internal controls, risk management systems, and control and governance processes, and ensured that, where applicable, necessary measures are taken to address any concern or issue arising therefrom.
• reported compliance to the Securities and Exchange Commission on the results of the accomplishment by the members of the Audit and Risk Oversight Committee of the Audit and Risk Oversight Committee Self-Rating Form in accordance with the Audit and Risk Oversight Committee Charter and in compliance with the requirements of the SEC Memorandum Circular No. 4, Series of 2012.

All the five members of the Audit and Risk Oversight Committee, three of whom are independent directors, are satisfied with the scope and appropriateness of the Committee’s mandate and that the Committee substantially met its mandate in 2018.

View Report of The Audit and Risk Oversight Committee on pdf.