By Dante Gagelonia

Originally published in MMLDC’s Highlights, 2Q 2010. Used with permission from the author.

The question of what good governance means is a complex matter, as it involves different elements depending on the context. What works for one nation may not work for another, and it takes a special awareness to be able to properly assess the state of a government.That awareness is usually exclusive to the people within government, as they are ensconced within the circumstances of applying and regulating the law.

Chief Justice Reynato S. Puno is one such indivudal, and his position as one of the most senior lawmen in the country places him in a unique position to discuss what it means to have good governance in a Philippine setting.

When asked about what it means to have good governance in the Philippines, Chief Justice Puno first emphasizes what “governance” means. He describes it as “the overall scheme within which institutions and mechanisms make sure that obligations are met, rights are complied with, and differences are mediated. It is the exercise of power or authority to manage one’s resources and affairs.”Without a clear basis such as this, it would be difficult to define “good.”

Given that definition, he then explains that “good governance… is the competent management of those resources and affairs. It entails transparency, accountability and responsiveness or relevance. Simply put, governance is the process of decision-making and the process by which those decisions are implemented; good governance is making sure that all the players in making those decisions comply with regulations and are accountable for their transactions.”

Chief Justice Puno also enumerates four essential qualities of good governance:

• Respect for the rule of law. There must be a fair legal framework within which transactions must be made, and there must be impartial enforcement of that framework. People should know what the rules are, and abide by them – which in turn requires an effective legal system.
• Transparency. Information should be available, and more importantly, accessible to those who will be affected by decisions and their enforcement.
• Accountability. Those who govern and make decisions affecting other people must be able to give justifications for their choices.
• Efficiency and effectiveness. Institutions should be able to meet the needs of the people while making the best use of available resources.

The Philippines is currently in a state of need, Chief Justice Puno explains, in terms of good governance. A lot of it stems from implementation, or the lack thereof: “The Philippines is not lacking in laws and issuances to ensure the practice of good governance. We have all these laws because where there is no good governance, corruption thrives. Throughout the years, corruption has always been an issue on our country’s table and I would say that in recent years, there has been an honest effort to combat it. But change does not happen overnight.”

Is there hope for our nation? He says yes: “We are trudging along the path of good governance on a slow but very steady pace, thanks to the willingness of both private businesses and public institutions to work together to monitor compliance with laws promoting good governance. The news paints a very grim picture of the state of corruption in our country, but I would say there is more to it than just that. Our eyes have been opened to the ills caused by a lack of good governance and we’re trying very hard to prevent that.”

Since governance applies not just to nations but to institutions as well, it’s interesting to note that Philippine law has provisions involving corporate governance. Chief Justice Puno explains: “Attempts to reform corporate governance in the Philippines began with the passage of Republic Act No. 8799, otherwise known as the Securities Regulation Code in July 2000. Salient provisions of this law include the establishment and strengthening of the enforcement powers of the Securities Exchange Commission (SEC), mandatory registration of securities, identification of reportorial requirements, and the clarification of insider trading.”

“In April 2002, as a reactive measure to the corporate scandals that originated from the United States but nevertheless reverberated worldwide, the SEC issued Memorandum Circular No. 02, which we now more commonly refer to as the Code of Corporate Governance. The Code provides regulations for the composition of the Board of Directors, the qualifications and responsibilities of a director, protection of stockholders’ rights, evaluation systems for directors and top management, as well as other provisions relating to accountability and audit, and disclosure and accountability. Soon thereafter, the SEC supplemented the Code with a model manual on corporate governance, to be used by the companies as a guide to create their own manuals as mandated by the Code.”

“The Code was updated in June 2009. Foremost in the revisions is the reinforcement of Board Committees geared to assist corporations in good governance, namely, the Audit, Nomination, and Compensation Committees. The Re

Photo from the Probe Media Foundation, Inc.

vised Code of Corporate Governance likewise highlights the role of the Compliance Officer, whose responsibility it is to issue a certificate each year explaining the extent of the company’s compliance with the Code and the reasons for any deviations.”

When asked about why the state of Philippine governance seems to be mired in corruption and unable to process reforms, he details how the process of improving governance is a challenging one: “The Philippines is on its way to achieving those reforms, seeing how more regulations have been put in place to address the problems a lack of good governance have created. The challenge now is to encourage stakeholders to comply with those regulations. The biggest roadblock, I feel, is unwillingness to comply with said regulations for fear that there will be no significant improvement in terms of governance or corruption despite such compliance.”

“In the private sector, businessmen are worried that conscientiously practicing good governance as required by law might set them back in terms of business gains, while their neighbors who do not make the same reforms do not experience the same setbacks. What they fail to realize is that institutionalizing these reforms will, in the long run, work to their benefit. Just look at the financial crisis the United States suffered in 2001 because of the Enron scandal. The collapse was caused by audit failure and accounting loopholes – clearly a lack of good governance. Our laws and regulations were created on a defensive stance against bad practices like those, to precisely avoid massive business losses like those suffered by the United States.”

“I also believe that practices in both the public and private sectors, as well as media reporting, that create a perception that corruption has been institutionalized in our country hold back the actualization of positive reform in governance. There is no reason for our country to succumb to these perceptions, especially now that there are more programs and institutions vigilantly monitoring and fighting against corruption. These programs will not succeed if they are always met with pessimism and hopelessness.”

Chief Justice Puno is himself keen on making a personal difference in the quest to improve Philippine governance, especially given the times: “May [2010] is a significant month, both for the country and myself. It is the month we will elect a new set of leaders, therefore, the Court is busy grappling with election cases and other cases of national importance. But May is also the month I hang up my judicial robe – I retire on the 17th. Before that, I would like to promulgate more rules of court that are responsive to the needs of our people today. We have been discussing several of these new rules, and hopefully, we will be able to promulgate them before I retire.”

With a lifetime in public service, it’s difficult to imagine the time when Chief Justice Puno will step down from the national stage. He has a positive mindset about retirement, though: “I would like to take some time to think about how else I can remain relevant to our country. I have been a public servant for 40 years and it would be difficult to wake up one day with nothing to do. Through my years of service, I have seen so many other things that can be done to help our country. Upon my retirement, I intend to evaluate which of these things I can focus my time on.”