AN ACT TO PROMOTE FINANCIAL VIABILITY AND FISCAL DISCIPLINE IN GOVERNMENT-OWNED OR -CONTROLLED CORPORATIONS AND TO STRENGTHEN THE ROLE OF THE STATE IN ITS GOVERNANCE AND MANAGEMENT TO MAKE THEM MORE RESPONSIVE TO THE NEEDS OF PUBLIC INTEREST AND FOR OTHER PURPOSES

Fifteenth Congress

First Regular Session

Begun and held in Metro Manila, on Monday, the twenty-sixth day of July, two thousand ten.

REPUBLIC ACT No. 10149

AN ACT TO PROMOTE FINANCIAL VIABILITY AND FISCAL DISCIPLINE IN GOVERNMENT-OWNED OR -CONTROLLED CORPORATIONS AND TO STRENGTHEN THE ROLE OF THE STATE IN ITS GOVERNANCE AND MANAGEMENT TO MAKE THEM MORE RESPONSIVE TO THE NEEDS OF PUBLIC INTEREST AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

CHAPTER I
GENERAL PROVISIONS

Section 1. Short Title. - This Act shall be known as the "GOCC Governance Act of 2011l".

Section 2. Declaration of Policy. - The State recognizes the potential of government-owned or -controlled corporations (GOCCs) as significant tools for economic development. It is thus the policy of the State to actively exercise its ownership rights in GOCCs and to promote growth by ensuring that operations are consistent with national development policies and programs.

Towards this end, the State shall ensure that:

Section 3. Definition of Terms. –

Section 4. Coverage. - This Act shall be applicable to all GOCCs, GICPs/GCEs, and government financial institutions, including their subsidiaries, but excluding the Bangko Sentral ng Pilipinas, state universities and colleges, cooperatives, local water districts, economic zone authorities and research institutions: Provided, That in economic zone authorities and research institutions, the President shall appoint one-third (1/3) of the board members from the list submitted by the GCG.

CHAPTER II
THE GOVERNANCE COMMISSION FOR
GOVERNMENT-OWNED OR -CONTROLLED CORPORATIONS (GCG)

Section 5. Creation of the Governance Commission for Government-Owned or -Controlled Corporations. - There is hereby created a central advisory, monitoring, and oversight body with authority to formulate, implement and coordinate policies to be known as the Governance Commission for Government-Owned or -Controlled Corporations, hereinafter referred to as the GCG, which shall be attached to the Office of the President. The GCG shall have the following powers and functions:

Section 6. Composition of the GCG. - The GCG shall be composed of five (5) members. The Chairman with the rank of Cabinet Secretary and two (2) members with the rank of Undersecretary shall be appointed by the President. The Secretaries of the Department of Budget and Management and the Department of Finance shall sit as ex officio members.

Section 7. Powers and Functions of the Chairman. – The management of the GCG shall be vested in the Chairman who shall have the following powers and duties;

CHAPTER III
COMPENSATION AND POSITION CLASSIFICATION SYSTEM FOR GOCCs

Section 8. Coverage of the Compensation and Position Classification System. - The GCG, after conducting a compensation study, shall develop a Compensation and Position Classification System which shall apply to all officers and employees of the GOCCs whether under the Salary Standardization Law or exempt therefrom and shall consist of classes of positions grouped into such categories as the GCG may determine, subject to the approval of the President.

Section 9. Position Titles and Salary Grades. - All positions in the Position Classification System, as determined by the GCG and as approved by the President, shall be, allocated to their proper position titles and salary grades in accordance with an Index of Occupational Services, Position Titles and Salary Grades of the Compensation and Position Classification System, which shall be prepared by the GCG and approved by the President.

The following principles shall govern the Compensation and Position Classification System:

Section 10. Additional Incentives. - The GCG may recommend to the President, incentives for certain position titles in consideration of the good performance of the GOCC; Provided, That no incentives shall be granted unless the GOCC has fully paid all taxes for which it is liable, and the GOCC has declared and paid all the dividends required to be paid under its charter or any other laws.

Section 11. Non-diminution of Salaries. – The Compensation and Position Classification System to be developed and recommended by the GCG and as approved by the President shall apply to all positions, on full or part-time basis, now existing or hereafter created in the GOCC; Provided, That in no case shall there be any diminution in the authorized salaries as of December 31, 2010 of incumbent employees of GOCCs, including those exempt under Republic Act No. 6758, as amended, upon the implementation of the Compensation and Position Classification System for GOCCs.

CHAPTER IV
BOARD OF DIRECTORS/TRUSTEES/OFFICERS OF
GOVERNMENT OWNED OR CONTROLLED CORPORATIONS

Section 12. Coverage. - The duties, obligations, responsibilities and standards of care provided under this Chapter shall be applicable to all members of the Board of Directors/Trustees and Officers of GOCCs and subsidiaries now existing or hereafter created including government appointed directors in affiliate corporations. These duties, obligations and responsibilities shall be in addition to the powers and functions provided in the individual charters or articles of incorporation and bylaws of the respective GOCCs.

Section 13. Number of Directors/Trustees. - The present number of Directors/Trustees provided in the charter of the GOCCs shall be maintained.

Section 14. Ex Officio Alternates. - The ex officio members of the GOCC may designate their respective alternates who shall be the officials next-in-rank to them, and whose acts shall be considered the acts of their principals.

Section 15. Appointment of the Board of Directors/Trustees of GOCCs. - An Appointive Director shall be appointed by the President of the Philippines from a shortlist prepared by the GCG.

The GCG shall formulate its rules and criteria in the selection and nomination of prospective appointees and shall cause the creation of search committees to achieve the same. All nominees included in the list submitted by the GCG to the President shall meet the Fit and Proper Rule as defined under this Act and such other qualifications which: the GCG may determine taking into consideration the unique requirements of each GOCC. The GCG shall ensure that the shortlist shall exceed by at least fifty percent (50%) of the number of directors/trustees to be appointed. In the event that the President does not see fit to appoint any of the nominees included in the shortlist, the President shall ask the GCG to submit additional nominees.

Section 16. Fit and Proper. - All members of the Board, the CEO and other officers of the GOCCs including appointive directors in subsidiaries and affiliate corporations shall be qualified by the Fit and Proper Rule to be determined by the GCG in consultation and coordination with the relevant government agencies to which the GOCC is attached and approved by the President.

To maintain the quality of management of the GOCCs, the GCG, in coordination with the relevant government agencies shall, subject to the approval of the President, prescribe, pass upon and review the qualifications and disqualifications of individuals appointed as officers, directors or elected CEO of the GOCC and shall disqualify those found unfit.

In determining whether an individual is fit and proper to hold the position of an officer, director or CEO of the GOCC, due regard shall be given to one's integrity, experience, education, training and competence.

Section 17. Term of Office. - Any provision in the charters of each GOCC to the contrary notwithstanding, the term of office of each Appointive Director shall be for one (1) year, unless sooner removed for cause: Provided, however, That the Appointive Director shall continue to hold office until the successor is appointed. An Appointive Director may he nominated by the GCG for reappointment by the President only if one obtains a performance score of above average or its equivalent or higher in the immediately preceding year of tenure as Appointive Director based on the performance criteria for Appointive Directors for the GOCC.

Appointment to any vacancy shall be only for the unexpired term of the predecessor. The appointment of a director to fill such vacancy shall be in accordance with the manner provided in Section 15 of this Act.

Any provision of law to the contrary notwithstanding, all incumbent CEOs and appointive members of the Board of GOCCs shall, upon approval of this Act, have a term of office until June 30, 2011, unless sooner replaced by the President: Provided, however, That the incumbent CEOs and appointive members of the Board shall continue in office until the successors have been appointed by the President.

Section 18. The Chief Executive Officer of the GOCC. - The CEO or the highest-ranking officer provided in the charters of the GOCCs, shall be elected annually by the members of the Board from among its ranks. The CEO shall be subject to the disciplinary powers of the Board and may be removed by the Board for cause.

Section 19. Fiduciary Duties of the Board and Officers. As fiduciaries of the State, members of the Board of Directors/Trustees and the Officers of GOCCs have the legal obligation and duty to always act in the best interest of the GOCC, with utmost good faith in all its dealings with the property and monies of the GOCC.

The members of the Board and Officers of GOCCs shall:

Where a member of the Board or an Officer, by virtue of the office, acquires or receives for oneself a benefit or profit, of whatever kind or nature including, but not limited to, the acquisition of shares in corporations where the: GOCC has an interest, using the properties of the GOCC for their own benefit, receiving commission on contracts from the GOCC's assets, or taking advantage of corporate opportunities of the GOCC, all such profits or benefits shall be subject to restitution under Section 24 of this Act, without prejudice to any administrative, civil or criminal action against members of the Board of Directors/Trustees or Officers. This provision shall be applicable notwithstanding the fact that such member of the Board or Officer risked one's own funds in the venture.

Section 20. Trustee Relation to the Properties, Interests and Monies of the GOCC. - Except for the per diem received for actual attendance in board meetings and the reimbursement for actual and reasonable expenses and incentives as authorized by the GCG, any and all realized and unrealized profits and/or benefits including, but not limited to, the share In the profits, incentives of members of the Board or Officers in excess of that authorized by the GCG, stock options, dividends and other similar offers or grants from corporations where the GOCC is a stockholder or investor, and any benefit from the performance of members of the Board or Officers of the Corporation acting for and in behalf of the GOCC in dealing with its properties, investments in other corporations, management of subsidiaries and other interest, are to be held in trust by such member of the Board or Officer for the exclusive benefit of the GOCC represented.

Section 21. Care, Diligence and Skill in the Conduct of the Business of the GOCC. - The members of the Board and the Officers must exercise extraordinary diligence In the conduct of the business and in dealing with the properties of the GOCC. Such degree of diligence requires using the utmost diligence of very cautious person with due regard for all the circumstances.

Section 22. Power of the Board of Directors/Trustees to Discipline, Remove Officers of GOCC. - Subject to existing civil service laws, rules and regulations, the Board shall have the authority to discipline the CEO, or order the removal from office, upon a majority vote of the members of the Board who actually took part in the investigation and deliberation.

Section 23. Limits to Compensation, Per Diems, Allowances and Incentives. - The charters of each of the GOCCs to the contrary notwithstanding, the compensation, per diems, allowances and incentives of the members of the Board of Directors/Trustees of the GOCCs shall be determined by the GCG using as a reference, among others, Executive Order No. 24 dated February 10, 2011: Provided, however, That Directors/Trustees shall not be entitled to retirement benefits as such directors/trustees.

In case of GOCCs organized solely for the promotion of social welfare and the common good Without regard to profit, the total yearly per diems and incentives in the aggregate which the members of the Board of such GOCCs may receive shall be determined by the President upon the recommendation of the GCG based on the achievement by such GOCC of its performance targets.

Section 24. Restitution. - Upon the determination and report of the Commission on Audit (COA) that properties or monies belonging to the GOGG are in the possession of a member of the Board or Officer without authority, or that profits are earned by the member of the Board or Officer in violation of the fiduciary duty, or the aggregate per diems, allowances and incentives received in a particular year are in excess of the limits provided under this Act, the member of the Board or Officer receiving such properties or monies shall return the same to the GOCC.

Failure to make the restitution within thirty (30) days after a written demand has been served shall, after trial and final judgment, be punished by an imprisonment of one (1) year and a fine equivalent to twice the amount to be restituted, and in the discretion of the court of competent jurisdiction, disqualification to hold public office.

GHAPTER V
DISCLOSURE REQUIREMENTS

Section 25. Full Disclosure. - All GOCCs shall maintain a website and post therein for unrestricted public access:

Section 26. Special Audit. –

CHAPTER VI
CREATION AND ACQUISITION OF A GOCC OR
RELATED CORPORATION

Section 27. Requisites for the Creation of a New GOCC or Related Corporation under the Corporation Code. – A government agency seeking to establish a GOCC or Related Corporation under "The Corporation Code of the Philippines" shall submit its proposal to the GCG for review and recommendation to the President for approval before registering the same with the Securities and Exchange Commission (SEC). The SEC shall not register the articles of incorporation and bylaws of a proposed GOCC or Related Corporation, unless the application for registration is accompanied by an endorsement from the GCG stating that the President has approved the same.

Section 28. Requisites for the Acquisition of Controlling Interest in Another Corporation. - Any government agency seeking to purchase a corporation or acquire controlling interest therein shall submit its proposal to the GCG for review and approval of the President.

CHAPTER VII
MISCELLANEOUS PROVISIONS

Section 29. Appropriations. - The amount of Ten million pesos (P10,000,000.00) for the initial operation of the GOG shall be sourced from the Contingent Fund of the President.

Subsequent funding requirements shall be included in the annual General Appropriations Act.

Section 30. Suppletory Application of The Corporation Code and Charters of the GOCCs. - The provisions of "The Corporation Code of the Philippines" and the provisions of the charters of the relevant GOCC, insofar as they are not inconsistent with the provisions of this Act, shall apply suppletorily to GOCCs.

Section 31. Transitory Provision. - The Privatization Council and the Privatization and Management Office created under Executive Order No. 323, Series of 2000, shall continue to implement and finish the privatization of GOCCs that have been identified by the said Privatization Council arid approved for privatization by the President prior to the effectivity of this Act: Provided, however, That the privatization of said GOCCs that remain unfinished at the end of two (2) years after the effectivity of this Act shall be automatically transferred to the GCG which shall continue the privatization of the GOCCs.

Section 32. Repealing Clause. - The charters of the GOCCs under existing laws and all other laws, executive orders including Executive Order No. 323, Series of 2000, administrative orders, rules, regulations, decrees and other issuances or parts thereof which are inconsistent with the provisions of this Act are hereby revoked, repealed or modified accordingly.

Section 33. Separability Clause. - Should any provision of this Act be declared unconstitutional, the same shall not affect the validity of the other provisions of this Act.

Section 34. Effectivity. - This Act shall take effect after fifteen (15) days following its publication in the Official Gazette or in two (2) newspapers of general circulation.

Approved,

This Act which is a consolidation of Senate Bill No. 2640 and House Bill No. 4067 was finally passed by the Senate and the House of Representatives on May 30, 2011 and May 31, 2011, respectively.

Approved: June 6, 2011

(Sgd.) BENIGNO SIMION C. AQUINO III
President of the Philippines