In Meralco, the practice of good corporate governance has long been a conventional disposition and is not merely driven by a desire to comply with statutory requirements. Even before the introduction of corporate governance imperatives and other related regulations impositions, the Company had already been committed to business value enhancement, not just for the benefit of its stakeholders, but more importantly to ensure reliable and efficient service to the consuming public in its franchise area. The Company strongly believes that its mandate does not emanate from a business profit motivation alone but from a public service point of view as well. Both paradigms shape a corporate governance mindset that breeds a business conscience and weaves a moral fiber which is eventually ingrained in all facets of the organization’s operational activities.

The Company’s philosophy, “Service Excellence with Integrity” says much about the Company’s intrinsic commitment on corporate governance principles and best practices.

On top of the existing mechanism for corporate governance of Meralco are the pertinent provisions in the Company’s Articles of Incorporation and By-Laws. The fundamental structure, the minimum qualifications of directors, and the duties and responsibilities of the Board and officers of the Company are contained in these documents.

To foster better understanding of the integral elements in institutionalizing corporate governance in Meralco, a Corporate Governance Framework, as shown below, has been developed.

The Corporate Governance Framework of Meralco identifies the key players involved in ensuring the application of good governance practices and policies within Meralco. At the top of this structure are the Shareholders and below it are three tiers of corporate bodies that implement and oversee good corporate governance in the context of the vision and goals of the Company. The Shareholders nominate and appoint Directors to the Board, whose qualifications are set by the Company and the Securities and Exchange Commission (SEC). The Board and its created Committees provide the effective oversight in carrying out the Company’s activities. The Board is responsible in ensuring the long-term success of the Company and in securing its sustained competitiveness in a manner consistent with its fiduciary responsibility. Management formulates and implements policies and directions governing the management and operation of the Company and its subsidiaries. It is also accountable for the Company’s organizational and procedural controls. The External Auditor and Internal Auditor serve as the independent mechanism to monitor and evaluate the existence and effectiveness of internal controls. The External Auditor is selected by the Board and appointed by the Shareholders. It provides an independent and objective assurance on the preparation and presentation of the Company’s financial statements. The Internal Auditor is nominated and appointed by Management, and confirmed by the Board. As an independent audit function within the organization, the Internal Auditor provides reasonable assurance that the Company’s key organizational and procedural controls are effective, appropriate and complied with. The Internal Auditor also evaluates the effectiveness of the Company’s risk management and governance processes. In the performance of their respective roles and responsibilities, the key players are guided by the corporate and governance principles, as well as the governance rules established by the Company.

The foundation for this Corporate Governance Framework is further strengthened by the adoption of a Manual of Corporate Governance which was approved by the Board in August 2002, in compliance with the SEC Memorandum Circular No. 2, Series of 2002. Since then, the Manual has undergone constant review and update to reflect newly embraced leading standards and recently implemented enhancements.