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  • II. Commitment to Principles of Good Corporate Governance

2.1. NORTHRAIL as an Active Partner of the Government in National Development. NORTHRAIL shall perform its functions as an active partner of the government in national development. Such functions include the delivery of public services, as well as the production and creation of wealth necessary to support vital government initiatives.

2.2. Governing Principles of Good Corporate Governance of NORTHRAIL. The corporate governance framework for NORTHRAIL shall be governed by the following principles:

2.2.1. NORTHRAIL shall conduct its business strictly in accordance with the rule of law and shall be supportive of the primary goals and objectives of the State.

2.2.2. Timely and accurate disclosure shall be made for transparency on all material aspects and development regarding NORTHRAIL, including its financial condition, performance, ownership, and governance.

2.2.3. The strategic guidance of NORTHRAIL shall be in accordance with the objectives set by the government, the effective monitoring of Management by the Board, and the Board's accountability to the corporation, its holding company (BCDA), and the State. Strategic direction of NORTHRAIL shall be in accordance with the National Transportation Program and other directives and policies of DOTC regarding transportation.

2.2.4. NORTHRAIL shall adhere to the highest degree of ethical standards and promote accountability and fairness in all its business transactions.

2.2.5. The long-term growth, development and strength of NORTHRAIL shall be fostered.

2.2.6. NORTHRAIL recognizes its corporate responsibility for the common good of society.

2.2.7. Active cooperation between NORTHRAIL, and its partners, affiliates, subsidiaries and stakeholders in creating wealth, jobs, and the sustainability of a financially sound enterprise shall be encouraged.

2.3 Commitment to Institutionalize the Principles of Corporate Governance. NORTHRAIL is committed to institutionalize the principles of good corporate governance in the entire organization. The Board of Directors, Management and Employees of NORTHRAIL equally commit to the principles contained in the Code of Corporate Governance for GOCCs and acknowledge that this Manual will serve as guide in the achievement of corporate goals.

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

2.5 Promotion of Corporate Governance. The Board of Directors, Management and Employees believe that good corporate governance is an integral component of sound strategic business management and of transparency and accountability in public corporate governance, and will undertake every effort necessary to create awareness of such within NORTHRAIL.

2.6 Governance Policy on Conflict of Interest Public policy dictates that the personal interest of board members and officers should never prevail over the interest of NORTHRAIL. As such, Board Members and officers may not directly or indirectly derive any personal profit or advantage by reason of their position in the corporation.

2.6.1. Determination of conflict of interest. Conflict of Interest exists when an official, employee or a member of the board of directors, an officer of the corporation, or a partner in a joint venture with NORTHRAIL whose interest or whose company’s interest or his rights or duties in said corporation or business, are opposed to or is affected by the faithful performance of official duty. A conflict of interest exists when a Board Member or officer of NORTHRAIL:

2.6.1.1. Supplies or is attempting or applying to supply goods or services to NORTHRAIL;

2.6.1.2. Supplies or is attempting to supply goods, services or information to an entity in competition with NORTHRAIL;

2.6.1.3. By virtue of his office, acquire or is attempting to acquire for himself a business opportunity which should belong to NORTHRAIL;

2.6.1.4. Is offered or receive consideration for delivering NORTHRAIL's business to a third party; and

2.6.1.5. Is engaged or is attempting to engage in a business or activity, which competes with or works contrary to the best interests of NORTHRAIL.

2.6.2. Disclosure of Conflict of Interest. If an actual or potential conflict of interest should arise on the part of board members, it should be fully disclosed and the concerned Board Member should not participate in the decisionmaking. A Board Member who has a continuing conflict of interest of a material nature should either resign or, if the Board deems appropriate, be removed from the Board.

2.6.3. Void Contracts. NORTHRAIL must not enter into any contract or agreement with one or more of its board members or officers in order to prevent a situation where there is actual or potential conflict of interest or one that could create the appearance of conflict of interest. Any such contract entered into by NORTHRAIL is considered void.

2.6.4. Liability of Board Members. Where a Board Member, by virtue of his/her office, acquires a business opportunity that should belong to NORTHRAIL, thereby obtaining profits to the prejudice of the corporation, the Board Member must account to the latter for all such profits by refunding the same, unless his/her act has been ratified. This provision shall be applicable notwithstanding the fact that the board member risked his own funds in the venture. The foregoing is without prejudice to NORTHRAIL’s Rules or Code of Conduct and Ethics for its officers, employees and staff.

2.7 No Gift Policy NORTHRAIL shall adhere to the highest form of ethical standards. The NORTHRAIL Board of Directors, Officers, Managers and employees shall demonstrate fairness, professionalism and deliver quality services without expectations of any undue favor or reward.

2.7.1. NORTHRAIL adopts a No Gift Policy. The Chairman and Members of the Board, Officers, Managers and Employees shall not solicit or accept, directly or indirectly, any gift, gratuity, favor, entertainment, loan, or use, or anything of monetary value (“gift”) from a person, group, association, or juridical entity, whether from the public or the private sectors, at any time, on or off the work premises, in the course of their official duties or in connection with any operation being regulated by, or any transaction which may be affected by the functions of their office, where such gift:

2.7.1.1. Would be illegal or in violation of law.

2.7.1.2. Is part of an attempt or agreement to do or refrain from doing anything in return. 2.7.1.3. Has a value beyond what is normal and customary in the business of NORTHRAIL.

2.7.1.4. Is being made to influence the Chairman and Members of the Board, Officers, Managers and Employees’ actions as such. 2.7.1.5. Could create the appearance of a conflict of interest.

2.8 Relations with Stakeholder. NORTHRAIL recognizes the rights of stakeholders established by law or through mutual agreements, and encourage active cooperation between NORTHRAIL and its stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.

2.8.1. Recognition and respect of stakeholders' rights established by law or through mutual agreements. Recognizing the vital contribution of its stakeholders, NORTHRAIL shall ensure that stakeholders have access to relevant, sufficient and reliable information on a timely and regular basis.

2.8.2. Report on Stakeholder Relations. NORTHRAIL shall communicate with investors, stakeholders and the public at large on their stakeholder policies and provide information on their effective implementation. NORTHRAIL shall allow its stakeholder reports to be independently scrutinized in order to strengthen their credibility.

2.8.3. Development, Implementation and Communication of Compliance Programs for Internal Codes of Ethics. The Board shall apply high ethical standards in the organization with checks and balances that will ensure the corporation is protected from deviation from these standards in the course of the interaction of business considerations with political and public policy ones. NORTHRAIL shall develop an internal code of ethics that would give clear and detailed guidance as to the expected conduct of all employees and disciplinary measures for non-compliance therewith. The internal code of ethics should include guidance on procurement processes, as well as develop specific mechanisms protecting and encouraging stakeholders, and particularly employees, to report on illegal or unethical conduct by corporate officers.

2.9 Disclosure and Transparency NORTHRAIL shall continue to enhance disclosure and transparency and impose a duty of loyalty of Board Members. Timely and accurate disclosure shall be made on all material matters regarding NORTHRAIL, including its financial situation, performance, ownership, and governance.

2.9.1. Disclosure on Material Information. NORTHRAIL shall make a disclosure on, among others, the following material information:

2.9.1.1. Objectives and their fulfillment. Corporate objectives shall be made clear to all stakeholders, investors and the general public. NORTHRAIL shall report on how it fulfills its objectives by disclosing key performance indicators.

2.9.1.2. Material risk factors and measures taken to manage such risks. NORTHRAIL shall establish sound internal risk management systems to identify, manage, control and report on risks. Appropriate disclosure by NORTHRAIL of the nature and extent of risk incurred in their operations shall be made. Public-Private partnerships shall also be adequately disclosed as such ventures are often characterized by transfers of risks, resources and rewards between public and private partners for the provision of public services or public infrastructure and may consequently induce new and specific material risks.

2.9.1.3. Financial assistance, including guarantees, received from the government and commitments made on behalf of NORTHRAIL. To give a fair and complete picture of NORTHRAIL’s financial situation, the mutual obligations, financial assistance or risk sharing mechanisms between the government and NORTHRAIL shall be appropriately disclosed. Disclosure shall include details on any government grant or subsidy received by NORTHRAIL, any guarantee granted by the government to NORTHRAIL for its operations, as well as any commitment that the government undertakes for and on behalf of NORTHRAIL.

2.9.1.4 Material transactions with related entities. Transactions between NORTHRAIL and related entities, such as an equity investment of one government owned or controlled corporation in another shall be disclosed. Reporting on transactions with related entities shall provide all information that is necessary for assessing the fairness and appropriateness of these transactions.

2.9.1.5 Information on Financial and Operating Results. NORTHRAIL shall also disclose information on its financial and operating results; the remuneration policy for members of the Board and key executives, and information about board members, including their qualifications, the selection process, other company directorships and whether they are regarded as independent by the Board; related party transactions; issues regarding employees and other shareholders; and governance structures and policies and the process by which they are implemented.

2.9.2 Electronic Disclosure of Information. NORTHRAIL shall maintain a website and post therein for unrestricted public access:

2.9.2.1. Institutional Matters:

2.9.2.1.1. The latest version of the NORTHRAIL Charter.

2.9.2.1.2. List of Subsidiaries and Affiliates.

2.9.2.1.3. Government Corporate Information Sheet (GCIS) as mandated by the GCG in its Memorandum Circular No. 2012-01.

2.9.2.2. Board and Officers:

2.9.2.2.1. Complete Listing of the Directors and Officers with attached resume and their membership in Board Committees.

2.9.2.2.2. Complete compensation package of all the board members and officers, including travel, representation, transportation and any other form of expenses or allowances.

2.9.2.2.3. Information on Board Committees and their activities.

2.9.2.2.4. Attendance Record of Directors in Board and Committee Meetings.

2.9.2.3. Financial Matters:

2.9.2.3.1. Their latest annual audited financial and performance report within thirty (30) days from receipt of such report.

2.9.2.3.2. Audited financial statements in the immediate past five (5) years.

2.9.2.3.3. Quarterly, annual reports and trial balance.

2.9.2.3.4. Current Corporate Operating Budget (COB).

2.9.2.3.5. Local and foreign borrowings.

2.9.2.3.6. Government subsidies and net lending.

2.9.2.3.7. All borrowings guaranteed by the government.

2.9.2.3.8. Any material risk factors and measures taken to manage such risk.

2.9.2.3.9. Performance Evaluation System (PES).

2.9.2.4. Governance Matters:

2.9.2.4.1. Charter Statement/Mission-Vision Statements.

2.9.2.4.2. Performance Scorecards and Strategy Map.

2.9.2.4.3. Organizational Chart.

2.9.2.4.4. Manual of Corporate Governance.

2.9.2.4.5. CSR Statement.

2.9.2.4.6. Such other information or report that the Commission on Audit (COA), the Governance Commission of GOCCs (GCG), or the Government Procurement Policy Board (GPPB) may require.

2.9.3. Development of Internal Audit Procedures. NORTHRAIL shall develop efficient internal audit procedures and establish an internal audit function that is monitored by and reports directly to the Board and its Audit Committee.

2.9.4. Conduct of an independent external audit based on international standards. NORTHRAIL may opt to undergo a periodic independent external audit based on international standards.

2.9.5. Observance of the highest quality accounting and auditing standards. NORTHRAIL shall take all measures to be as transparent as publicly listed companies. It shall disclose financial and non-financial information according to high quality internationally recognized standards.

2.10 Communication

2.10.1. Communication within the organization. The Board and Management shall ensure the thorough dissemination of this Manual to all employees and third parties, and shall enjoin the development of organizational policies and processes consistent with the GOCC Code of Corporate Governance and this Manual.

2.10.2. Education on the Code of Good Public Corporate Governance. Funds shall be allocated for the conduct of an orientation program to operationalize this Corporate Governance Manual and for the continued education and training of all officers and employees to ensure compliance with the GOCC Code of Corporate Governance and this Manual.

2.11 Penalties for Non-Compliance

2.11.1. Table of Penalties. To ensure faithful compliance with the GOCC Code of Corporate Governance and the strict adherence to and implementation of the provisions of this Manual, the following penalties shall be imposed, after due notice and hearing, on the Members of the Board and officers who are found liable for any violation, in addition to such penalties as may have been specifically provided:

2.11.1.1. The penalty of reprimand shall be meted for the first infraction;

2.11.1.2. The penalty of suspension from office shall be imposed upon the offender for the second infraction. The duration of suspension, which shall be determined by the Board, shall be commensurate to the gravity of the violation;

2.11.1.3. The penalty of removal from office, in the case of an appointive director, or dismissal from service, in the case of an officer of Management, shall be imposed on the offender for the third infraction. In cases where the offender is a Member of the Board, the Board shall recommend the imposition of the penalty to the GCG.

The Board may, at its discretion, constitute a committee or appoint a Member or officer to conduct a fact-finding investigation or a hearing for this purpose. The results of the investigation and/or hearing shall be submitted to the Board for its consideration and approval.