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  • IV. Board Committees and Oversight Directors

To aid in ensuring compliance with the principles of sound corporate governance, the Board may create such committees, as it may deem necessary to support it in the performance of its functions and in accordance with the Articles of Incorporation and By-laws and to aid in good governance.

4.1. Regular Committees. As a minimum, however, the Board shall be supported by the following regular committees:

4.1.1. Audit Committee. There shall be an Audit Committee composed of at least three (3) members. An independent board member, if any, shall chair the Audit Committee. Each member shall have an adequate understanding of accounting and auditing principles in general and of the NORTHRAIL's financial management systems and environment in particular.

The Audit Committee is expected, through the provision of checks and balances, to bring positive results in supervising and supporting the management of the corporation. It shall have the following particular duties and responsibilities:

4.1.1.1 Exercise oversight over NORTHRAIL’s internal auditors.

4.1.1.2 Be responsible for the setting-up of an internal audit department and consider the appointment of an internal auditor.

4.1.1.3 Review and approve audit scope and frequency and the Annual Audit Plan of the Internal Audit Services Office (IASO).

4.1.1.4 Work with the Head of IASO to monitor and evaluate the adequacy of NORTHRAIL’s internal control systems.

4.1.1.5 Review the findings of IASO on NORTHRAIL’s periodic financial statements including (i.) any change in accounting policies and practices; (ii.) major judgmental areas; (iii.) significant adjustments resulting from audit; (iv.) going concern assumptions; (v.) compliance with accounting standards; (vi.) compliance with tax, legal and regulatory requirements.

4.1.1.6 Establish and identify the reporting line of the Chief Audit Executive so that the reporting level allows the internal audit activity to fulfill its responsibilities. The Chief Audit Executive shall report directly to the Audit Committee functionally. The Audit Committee shall ensure that the internal auditors shall have free and full access to all the company’s records, properties and personnel relevant to the internal audit activity and that the internal audit activity should be free from interference in determining the scope of internal auditing examinations, performing work, and communicating results, and shall provide a venue for the Audit Committee to review and approve the annual internal audit plan.

4.1.1.7 Confirm and assure the independence of the internal auditors.

4.1.2. Governance, Nominations and Remunerations Committee. There shall be a Governance, Nominations and Remunerations Committee composed of at least three (3) members and chaired by the Chairman of the Board. Each member shall have experience in the fields of business, economics, finance and investment, management, and/or marketing. The committee shall have the following particular duties and responsibilities:

4.1.2.1. Oversee the periodic performance evaluation of the Board and its committees and Management; and conducts annual self-evaluation of their performance.

4.1.2.2. Decide whether or not a Director is able to and has been adequately carrying out his/her duties as director bearing in mind the director’s contribution and performance.

4.1.2.3. Recommend to the Board regarding the continuing education of Directors, assignment to Board Committees, succession plan for the Executive Officers, and their remuneration commensurate with corporate and individual performance;

4.1.2.4. Recommend the manner by which the Board’s performance may be evaluated and propose an objective performance criteria to be approved by the Board. Such performance indicators shall address how the Board will enhance long-term shareholder’s value;

4.1.2.5. Install and maintain a process to ensure that officers to be nominated or appointed shall have the qualifications and none of the disqualifications mandated under the law, rules and regulations;

4.1.2.6. Review and evaluate the qualifications of all persons nominated to positions in NORTHRAIL which require appointment by the Board;

4.1.2.7. Recommend to the GCG nominees for the shortlist in line with the GOCC’s Board composition and succession plan;

4.1.2.8. Develop recommendations to the GCG for updating the Compensation Position Classification System (CPCS) and ensuring that the same continues to be consistent with NORTHRAIL’s culture, strategy, control environment, as well as the pertinent laws, rules and regulations;

4.1.2.9. Assess investment proposals with terms, issues and conditions, which will require study for formulation of policies for approval by the Board.

4.1.2.10. Establish guidelines for the formulation of the annual and supplemental budgets of NORTHRAIL for the consideration of the Board.

4.1.2.11. Perform a periodic in-depth review of the operating budget, which includes: Operation Expenses (OPEX); Personal Services (PS); Maintenance and Other Operating Expenses (MOOE); and Capital Expenditures (CAPEX).

4.1.2.12. Exercise oversight function in the fiscal management of resources.

4.1.2.13. Formulate guidelines for the investment of corporate funds and conduct periodic review to determine viability and profitability of investments and/or placements.

4.1.2.14. Determine the necessity of incurring loans or other financial obligations.

4.1.2.15. Conduct an in-depth review of the financial terms of all loan requirements and financial obligations.

4.1.2.16. Conduct monthly review of NORTHRAIL’s financial statements.

4.1.2.17. Validate financial statements prior to the submission by Management to the Board.

4.1.2.18. Recommend changes in accounting policies, where appropriate, in accordance with the pronouncements of regulatory bodies.

4.1.2.19. Assist the Board of Directors in the conduct of studies, policy formulation, and monitoring of the implementing guidelines pertaining to issues, concerns and problems that affect organization and personnel.

4.1.2.20. Coordinate with Management in addressing specific key result areas (KRAs) and adherence to existing policies on such matters as personnel recruitment, performance evaluation standards and processes, assignments, promotions and entitlements.

4.1.2.21. Pursue broad organizational goals such as the promotion of meritocracy, the development of teamwork, and the enhancement of morale among personnel.

4.1.2.22. Review and approve the Annual Training Program of the Human Resources Unit (HRU).

4.1.2.23. Conduct periodic review of the organizational structure to ensure that it remains responsive to the NORTHRAIL goals, objectives and strategies.

4.1.2.24. Oversee the development and periodic update of a Human Resources Development or Personnel Manual to ensure documentation and enforcement of as well as compliance with personnel policies, guidelines on employee benefits, and code of conduct for officers and employees.

4.1.2.25. Review and evaluate the qualifications of all persons nominated to the Board as well as those nominated to other positions requiring appointment by the Board and provide assessment on the Board's effectiveness in directing the process of renewing and replacing Board members.

4.1.2.26. Establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of corporate officers and directors, and provide oversight over remuneration of senior management and other key personnel ensuring that compensation is consistent with the corporation's culture, strategy and control environment.

4.1.3. Legal and Risk Management Committee. There shall be a Legal and Risk Management Committee composed of at least three (3) members. The Chairman of the Committee must possess an adequate understanding of Philippine Law and the legal system. The committee shall evaluate, review and monitor legal and risk management policies, structures and processes as defined by Management. It shall also recommend measures to address, mitigate, minimize or eliminate risks affecting the organization. In particular, the committee shall:

4.1.3.1. Monitor the creation of a risk management structure for the organization by Management.

After the creation of the structure, the committee shall evaluate, review and monitor risk management policies, structures and processes as defined by Management. It shall also recommend measures to address, mitigate, minimize or eliminate risks affecting the organization.

4.1.3.2. Review, evaluate and monitor policy-level studies, risk and threat assessments and other reports provided by Management for consideration of the Board.

4.1.3.3. Assess information periodically provided by Management on risk exposures and risk management activities.

4.1.3.4. Review, evaluate and monitor Management’s researches and the preparation of analytical materials on probable causes, explanations and possible solutions to risks that the corporation faces.

4.1.3.5. Review and endorse to the NORTHRAIL Board position papers and key policy issues prepared by Management for use of any branch of the government.

4.1.3.6. Review, monitor and recommend measures on legislative proposals affecting the organization.

4.1.3.7. Assess the Annual Planning Program of NORTHRAIL as it relates to risk management.

4.1.3.8. Provide oversight over the senior management's activities in managing credit, market liquidity, operational, legal and other risks of the corporation.

4.2. Special Committees. When necessary, the Boards shall set up special committees to support the Board in the performance of its functions. In the creation of a special committee, the Board should define the cases in which the said committee may be considered by using a combination of criteria. It is essential that special board committees are chaired by a non-executive member and include a sufficient number of independent members. The existence of special board committees shall not excuse the Board from its collective responsibility for all matters. Special board committees shall have written terms of reference that define their duties, authority and composition. Special board committees shall report to the Board and the minutes of their meetings shall be circulated to all board members.

4.3. Ad Hoc Committees. The Board may also set up Ad Hoc Board Committees to address particular issues affecting NORTHRAIL, which may include operational matters. Such issues may encompass operational decisions that are specifically delegated by the Board. For this reason membership in the committee may include representatives of Management. Ad Hoc Committees are temporary in nature and shall be dissolved after they have served the purpose specified for their creation.

4.3.1 Executive Committee. The President and four members of the Board of Directors, to be designated by the Chairman from time to time, shall constitute an Executive Committee and shall, in the interim between meetings of the Board of Directors, perform such duties as the Board of Directors may confer upon in accordance law and the NORTHRAIL’s by-laws.

4.4. Per Diems for Committee Meetings. The maximum per diem per committee meeting attended provided to Members of the Board of Directors shall be based on the classification approved by the GCG and shall be at most sixty percent (60%) of the amount set per Board Meeting but not to exceed the maximum amount corresponding to the classification. (Sec. 10, E.O. No. 24, Series of 2011)

4.5. Oversight Directors. Certain occasions may arise when the Board, through the Chairman, may deem it necessary and/or convenient to tap a Board Committee or a particular Member of the Board to oversee a specific project or function. This is in line with Corporate Directorship principles of availing of specific expertise and developing niches of contributions of Directors. A Member of the Board assigned to oversee a specific project or function shall provide consultancy-type advice and service, analyze information and recommend to the Board decisions/courses of action to be taken.

Such assignments are mere extensions of corporate governance and oversight functions of the Board of Directors and do not constitute the grant of management authority and functions.

4.6. Reporting and Coordination. Board Committees and Oversight Directors report directly to the Board. This reporting function is inherent in the mandate of each committee. Comments and/or actions taken by management shall be incorporated in the Board Committee report to the Board.

In the Conduct of their functions, the Board, its Committees or Oversight Directors may require specific information, conduct visits to facilities, hold discussions with Management officials and rank-and-file, and consult outsiders (professional experts, Local Government Units (LGUs), National Government Organizations (NGOs), etc.) Accordingly, the Board, its Committees or Oversight Directors shall liaise with Management with whom they may discuss functional concerns and tasks, preliminary findings and recommendations. As a rule, Board Committees or Oversight Directors shall inform the Office of the President and the Board Secretariat when undertaking activities involving internal affairs with a view to facilitate coordination with units or offices concerned. The Board Secretariat shall be responsible for following-up arrangements with the latter, as required.

4.7. Support Staff. A Technical Working Group (TWG) and Secretariat shall be permanently assigned to each Board Committee. The composition and membership of said TWG shall be identified by the respective Committees. Members of management and other NORTHRAIL employees may be called upon by the Board Committees as may be necessary to act as part of the TWG. The Board Secretariat shall likewise serve as the committee secretariat.