Board Processes

To ensure that the Board is adequately prepared and informed of the meeting’s purpose, relevant meeting materials shall be distributed to the board at least five business days before the relevant meeting.

The Corporate Secretary ensures that the Board of Directors received adequate and timely information before meetings and serves as a legal adviser to the directors on their responsibilities and obligations. Mr. Solomon M. Hermosura assumed the post of AREIT’s Corporate Secretary in 2019.

The directors shall be elected by the Corporation’s stockholders entitled to vote at their annual meeting in accordance with the By-laws and the rules of procedure for annual meeting of stockholders. Pursuant to the Corporation Code, any shareholder, including minority shareholders, shall have the right to nominate candidates to the Board. The list of names of the nominees to the Board, together with the written consent of the nominees, shall be filed and submitted to the Nomination Committee through the office of the Corporate Secretary at least thirty (30) business days prior to the date set for the annual meeting of stockholders wherein they will be elected.

For the election of directors, it is necessary for one-half plus one of the outstanding shares of stock to be present or represented. No person shall be elected nor be competent to hold the office of director unless at least one (1) share of stock of the Corporation shall stand in his name in the books of the Corporation at the time of his election.

The election of directors shall be by ballot and each stockholder may vote such number of shares he owns for as many persons as there are directors to be elected or he may accumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute his votes on the same principle among as many candidates as he may see fit, provided that the total number of votes cast by him shall not exceed the number of shares owned by him multiplied by the whole number of directors to be elected.

The Committee of Inspectors of Proxies and Ballots appointed by the Board shall supervise the election of directors. No candidate for the office of director maybe a member of the Committee. Directors shall hold office for the term of one (1) year or until their successors shall have been elected and qualified, in accordance with the By-Laws.

The Company institutes a plan of succession that formalizes the process of identifying, training and selection of successors in key positions in the Corporation. The Board of Directors prioritizes senior officers from within the organization. Strong candidates are usually given expanded roles for a few years prior to assuming a higher post. In the event that the Board opts to hire externally, the Human Resource Department and accredited executive search firms are tasked to source potential candidates.

It is the responsibility of each director to promote the best interest of the Corporation. Therefore, in making decisions, the directors should only pursue the interest of the Corporation, and must not consider their own personal advantage. Each director shall disclose any conflict of interest, annually through the Ayala Land Disclosure Form. A director with any material conflict of interest that has been determined to be permanent in nature shall be disqualified from the Board.

Notwithstanding the precautions set by the annual disclosure of conflict of interest, each director is required to abstain from participating in the discussion of, and from voting on, any matter where he is in conflict of interest at any point during the course of his service.

In line with the insider trading policy of the Corporation, each director is required to notify the Board at least one day before dealing in the shares of stock in the Corporation. No person shall qualify or be eligible for nomination or election to the Board of if he is engaged in any business which competes with or is antagonistic to that of the Corporation in accordance with the Corporation’s By-laws.

At least once a year, the non-executive directors meet without any executives present. Directors shall keep confidential all the information contained in the confidential reports or discussions for a period of at least two years. They shall also ensure that all persons who have access to the same information on their behalf shall likewise comply with this rule.

The personal interest of directors, key officers and employees should never prevail over the interest of the Company. If an actual or potential conflict of interest should arise on the part of directors, it should be fully disclosed and the concerned director should not participate in the decision-making. If a director has an interest in a matter under consideration by the board, then the director should not participate in those discussions and the board should follow any further appropriate processes. Individual directors should be conscious of shareholder and public perceptions and seek to avoid situations where there might be an appearance of conflict of interest.

The Ayala Land Internal Audit has aligned the policies on conflict of interest of Ayala Land with the subsidiaries and affiliates to facilitate a group-wide implementation. The amended group-wide policy will continue to require strict compliance by all employees to file their Annual Business Interests and Related Party Disclosure forms with their respective Human Resources Division which will then be submitted for consolidation and filing. IAD will then review the disclosures and conduct audit to check compliance.

Each AREIT independent director is entitled to receive a reasonable per diem allowance for attendance at each meeting of the Board of Directors. Any additional compensation, other than per diems, shall be subject to stockholders’ approval.

Pursuant to the REIT Act, the total annual compensation of all directors and officers of the company shall not exceed 10% of the net income before regular corporate income tax of the company during the immediately preceding taxable year and shall be disclosed in accordance with the relevant rules and regulations.

Each independent director received a fixed per diem of P40,000 for every board meeting attended, and a fxied per diem of P20,000 for every committee meeting attended. This remuneration was approved during the 2019 Annual Stockholders’ Meeting.

No director, in his or her personal capacity, was contracted and compensated by the company for services other than those of a director. Any additional compensation, other than per diems to be given to members of the Board of Directors shall be subject to stockholders’ approval. AREIT has no other arrangement regarding the remuneration of its directors and officers aside from those stated in this section.

AREIT officers and executive directors are seconded from Ayala Land and thus do not receive any compensation, salary or per diem from AREIT. The compensation of these officers, long-time employees of Ayala Land, are paid by Ayala Land.

The total compensation of the CEO and the four most highly compensated officers is disclosed in the Definitive Information Statement (DIS) sent to all shareholders. The total annual compensation reported are paid by Ayala land. Said amounts include the basic salary and variable pay, such as performance-based cash bonuses.

The Internal Audit Group provides AREIT with independent and objective assurance and advisory services aimed at adding value and improving the organization’s operations. It implements an effective system of internal control that ensures the integrity of the financial reports and protection of the assets of the company for the benefit of all shareholders and other stakeholders.

It provides the board, management, and the stockholders and other stakeholders with reasonable assurance that the company’s key organizational and procedural controls are effective, appropriate, and complied with. It also reviews, audits, and reports on, among others, the effectiveness of the system of organizational controls, considering the nature and complexity of the busienss and the business culture; volume, size and complexity of transactions; degree of risk; degree of centralization and delegation of authority; extend and effectiveness of information technology; and extend of regulatory compliance.

The company continues to improve the internal audit function by benchmarking against best practices.

On February 24, 2021, AREIT appointed Ms. Rowena P. Libunao as its Chief Audit Executive.

Careful attention is given to ensure that there is independence and diversity, subject to the possession of the necessary knowledge, abilities, and experience determined by the board as necessary for it to properly perform its functions. Collectively, the board possesses the required knowledge, skills, competencies, and experience in general business, real estate, industry, law, and finance to properly perform its duties.

The Board regularly reviews its composition considering the evolving requirements of the company and best practices in corporate governance, taking into consideration the benefits of a diverse and balanced board. To ensure that optimal decision-making is achieved, the Board gives careful attention to reviewing its composition. The Board strives and shall be composed of at least two (2) female directors. Further, to ensure diversity, nominees to the Board shall be selected based on merit, and consider business experience, age, gender, ethnicity, culture, skills, competence, and knowledge. Four (4) out of the six (6) non-executive and independent directors have prior working experience in real estate and investments, finance, or business management, areas where the company operates in. The board members’ diverse professional backgrounds and expertise facilitate the effective execution and oversight of corporate governance in AREIT.

AREIT requires all board members to participate in continuing professional education. Moreover, new directors undergo an orientation program to ensure they have all the information they need to fulfill their duties and responsibilites. The orientation program typically consists of a presentation of AREIT’s operations, business performance, and financial results, as well as a discussion of disclosure obligations of directors, conflict-of-interest situations, relevant governance issues, and an optional tour of the company’s properties.

On October 3, 2023, all of AREIT’s directors and officers attended the training program, “The Board’s Agenda 2023: Accelerating Ambition through Action: Charting the Transition to Net Zero” organized by the Institute of Corporate Directors.

Further, AREIT’s officers participate in various training programs provided by the Ayala Land Group including trainings on corporate governance, business management, and further professional development. These programs and officers and directors’ participation ensures that directors and officers are updated on latest business trends, issues, and most recent information that would guide them in making informed decisions in the best interest of the company and its stakeholders.

AREIT’s commitment to good governance and to ensure continued improvement in performing its governance functions, the Board conducts an annual self-assessment of its performance, including the performance of the Chairman, individual members, and committees. The exercise evaluates the Board’s performance and identifies areas for improvement. Each director is expected to assess themselves and the Board and its commitees, through a questionnaire that covers a broad range of topics from governance, management, composition, role, compensation, management performance, overall perception, and individual performance.

The Chief Compliance Officer (CCO) conducts the tall and sends the results to the Corporate Secretary for presentation and action. The CCO likewise regularly reviews the questionnaire and ensures its relevance. The Board and Committee self-assessments are vital for improving corporate governance practices and ensures that the Board remains effective and accountable.

To strengthen the objectivity of the assessment, the Board engages an external facilitator to conduct the process every three years. The external facilitator can be an independent party such as, but not limited to, a consulting firm, an academic institution, or a professional organization.

All employees of AREIT, Inc. are seconded from Ayala Land and receive no compensation, salary or per diem from AREIT.

The Sponsor provides compensation and benefits to the seconded employees following practices as mandated by national labor laws and its own performance incentives program. The company rejects any form of forced or compulsory labor. All regular employees receive life insurance, in-patient and out-patient health coverage, disability and invalidity coverage, retirement benefits, and medical allowances. Project employees are provided with heath insurance coverage and are entitled to service incentive leaves and overtime pay.

The Sponsor also provides variable pay such as performance-based incentives directly linked to an individual’s key deliverables established at the start of the year.