Mr. Ricardo Victor Marfori

June 3, 1982 Mr. Ricardo Victor Marfori 17 J.S. Torralba Street City of Tagbilaran Dear Mr. Marfori: This refers to your letter dated April 10, 1982 requesting opinion of this Commission on the following queries: 1. Is a general manager/director who was elected president, entitled to director's per diem, president's salary and general manager's salary? prcd 2. Will director's per diem vary from year to year or is it legal for the new set of directors to receive the same amount of per diems as past directors received even if the corporation's income has gone down? 3. What is the proper venue to discipline erring director or officer? 4. Is the act of a director, who was absent during the board of director's meeting which approved the budget of the corporation legal if she makes corrections and amendments of said budget during the next meeting of the board? In reply to your first query, the Corporation Code of the Philippines only provides for payment of compensation and/or per diems to the members of the Board of Directors of stock corporations, to wit: SECTION 30. Compensation of directors . In the absence of any provision in the by-laws fixing their compensation, the directors shall not receive any compensation as such directors, except for reasonable per diems ;Provided, however, That any such corporation (other that per diems) may be granted to directors by the vote of the stockholders representing at least a majority of outstanding capital stock at a regular or special stockholders' meeting. In no case shall the total yearly compensation of directors as such directors exceed ten (10%) percent of the net income before income tax of the corporation during the preceding year. Clearly, any director, whether or not elected as president and/or general manager, is entitled to a director's per diem. Unfortunately, the aforequoted provision does not provide any answer to the last portion of your first query relative to the compensation of officers of a corporation. However, there is no question that the Board of Directors appoints/elects the corporate officers. Ordinarily then and as managers of the corporate affairs and property, it is within the Board's power to fix the salaries of its officers by way of a resolution to that effect. If there is such an authority, a general manager/director elected president may therefore collect the salaries for the offices of president and general manager. The reason is that these two (2) offices have different functions; and it is the look-out of the Board of Directors if they want to entrust the said two(2) positions to one person and pay him twice; provided that the compensation is commensurate with the services rendered. It is a well-settled principle that: ...provisions for compensation to officers should be made in advance. Resolutions of the Board of Directors fixing salaries could have operation only for the future and there could not be any retroactivity in the giving of salaries if any stockholder objects. The law guards against the misapplication of corporate funds which is necessarily prejudicial to the stockholders. (3 Agbayani, Commercial Laws of the Philippines, p. 1831) Relative to your second query, in case there is a provision in the by-laws regarding per diems, it has to be observed by the directors as long as the by-laws has not been amended in accordance with law. In the absence of a provision in the by-laws, the Board is authorized to fix the per diem and therefore vary the amount thereof, provided that the same is reasonable: MR. VILLEGAS. ...Your Honor, does it mean, therefore that if there are no profits that are earned by the company, the board of directors may not give salary to themselves? MR. ABELLO. Correct, Your honor. MR. VILLEGAS. So that the salary of the members of the board ... MR. ABELLO. Except, of course, Mr. Speaker, reasonable per diems in accordance with present law. (Batasan Proceeding, February 28, 1980, emphasis supplied) In answer to your third query, the proper venue to discipline erring officers will depend on whether the suit is civil or criminal. If the suit is civil, it should be the competent court in the place where the principal office of the corporation is located. If the suit is criminal, it should be the proper court in the place where the alleged crime was committed. But, for intra-corporate cases involving the officers and the corporation, the SEC has jurisdiction over the same under P.D. 902-A, as amended. Finally, with regards to your fourth query, it is illegal for a member of a board of directors, who was absent during the board meeting where the budget was approved, to unilaterally make the corrections and amendments on said budget, for the obvious reason that the corporation acts only through its board of directors. The only thing that an absent member can legally do is to place on record his conformity/or disagreement to any previous act or resolution of the board of directors. Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Associate Commissioner