Atty. Waldo Q. Flores

January 30, 1996 Atty. Waldo Q. Flores Philippine National Bank PNB Financial Center Roxas Blvd.,Pasay City S i r : This refers to your letter dated January 23, 1996 inquiring whether the following proposed provision of the PNB's By-laws is legally allowable. "Executive Committee. There shall be an executive Committee to be chaired by the Bank President and to be composed of the President of the Bank, at least four (4) other directors, and such other members who need not be directors as the Board may from time to time designate, provided that at least a majority of the members of the Executive Committee shall be members of the Board of Directors. In the interim between meetings of the Board of Directors, the Executive Committee shall perform such duties as the Board may confer upon it in accordance with law and these By-Laws." Further, you would like to inquire on the extent of authority which may be delegated to the Executive Committee. The Commission interposes no objection to the above proposed By-Law provision, provided, however that it does not violate any provision of the General Banking Act and pertinent rules and regulations implemented by the Bangko Sentral. Regarding the extent of the powers of the Executive Committee, the Corporation Code provides: "SECTION 35. Executive Committee . The by-laws of a corporation may create an executive committee, composed of not less than three members of the board, to be appointed by the board. Said Committee may act by the majority vote of all its members, on such specific matters within the competence of the board, as may be delegated to it in the by-laws or on a majority vote of the board, EXCEPT with respect to: (1) approval of any action for which shareholders' approval is also required; (2) the filing of vacancies in the board; (3) the amendment or repeal of by-laws or the adoption of new by-laws; (4) the amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable; and (5) a distribution of cash dividends to the shareholders." (Emphasis supplied) The enumeration of excepted matters in the above provision upon which the Executive Committee cannot act upon implies that it can function as the Board itself in all other matters. Thus, any delegated power, other than those enumerated above, will be legally recognized for as long as it would not result to undue abdication by the Board of the responsibilities and authority vested upon it by the Corporation Code. However, it has to be emphasized that blanket authority to act cannot be given to the Executive Committee. The above provision requires that matters on which the Executive Committee could act upon should be specified either in the by-laws or by the Board. Accordingly, subject to the specific limitations which cannot be delegated to the Executive Committee under Section 35 of the Corporation Code, a duly constituted Executive Committee has the authority of the Board to the extent specifically provided in the resolution of the Board of Directors or in the by-laws. Take note however that while the Executive Committee may be authorized to manage the day to day operation of the business of the corporation, the business affairs thereof shall be controlled, and all corporate powers shall be exercised under the ultimate direction of the Board of Directors. llcd Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner