The Supreme Court held that department heads specifically named to a board of directors, like the National Power Board (NPB), must personally exercise their judgment and cannot delegate this duty to representatives. This means that resolutions passed by a board without the participation of the specifically designated members, or with improperly delegated authority, are considered void and without legal effect, protecting against potential abuses of power during critical restructuring processes. This ruling underscores the importance of adherence to the law when making crucial decisions that affect many individuals.

Safeguarding Corporate Powers: Can Designees Replace Designated Decision-Makers?

The National Power Corporation (NPC) underwent a significant restructuring following the enactment of the Electric Power Industry Reform Act of 2001 (EPIRA Law). This led to the creation of the National Power Board of Directors (NPB), responsible for overseeing critical changes, including personnel decisions. Specifically, two NPB resolutions, No. 2002-124 and No. 2002-125, directed the termination of NPC employees as part of the restructuring efforts. These resolutions were challenged by the NPC Drivers and Mechanics Association (NPC DAMA) and other employees who argued the resolutions were invalid. The core legal question revolved around whether these resolutions were properly enacted, considering that some board members were represented by alternates during the voting process.

The petitioners asserted that the NPB Resolutions were not passed legitimately because a majority of the duly constituted board members, as outlined in Section 48 of the EPIRA Law, were not present. Only three members—the Secretary of Energy, the Secretary of Budget and Management, and the NPC President—were physically present. The other members sent representatives, which the petitioners argued violated the principle against undue delegation of power. They also pointed out that these resolutions were not endorsed by the Joint Congressional Power Commission or approved by the President of the Philippines, as allegedly required by Section 47 of the EPIRA Law, adding to the contention that the massive layoff of NPC employees would contradict the Constitution’s mandate for promoting employment.

In contrast, the respondents maintained that the NPB Resolutions were valid because the absent board members were adequately represented by their alternates. They contended that Section 48 of the EPIRA Law did not explicitly prohibit board members from authorizing representatives to sign resolutions. The pivotal issue, therefore, was whether NPB Resolutions No. 2002-124 and No. 2002-125 were properly enacted despite the use of representatives by some board members. At the heart of this legal matter lies the principle of **delegation of authority**, and whether the powers conferred upon specific individuals can be further delegated.

The Supreme Court sided with the petitioners. The Court underscored that the EPIRA Law specifically named department heads to compose the NPB, thereby vesting these individuals with the responsibility of exercising their judgment and discretion in managing NPC’s affairs. The court highlighted that in designating these specific individuals as board members, the legislature did so because of their qualifications and acumen. Therefore, these department heads cannot delegate their duties, including the power to vote, since their unique, personal judgment is required for these responsibilities. Delegation of authority cannot be given if the proper execution of the office requires, on the part of the officer, the exercise of judgment or discretion.

An officer to whom a discretion is entrusted cannot delegate it to another, the presumption being that he was chosen because he was deemed fit and competent to exercise that judgment and discretion, and unless the power to substitute another in his place has been given to him, he cannot delegate his duties to another.

In clarifying its stance, the Supreme Court differentiated the present case from scenarios where subordinates assist an officer in exercising their authority. The court clarified that, **judgment and discretion finally exercised are those of the officer authorized by law**. In this case, the resolutions showed that it was indeed the representatives of the secretaries of the executive departments who approved NPB Resolutions No. 2002-124 and No. 2002-125. The Court found this practice to violate the duty of specifically enumerated department heads to exercise their sound discretion when carrying out corporate powers of the NPC. Thus, the Court disregarded the votes cast by the representatives and found that there were not enough votes for adoption.

Ultimately, the Supreme Court declared NPB Resolutions No. 2002-124 and No. 2002-125 void and without legal effect, granting the Petition for Injunction and restraining the respondents from implementing the said resolutions. This decision emphasized the importance of adhering to the legal framework in corporate restructuring, particularly when it involves the rights and welfare of employees.

FAQs

What was the key issue in this case?	The central issue was whether NPB Resolutions No. 2002-124 and No. 2002-125 were validly enacted, given that representatives of some board members participated in the voting.
What is the Electric Power Industry Reform Act of 2001 (EPIRA Law)?	The EPIRA Law, or Republic Act No. 9136, is an act that provides a framework for restructuring the electric power industry, including the privatization of assets of the NPC.
What is the National Power Board (NPB)?	The NPB is the governing body responsible for overseeing the operations and restructuring of the National Power Corporation (NPC). Its composition is defined under Section 48 of the EPIRA Law.
Why did the petitioners challenge the NPB resolutions?	The petitioners challenged the resolutions because they believed that the NPB resolutions were not properly enacted because not all members of the duly constituted board members were present.
What did the Supreme Court decide?	The Supreme Court decided that the NPB resolutions were void because the department heads could not delegate their powers as board members to their representatives.
What does the term “delegation of authority” mean in this context?	Delegation of authority refers to the act of an official entrusting their duties or powers to another person. In this case, it pertains to whether the designated department heads of the NPB could delegate their board membership responsibilities.
Why is it important for department heads to personally exercise their duties as NPB members?	It’s important because the law specifies the individuals who should be responsible in the board because their qualifications and acumen make them fit to the board.
What were the practical implications of this decision?	The decision effectively stopped the implementation of NPB Resolutions No. 2002-124 and No. 2002-125, preventing the planned termination of NPC employees under the restructuring plan and emphasizing the importance of validly enacted corporate action.

In conclusion, this case serves as a vital reminder of the importance of proper procedure and adherence to legal frameworks within corporate governance. It underscores the principle that designated officials cannot freely delegate their powers, especially when those powers involve substantial decision-making with significant implications for individuals and organizations.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: NPC Drivers vs. National Power Corporation, G.R. NO. 156208, September 26, 2006