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THE SECURITIES and Exchange Commission (SEC) seeks to ensure that independent directors <\/span> of publicly traded firms possess security of tenure.<\/p>\n SEC Chair Francisco Ed. Lim informed journalists on Friday that they are presently exploring the possibility of releasing a new memorandum circular on corporate governance, which will include provisions for the security of tenure for independent directors.<\/p>\n Mr. Lim stated that independent directors ought to enjoy security of tenure throughout their nine-year term, allowing them to voice concerns regarding company policies without the anxiety of dismissal from their position.<\/span><\/p>\n \u201cWe\u2019re still deliberating on the matter because what I envision is a new memorandum circular focused entirely on corporate governance issues, which will entail aspects like the terms of independent directors and their security of tenure\u2026 What we have in mind is security of tenure within that nine-year framework,\u201d he remarked.<\/span><\/p>\n \u201cIf you\u2019re an independent director and you advocate for what you believe is correct, yet it contradicts the wishes of the controlling shareholders, you\u2019re jeopardizing your tenure,\u201d he added. <\/span><\/p>\n An independent director is an individual on a company\u2019s board who does not hold any significant ties to the company, its parent, subsidiaries, or affiliates, and is free from management influence.<\/span><\/p>\n Per the Code of Corporate Governance for Publicly-Listed Companies issued in 2016, the SEC advised that the board should comprise at least three independent directors or that they constitute a minimum of one-third of the board.<\/p>\n Mr. Lim expressed that he also intends to rigorously apply the nine-year term limit for independent directors according to existing regulations, rather than permitting companies to apply for exemptions.<\/p>\n \u201cIn some instances, what occurs is that they (companies) approach the SEC to request an exemption from the nine-year term limit. This is why certain independent directors surpass the nine-year limit. I aim to enforce (the term limit),\u201d he noted.<\/p>\n \u201cThere is no monopoly on talent. There is talent available in the market.\u201d<\/p>\n According to the Code of Corporate Governance, independent directors can serve a maximum cumulative term of nine years. However, the board must provide compelling justification and obtain shareholder approval if an independent director\u2019s term is extended beyond nine years.<\/span><\/p>\n \u201cIf the current independent directors genuinely wish to assist, they can become independent directors for other companies, particularly smaller firms that could benefit from their knowledge and expertise. The SEC might facilitate this by establishing a term limit for independent directors,\u201d Mr. Lim stated.<\/span><\/p>\n Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort remarked that the SEC\u2019s proposal would further enhance corporate governance standards within the nation.<\/span><\/p>\n \u201cThis will aid in maintaining checks and balances on significant decisions, while preventing groupthink,\u201d he conveyed in a Viber message. <\/span><\/p>\n \u201cThis will also assist in aligning with the evolving regulatory environment regarding higher environmental, social, and governance standards,\u201d he added.<\/p>\n DIALOGUES WITH GOCC
\n<\/b>Conversely, Mr. Lim mentioned that the SEC has been engaging with the Philippine Stock Exchange (PSE) regarding potential Philippine government-owned and -controlled corporations (GOCC) that may be listed on the stock market. <\/span><\/span><\/p>\n