The Securities and Exchange Commission (SEC) will press for similar powers now assigned to the Bangko Sentral ng Pilipinas (BSP) under the newly enacted General Banking Act (GBA).
At the same time, the SEC said companies should adopt a code of corporate governance for members of their board of directors to ensure more responsible governance.
In particular, SEC chairman Lilia Bautista said the corporate watchdog wants to insert in the proposed Revised Securities Act (RSA) still being deliberated in Congress, a provision which authorizes the SEC to fire unfit members of a company's board of directors for committing acts that violate corporation and/or securities laws which as a result, contribute in bringing down a company.
"We do hope to have those powers just like what the BSP has now under the GBA," Bautista said in an interview yesterday at the Open Conference in Corporate Governance and Related Reforms in the Philippines held at the Peninsula Manila.
The GBA under Section 36, which more strictly regulates loans by banks to directors, officers, shareholders, and related interests (DOSRI), provides that no director or officer of any bank may directly or indirectly, for himself or as an agent, borrow from the bank or guarantee or endorse a loan without the written approval of a majority of the bank's board of directors.
In the event of such written approvals, the terms under which DOSRI transactions are consummated must be on terms equal to that granted by the bank to non-related clients. Violations of the DOSRI provisions provide for the removal of an officer or director from his post in addition to penalties imposed.
Bautista said that if the SEC is authorized to exercise a similar function as removing undesirable directors from a company, it will be able to substantially reduce the number of pending cases.
"At the SEC right now, more than 50 percent of the cases are intra-corporate, meaning that the fights are mostly intra-corporate, fights between group of directors against another group, responsibilities of directors, while about three percent of the disputes come from shareholders demanding for their rights to inspect company books," Bautista said.
Bautista added that just like the BSP, the SEC should also have a hand in determining the qualifications of nominees for directorships in companies and to include nominees who do not have hold a position in the company but who are highly-regarded in the business community to ensure a check and balance system.
To ensure better corporate governance practices, Bautista is recommending the adoption of a code of corporate governance by companies.
With investor confidence at its lowest as a result of the series of shocks that hit the country's financial and capital markets, Bautista said good corporate governance is needed for companies to ensure not just their global competitiveness but to lure back investors with the financial muscle to get the country back on its feet.
Bautista said directors should be educated on their responsibilities. She said that directors who place their primary loyalty on the corporation and its shareholders and other stakeholders can lower the risks of abuse, DOSRI and behest loans, insider trading and self-dealing.