SEC crafts rules to prevent conflict of interest

MANILA, Philippines - Corporate regulators are crafting a policy to prevent conflict of interest in government officials acting as independent directors in publicly listed companies.

The Corporation Finance Department of the Securities and Exchange Commission (SEC) requested the en banc for a policy guidance on whether public officials are qualified to be independent directors of publicly listed companies.

This stemmed from SEC’s observation that a number of publicly listed firms enlisted current government officials as independent directors, said Gerard M. Lukban, commission secretary of the SEC.

“It can be gleaned from (Republic Act 6713) Code of Conduct and Ethical Standards for Public Officials and Employees that public officials are absolutely prohibited from holding positions in private enterprises due to conflict of interest,” SEC said.

A conflict of interest occurs when a government employee is a substantial stockholder, a board member, a corporate officer or a partner in a partnership.

However, Memorandum Circular 17 of the Office of the President dated Sept. 4, 1986 allowed government officials to engage in outside activities.

Government officials wanting to hold posts in private companies should secure a written permission from the head of his department or agency, the memorandum stated.

“If an employee is granted permission to engage in outside activities, the time so devoted outside of office hours should be fixed by the chief of the agency to the end that will it will not impair in any way the efficiency of the other officer or employee,” it added.

The memorandum also allowed government officials to invest in companies and engage in outside activities “as long as this will not involve any real or apparent conflict between his private interest and public duties.”

Lukban said the SEC en banc will come up with a resolution to adopt a new policy within the year, which will be in consultation with the Governance Commission for Government Owned and Controlled Corporations.