SharePhil pushes SEC authority over independent directors

MANILA, Philippines - The Shareholders’ Association of the Philippines (SharePhil), a group of minority shareholders in the country, is proposing changes in the Corporation Code that would allow corporate regulators to prescribe requirements for independent directors as part of overall efforts to promote good corporate governance.

“There is an ongoing effort to amend the Corporation Code, which includes provisions on independent directors…We are proposing to include a provision expressly granting our regulators the power to prescribe requirements for independent directors and adopt international best practices on good corporate governance which, in its sound discretion, are best suitable for the country,” SharePhil president Francis Lim said.

Lim was reacting to the position pushed by former chief justice Artemio Panganiban, who currently serves as independent director of various listed companies including San Miguel Corp.

In a recent forum, Panganiban said agencies like the Securities and Exchange Commission (SEC) have no authority to prescribe term limits, age limitation and maximum number of directorships for independent directors.

Panganiban said this would amount to administrative legislation or “usurpation of legislative powers, which is prohibited under our constitutional separation of powers.”

However, Lim said the SEC is expressly granted by the Securities Regulation Code (SRC) the power to implement its provisions.

“Now, the SRC determines the independence of an independent director not only in terms of his ownership or professional affiliation but also in terms of other relationship with the corporation or its owners, which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director,” Lim said.

He said the SRC does not specify in detail what “other matters” would interfere with their independent judgment.

“Therefore, as the implementing agency for the SRC, the SEC, in the exercise of its sound judgment, can determine what these other matters are. The determination of such matters (such as long standing relationship) goes into the wisdom or best business judgment of the administrative agencies, which, in my opinion, cannot be interfered with by our courts of law in the absence of grave abuse of discretion,” Lim said.