Monday, June 29, 2009 | MANILA, PHILIPPINES
Corporate News
COMPANIES MUST wait for two years before it can appoint a resigned director as an independent board member, and a year in the case of a person who had helped the board perform its duties, to ensure their "independence," the Securities and Exchange Commission (SEC) has ordered.
In a memorandum circular last Wednesday, the SEC added the two provisions to the seven already stated in the implementing rules and regulations of the Securities Regulation Code (SRC).
It states that a regular director who resigns or whose term ends on the day of the board elections shall only qualify for nomination and election as an independent director after two years.
Meanwhile, those who were appointed chairman emeritus, ex-officio directors and officers or were part of any executive advisory board need a one-year "cooling off" period before being nominated.
Rule 38.2 of the SRC states that firms may not have independent directors who own more than 2% of its shares, is a relative of any of the firm’s officials, substantial shareholders or directors or those acting as representative of other directors, officials or owners.
Persons who are being retained by the company as an adviser, or who had been an executive of the firm at least five years before are also prohibited from being independent directors.
In an interview, SEC Secretary Gerard M. Lukban said the commission decided to the add the "cooling off" provisions to ensure that former company officials are sufficiently insulated from a firm before being nominated as an independent board member.
The recent circular is the fourth one issued by the commission since June 8 in an effort to improve corporate governance practices.
Since then, regulators have approved a new scale of fines that increases penalties for public firms that do not comply with reporting requirements, and resolved to fine listed companies that do not participate in the annual corporate governance survey.
Last week, the SEC has also revised the Corporate Governance Code to make its provisions mandatory instead of recommendatory. — D. G. K. Carreon
http://www.bworldonline.com/BW062909/content.php?src=1&id=045
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