THE SECURITIES and Exchange Commission (SEC) has mapped out a new corporate governance (CG) framework, which includes reforms such as restricting the tenure of independent directors to nine years, implementing board diversity and adopting a “whistle-blowing” policy.
The SEC said the proposed whistle-blowing policy will allow employees and other stakeholders to freely communicate their concerns without fear of any retribution or repercussion.
“Companies should refrain from discriminatory or disciplinary actions against employees or other stakeholders. Instead, they should encourage and protect them. Protection of whistle-blowers should emanate directly from the highest level of the corporation,” it said.
The proposal is part of the draft framework, which seeks to raise the governance bar for local corporations and put them on par with best practices in the region.
It has been posted by the SEC online to draw public feedback. Once finalized, the new blueprint is targeted for implementation within the next five years.
On restricting the tenure of independent directors, the corporate regulator noted that in other jurisdictions within the Association of Southeast Asian Nation, the recommended best practice is a cumulative term of up to nine years.
It said this period would allow them to understand the business well enough to contribute in boardroom discussions, test strategies of the CEO and management and create long-term shareholder value.
Based on current data, the SEC said there are still 125 independent directors in the Philippines serving more than nine years in the same board.
On the proposal for board diversity, the SEC said having a diversity of perspectives and proven experience in building relevant businesses as well as deep functional knowledge are critical.
“In this regard, importance must be given to having a diverse board. Board diversity does not merely refer to gender diversity, it could also mean diversity in age, ethnicity, culture, skills, competence and knowledge. However, much attention is given globally to gender diversity as an important component of inclusive growth,” the SEC said. Doris Dumlao-Abadilla