Exchange readies tough rules for Maharlika Board listing

The Philippine Stock Exchange (PSE) has set stricter rules for listed firms that want to join the local bourse’s planned “Maharlika Board.”

Officials said making it harder for listed firms to join the new board, which was scheduled to go online by September, would send the message that the country was serious in its efforts to promote good governance. This is aimed at attracting new investments.

The Maharlika Board will be patterned after Brazil’s Novo Mercado, or a trading board for listed firms that lead in the practice of good corporate governance.

“In terms of trying to replicate the Novo Mercado, the Philippines is the only country that’s trying to have rules that are as stringent as the Novo Mercado,” PSE chairman Hans Sicat said.

Joining the Maharlika Board will be voluntary for listed firms. The PSE hopes companies that join the Maharlika Board will become models in transparency and giving minority shareholders a say in board decisions.

Among the new rules proposed by the PSE include requiring companies to have presidents and CEOs that are not related to their board chairs.

Companies that wish to join the board will also need to have at least 30 percent, higher than the earlier proposed 10 percent, of their shares traded on the local market.

A company’s board must also be composed of at least three independent directors, or 40 percent of the total number of members, whichever is higher. This will give minority shareholders the power to “veto” board decisions if they wish to.

“It’s not for everyone. Joining the board will be voluntary, but if the companies fall below the minimum standards, they will automatically be removed from the board,” Sicat said.

Sicat noted that these were still proposals and were still up for discussion with other stakeholders.

In a separate interview, Institute of Corporate Directors (ICD) president Rex Drilon said the Maharlika Board requirements had to be strict if the project was to gain any credibility.

He said this would be a vital step in improving the country’s image in order to attract new investments.

The Corporate Governance Watch 2010 report of the Asian Corporate Governance Association and CLSA Asia-Pacific Markets placed the Philippines last among 11 Asian countries in terms of adherence to corporate governance standards.

This poor showing, along with other issues such as peace and order and political risks, has been driving away investors from making bets on the Philippines.

“This is one of the reasons why Vietnam, a communist state, is getting five times more foreign investments than the Philippines, which is a democracy where people speak English well,” Drilon said.

“Our goal here is really poverty reduction. The only real antidote to poverty is additional jobs. The only way to create jobs fast is to have more investments,” he said.