CAN a former chairman of a publicly listed corporation run as an independent director (ID) of that company?
The question is addressed to this column by an acquaintance who saw the times as offering opportunities for investment in the energy sector. He is disturbed by the unexpected emergence of Edgar Chua as a nominee for independent director in the company’s coming board elections. Based on the company’s own disclosure, Chua previously served as country chairman of Shell in the Philippines from 2003 to 2016, a level of prior involvement in management that creates a strong and continuing association with the company, while under existing Securities and Exchange Commission (SEC) rules, and corporate governance standards, an independent director must be free from any relationship that could interfere, or be perceived to interfere, with independent judgment.
The potential investor fell short of naming the specific SEC rules on the issue, to wit:
Effective in 2026, board officials [such as executive directors, officers or employees] are prohibited from running as independent directors due to conflicts of interest defined in the Securities Regulation Code (SRC) Implementing Rules and Regulations, and reinforced by the Code of Corporate Governance for Publicly Listed Companies.
Key regulations include:
– Definition of Independence (SRC Rule 38 & SEC MC 19, s. 2016): An Independent Director (ID) must be independent of management and free from any business or other relationship with the corporation, its parent, subsidiaries or affiliates that could materially interfere with the exercise of independent judgment.
– Automatic Disqualification (SEC MC 02, s.2002): If an ID becomes an officer or employee of the same corporation, he is automatically disqualified.
– New 2026 Restrictions (SEC MC 07, s. 2026): Effective Feb. 1, 2026, a former nonindependent director or officer must observe a two-year cooling-off period before being reelected as an independent director.
But, in the first place, since the fellow seems that much in doubt, why bother at all? If he does not wish to suffer the risk, just don’t invest. That’s the best way to be rid of so much corporate and legalistic rigmarole.
The trouble is, the fellow does want to see his precious lifetime savings grow. And investing in the country’s foremost energy hub is insurance enough — that is, rid of his misgivings.
Besides, the guy has a number of friends already heavily invested in the company whose misfortune he would wish averted, if only for justice’s sake.
“Isn’t fair play this column’s concern?” asked the guy.
He certainly knew where to throw his punches.
Readers will notice how this column rarely, if at all, bothers with business talk.
Not my cup of tea.
But talk of corrupt practices in the conduct of business, particularly in the energy sector that has a direct impact on the livelihood of the masses, this column definitely must take a stand.
Sheer human nature unavoidably prompts the major category of shareholders to implement policies detrimental to the minority ones, which under the law should not be tolerated.
Big or small, stockholders enjoy equal rights under the law. But governed by men with unequal corporate capabilities, those with more of such end up lording it over those with less.
Thus are the categories majority and minority stockholders.
It has come to pass that minority stockholders have learned to accept their voicelessness in the corporate jungles, leaving their fate totally under the mercy of lords of the corporate wild.
As earlier pointed out, the SEC has enough governing rules to cure this discrepancy.
Yet, here we are faced with what could amount to a clever circumvention of these rules.
Records show that Chua is a member of the Nomination Committee, the body responsible for creating criteria for qualifying nominees to the board elections.
Immediately, this should strike even disinterested observers as highly anomalous. In a process where a body would otherwise exercise independence, honesty and unanimity of discretion, none of its members would ever dare to exceed the limits of decency and elementary decorum by nominating himself. And yet, this is what Chua has effectively done.
He nominated himself.
Will the Securities and Exchange Commission allow this?
It contradicts the very purpose of nominating independent directors, who are expected to provide valuable oversight over the company without any vested interest.
Moreover, what seems to be conveniently sidelined is the fact that in any democratic representation process, the rule of the majority must prevail. In the case at bar, this rule seems euphemistically subsumed — that is, whose literal meaning is replaced with something else.
In ordinary language, majority means the superior quantity, minority the fewer one. In the world of corporate stocks and shares, a majority of some, say, 10 shareholders owning shares of stock in the millions while 10,000 shareholders with few shares of stock, say 20, each, being the minority.
The ownership structure shows that most shares are held by a controlling shareholder. Under the current system, directors, including independent directors, are elected at large by all shareholders.
This structure allows the controlling shareholder to significantly influence, if not decide, the outcome of the election of independent directors. While this is allowed under existing rules, it weakens the purpose of having independent directors as safeguards for minority shareholders.
In the case of proxy voting and participation, in accordance with existing rules and regulations, the company allows voting through proxies, remote communication and in absentia mechanisms. While legally sanctioned and ostensibly designed to broaden shareholder engagement, in practice they may potentially facilitate the consolidation of voting power in the hands of a few. Institutional investors or majority shareholders may disproportionately benefit from such mechanisms as they are better positioned to mobilize proxy campaigns or efficiently coordinate remote voting. These dynamics risk diluting the meaningful participation of minority shareholders, most of whom lack the same organizational capacity or access.
That’s too much talk in any case when the one single issue is: Will SEC allow the nomination of former Pilipinas Shell country chairman Edgar Chua as independent director?
