THE Philippine Stock Exchange (PSE) is planning to revise the suitability rule involving directors, officers, promoters, and control persons of its listing rules to include a new rule and to update some clauses.

“The proposed revisions seek to clearly define the suitability issues involving the directors, officers, or controlling stockholders of an issuer which would disqualify an issuer from listing its securities on the exchange, consistent with the exchange’s mandate to protect public interest at all times and maintain public confidence in the market,” the PSE said in a consultation paper on Tuesday.

Under the proposed rules, the PSE will be considering any conviction in the Regional Trial Court, Municipal Trial Court, Metropolitan Trial Court, Sandiganbayan, and other trial courts – whether abroad or at home — from a criminal proceeding for an offense involving moral turpitude as grounds for disqualification from listing securities.

Traffic violations and other minor offenses, however, are excluded.

The exchange will also consider as grounds for disqualification if the individual or if a company, where the individual has a stake in as a controlling stockholder or as a director/officer, was found by the commission or a similar body or a department, or by the Anti-Money Laundering Council, or by a self-regulatory organization violating its pertinent laws.

This will apply if the decision is not reversed, suspended, or vacated.

A director’s, executive officer’s, promoter’s, or control person’s “demonstrated poor track record in governance and management of another listed company” will be considered as probable grounds for disqualification from the listing of securities, the PSE proposed.

The exchange said “a serious question relating to the integrity or capability of the issuer or any of its director, executive officer, promoter or control person” is raised if any of the above happened in the past five years.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort views the proposed changes as a move “meant to better protect the interest of the investing public.”

“Furthermore, these are consistent with the increased adherence and compliance with ESG (environmental, social, and governance) standards in recent years, as increasingly required by regulators worldwide,” he said in a text message.

The PSE is now asking market participants to comment on the proposed revisions. — Keren Concepcion G. Valmonte

THE role of independent directors in companies or publicly listed companies are said to be important as they do not have any affiliations, therefore always putting forward the needs of the firm.

“The independent director distinguishes himself because he has no hidden agenda to support, except what is good for the company and all of its stakeholders,” Angelica H. Lavares, independent director at Metropolitan Bank & Trust Co. and Prulife UK said during the virtual forum hosted by the Management Association of the Philippines on Tuesday.

Independent directors are able to exercise their judgments freely, guided by their experiences and insights.

Panelists at the forum also said that independent directors should hold the position of chairperson of a publicly listed company.

“My view is that the chairperson of publicly listed companies should be an independent director because that enables him to remain objective in situations when there are conflicts or there are potential conflicts between parties in the organization,” SM Investments Corp. Lead Independent Director Alfredo E. Pascual said.

Former Independent Director and Board Chairman of Philippine National Bank Florencia G. Tarriela said if the chairperson is also an independent director, it allows for the company’s management to be perceived as independent “and there is credibility immediately.”

Companies are reminded to take the time to nominate and get to know who they are putting on the table to be their independent directors.

“I think a lot of companies engage in what I call supply-driven nominations,” said Roman Zyla, senior corporate governance officer and regional corporate governance lead for East Asia-Pacific at International Finance Corp.

“A company will cast a lookout on the market and say, ‘we can get that person, or that person,’ without often spending enough time reflecting on what the company’s real needs are.”

Firms should take into account what their needs are and what they are looking for in a director to help improve how their company is run, he said.

“Independence is a very subjective thing and yet, it’s a critical thing we need at boards more and more,” Mr. Zyla said. — Keren Concepcion G. Valmonte