The SEC Code of Corporate Governance: From foundation to market imperative

The evolution of corporate governance in the Philippines reflects the broader journey of its capital markets — from underdeveloped and compliance-driven to increasingly structured, transparent, and globally aligned. At the center of this transformation is the SEC (Securities and Exchange Commission) Code of Corporate Governance, first issued on 5 April 2002, under SEC Memorandum Circular No. 2, Series of 2002, pursuant to the mandate of the Securities Regulation Code (Republic Act 8799).

The 2002 Code introduced critical concepts such as independent directors, defined board responsibilities and disclosure discipline. However, in its early years, governance was largely viewed as a formal requirement rather than a strategic priority. Many corporations complied in form, but not always in substance. Board structures existed, but true independence, rigorous oversight, and stakeholder accountability were not yet deeply embedded in corporate practice.

This began to change with key revisions. The 2009 Revised Code strengthened governance expectations, while the 2016 Code for Publicly-Listed Companies introduced the pivotal “comply or explain” approach, shifting the focus from rigid compliance to transparency and accountability. The 2019 Code for Public Companies and Registered Issuers further expanded governance coverage beyond listed firms, recognizing that large, widely held corporations also shape investor confidence and economic outcomes.

Equally important has been the role of key stakeholders in reinforcing governance standards. Institutions such as the Institute of Corporate Directors (ICD) have professionalized board practices through director training and the promotion of the ASEAN Corporate Governance Scorecard. The Philippine Stock Exchange (PSE) has embedded governance into listing and disclosure requirements, while the Governance Commission for GOCCs (GCG) has strengthened governance in government-owned and controlled corporations. Together, these institutions have transformed governance from a regulatory obligation into a multi-stakeholder ecosystem.

Today, the impact of the SEC Code is far more visible — particularly among listed companies. Boards are more structured, independent directors play a more active role, and disclosures are more robust and timely. Governance committees, risk oversight, and sustainability reporting are no longer exceptions but emerging norms. Compared to the early 2000s, there is a clear shift: governance is now increasingly practiced in substance, not merely in form.

Yet, despite these advances, the Philippine capital markets remain relatively shallow and underperforming compared to regional peers. The PSE continues to face challenges in liquidity, new listings, and investor participation. This raises an important question: what more must be done?

The answer points back to governance. The next phase of capital market development will depend not only on economic fundamentals, but on the credibility of corporate institutions. Stronger governance — both in legal frameworks and in actual boardroom practice — will be a key driver in restoring investor confidence. This includes deeper board independence, higher-quality disclosures, stronger enforcement, and a culture of accountability that goes beyond minimum compliance.

Looking ahead, the SEC Code will become even more relevant. As global investors place increasing emphasis on governance, sustainability, and transparency, Philippine corporations must meet higher expectations to remain competitive. Governance will no longer be a supporting function — it will be a primary determinant of capital access and valuation.

If the Philippine capital markets are to move beyond their current flat and constrained state, governance must lead the way. The foundation has already been laid by the SEC Code and reinforced by institutions like the ICD, PSE, and GCG. The challenge now is execution — ensuring that governance principles are consistently applied, deeply embedded, and rigorously enforced.

In the end, the path to a stronger, more vibrant capital market is clear: better governance, practiced both in principle and in action, will be the catalyst for its renewal. While global governance standards have, in many respects, outpaced the Philippines, the country’s potential remains as vast as ever. With disciplined adoption by regulators, boards and market institutions, governance can decisively restore credibility, unlock capital flows and position the Philippine market for meaningful and sustained growth.