Independence is not a lifetime appointment

The SEC's term limit rule is not an attack on directors—it is a defense for the investing public.

There is a peculiar irony in watching some of the Philippines' most powerful corporate boards resist a rule designed to make them more credible.

When the Securities and Exchange Commission issued Memorandum Circular 7, series of 2026, capping the tenure of independent directors of publicly-listed companies at a cumulative nine years, it was not acting on a whim.

It was acting on principle, on law, and on the lessons of corporate history. Let us be clear about what this rule is and what it is not.

It is a measured, internationally aligned governance reform. It is not a purge. It does not remove anyone without cause.

It does not question the integrity or the accomplishments of the directors it affects. What it does is enforce something the law has always intended: that the word "independent" must mean something.

Section 22 of the Revised Corporation Code explicitly grants the SEC authority to prescribe "the qualifications, disqualifications, voting requirements, duration of term and term limit" for independent directors. This is not a gray area.

The legislature did not leave it to individual corporations to decide when independence expires. It entrusted that judgment to the Commission—precisely because the regulated cannot always be trusted to regulate themselves.

The logic behind term limits is not novel. It is the same logic we apply in government, in audit engagements, and in professional standards globally.

The International Organization of Securities Commissions has long recognized that prolonged tenure erodes the very objectivity that independent directors are appointed to provide.

Familiarity breeds not contempt, but something far more dangerous in a boardroom: comfort. A director who has sat alongside the same executives for fifteen years, attended the same dinners, and navigated the same crises does not bring fresh eyes to the table. They bring institutional loyalty dressed up as institutional knowledge.

Critics argue that removing long-serving directors disrupts continuity and strips boards of irreplaceable expertise. This argument, however well-intentioned, mistakes entrenchment for excellence.

The Philippines is not short of capable, accomplished individuals who can serve with distinction on public company boards. What has been short-supplied is opportunity—the chance for new voices, new perspectives, and genuine scrutiny to enter rooms long dominated by familiar faces.

The legal challenge mounted by one listed company deserves respect as a matter of due process, but the substance of the complaint—that there was insufficient time to vet replacements—does not hold up to scrutiny.

The memorandum circular provided a transitory period. Companies have known about the reform since at least the draft circular published in 2025. The surprise, if there is any, is self-imposed.

SEC Chairperson Francis Lim put it plainly: our people resist political dynasties, and our capital markets must resist boardroom dynasties with equal resolve.

That is not rhetoric. It is a statement of democratic consistency. Governance reform is never painless, and it is never without resistance from those who benefit from the status quo. But the measure of a regulator is not whether it governs without friction—it is whether it governs in the interest of those who have the least power in the room: the minority shareholder, the investing public, the market itself.

The nine-year rule is not the end of corporate governance reform. It is a floor. Independent directors must now earn their title not just in appointment, but in practice—renewed, refreshed, and genuinely free from the ties that long tenure quietly builds.

That is not a burden on Philippine business. It is a promise to the people who trust it with their money.