Currently, unless canceled by the high court, the document of Securities and Exchange Commission (SEC) reducing to nine years the general term limit for independent directors.
The SEC may have scored one historic regulatory victory in the Philippine financial sector. In a decision dated May 11, 2026, the Regional Trial Court of Makati refused to agree with GMA Network’s opposition to the SEC’s motion.
This is long overdue.
The SEC’s efforts to impose a time limit did not occur in a vacuum. Long before the GMA decision, the regulator had extended its disdain for governance to the Philippine Stock Exchange (PSE) itself – much more. a politically sensitive battlefield.
Earlier this year, the SEC also proposed a Total term limit of 10 years to PSE agency directors, possibly firing some of the exchange’s longest-serving brokers.
It is important to distinguish two modifications. The SEC’s nine-year general term limit applies to independent directors of listed companies – the very law challenged by GMA Network before the Makati court. Separately, the regulator also proposed an additional 10-year limit for director-agents of the Philippine Stock Exchange, while giving veteran directors additional transition time before full implementation.
The SEC’s recent proposal suggests that reform would occur without unnecessary market turmoil. It’s a compromise that undermines claims that the SEC is recklessly trying to push for regulatory reform. Instead, the regulator seems to address the improvement of modern governance and the reality of operations in long-established market institutions.
SEC headed by Francis Lim It is believed more and more that the weakness in the Philippine market is not only a liquidity problem but a matter of trustworthiness of the administration. His campaign against years of board establishment is, in the end, an effort to convince investors that Philippine capital markets were finally ready to favor institutional independence over hereditary ties.
The Philippine capital market has labored under a regime of resistance that regulators have been reluctant to confront head-on. Listed companies proudly announce “independent directors,” but many of those same directors have sat in their seats for more than a decade, eventually becoming deeply entrenched in the institutional, social, and strategic structures of the very organizations they were supposed to manage independently.
That contradiction is now at the center of one of the biggest governance reforms in the recent history of the Philippine market.
The document imposing a strict 9-year general term limit for independent directors has been criticized by some organizations as being cumbersome, ineffective, and unnecessary. A recent court challenge from GMA Network has highlighted those concerns.
The company said that forcing a group of long-serving independent directors, such as retired Supreme Court chief justice Artemio Panganiban and former Bangko Sentral ng Pilipinas (BSP) governor Jaime Laya, to retire would deprive the board of institutional expertise, weaken audit and risk management, and disrupt governance sustainability.
Those concerns are not frivolous. For one, independent directors in the largest listed companies are not just symbolic figures. He usually chairs the audit, risk oversight, nomination and compensation committees that form the board’s main defense against governance deficiencies, internal control deficiencies and ineffective management authority.
The court’s decision gives the SEC some muscle
But the Makati Regional Trial Court’s refusal to stay the SEC’s memorandum may be more significant and important overall than the dispute itself.
The decision essentially confirmed a larger regulatory principle that could change the way listed companies think about how the PSE is governed: once corporations enter the public capital markets, governance ceases to be a private matter.
That distinction is very important. For decades, most Philippine listed companies viewed independent directors more as members of the inner leadership circle than as objective, roving watchdogs. But the issue was not corruption per se.
Many of the long-time directors were knowledgeable and well-respected. The problem was structural. Sitting for long periods of time gradually reduces the semblance – and perhaps the discipline – of freedom. Familiarity creates alignment. Alignment reduces uncertainty. And the reduced concern undermines investors’ confidence that boards can still challenge management and control shareholders. Basically, the SEC circular is an effort to address that structural decay.
The important aspect of the court order was not procedural but philosophical. The SEC emphasized that no corporation has a constitutional right to retain certain individuals as independent directors indefinitely. It added that the Philippine capital market cannot remain globally competitive if updating the board is an administrative hassle.
The court seemed to accept the argument – that once investor protection and market integrity are linked, public companies do not have unlimited freedom to shape governance in their own way.
Independent directors are not the personal assets of the management or controlling shareholders. They exist because securities laws require that there be ways to prevent undue insider influence on public investors. The definition subtly expands the SEC’s regulatory reach.
Beyond persuasion and voluntary compliance
Over the years, most governance reforms in the Philippines worked largely through persuasion and voluntary compliance. Regulators were often cautious about aggressively interfering with internal board structures, especially in large and institutionally respected corporations.
This strengthens the SEC’s authority by not only punishing fraud after investors have suffered losses, but by carefully redesigning governance systems to reduce the likelihood of governance failures before capital is destroyed.
Global institutional investors now view governance quality as an evaluation measure of board renewal, succession planning, and director independence, making it a close examination of financial metrics such as revenue and profitability.
Markets that are willing to tolerate a deep governance structure later bear a discount as investors incorporate risk into their valuation decisions. Critics argue that expertise is not something that can be replaced overnight. GMA Network itself warned that replacing retired directors in charge of audit, risk management and governance could disrupt continuity and undermine the effectiveness of the board.
The court, however, pointed out a more serious flaw. If a listed company relies on some independent directors, it highlights a failure in succession planning.
Systems of governance should prevail over individuals. The board cannot be structurally unstable because two directors are retiring after nearly two decades of service. The court found that the alleged injury was irreparable and that the companies had sufficient time to prepare successors.
The public interest in retaining oversight of the board of objectives outweighed the disruption of the board’s sale.
I welcome your comments on these and other issues where the decisions made by the authorities shape the future of the country’s economy.
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