The Securities and Exchange Commission (SEC) is pushing for the strict enforcement of a cumulative nine-year term limit for independent directors in publicly listed companies, signaling a stronger stance on corporate governance reform.
SEC chairman Francis E. Lim emphasized that while the term limit is already enshrined in SEC Memorandum Circular No. 4, Series of 2017, the regulator is looking to eliminate exemptions that have allowed some directors to exceed the nine-year threshold.
“We want to do away with the practice of seeking exemptions from the nine-year term limit,” Lim said during a media briefing at the FINEX general membership meeting on Friday. “There’s no monopoly of talent. If sitting independent directors truly want to contribute, they can serve other companies—especially smaller firms that would benefit from their expertise.”
Under current rules, independent directors may serve a maximum of nine cumulative years. Extensions are allowed only with shareholder approval and a compelling justification presented at the annual stockholders’ meeting.
Lim said the SEC is reevaluating these exceptions, citing the importance of board independence and director rotation.
Beyond term limits, the SEC is also considering new protections ensuring the security of tenure for independent directors within the allowed period. “If you speak up against controlling shareholders, your chances of reelection are slim,” Lim explained. “We’re studying how to give independent directors a level of protection so they can fulfill their oversight role without fear of removal.”
Lim added that a dedicated memorandum circular on corporate governance matters—covering term limits and tenure protection—is currently under discussion. While the current focus is on publicly listed firms, the SEC may later expand the policy to cover companies deemed of public interest.
The initiative reflects the agency’s broader effort to institutionalize governance standards that promote board independence, accountability, and transparency across the corporate sector.
