By Alexandria Grace C. Magno, Reporter
SHELL Pilipinas Corp. said it will address through the right regulatory process concerns raised before the Securities and Exchange Commission (SEC) over the nomination of its independent directors, as questions emerged regarding board independence and shareholder influence before its annual stockholders’ meeting.
In a regulatory filing on Monday, the listed oil company said its nomination and election process complied with applicable laws, SEC rules and company governance procedures.
The corporate defended the nomination of former Shell Pilipinas Country Chairman Edgar O. Chua as an independent director, saying his previous role in the corporate didn’t disqualify him under the foundations.
“We consider that Mr. Edgar O. Chua’s previous position as an officer of the corporate which ended nine years ago will not be a disqualification and doesn’t impair his independence,” Shell Pilipinas said.
“The SEC allows the reelection of an independent director after observing a cooling off period of two years from the date he ceases being a nonindependent director or officer,” it added.
Shell Pilipinas also said it respects shareholder concerns and doesn’t expect the problem to affect its operations, financial condition or business outlook.
The statement got here after shareholder and independent director nominee Jordan M. Pizarras asked the SEC to review alleged irregularities within the upcoming board elections.
In a May 7 letter addressed to SEC Chairman Francisco Ed. Lim, Mr. Pizarras questioned whether Mr. Chua met the spirit of independence requirements under corporate governance standards, citing his long tenure as the corporate’s top executive from 2003 to 2016.
“Under existing SEC rules and company governance standards, an independent director have to be free from any relationship that might interfere, or be perceived to interfere, with the exercise of independent judgment,” he said within the letter.
Mr. Pizarras also raised concerns over disclosures indicating that Mr. Chua had reportedly been a part of the nomination committee while also being considered for election as an independent director.
“This creates the anomalous situation where a nominee participates within the evaluation process that determines his own eligibility,” he said.
He also questioned how Shell Pilipinas evaluated the independence of nominees with prior executive roles and long-standing ties to the corporate.
Mr. Pizarras said the corporate’s ownership structure, where a controlling shareholder holds most shares, allows majority shareholders to significantly influence the election of independent directors.
“While that is allowed under existing rules, it weakens the aim of getting independent directors as safeguards for minority shareholders,” he added.
He said the problems raised reflect the gap between “formal compliance” and “substantive adherence” to corporate governance standards.
“While the corporate appears to comply with procedural requirements, there are indications that the spirit of the foundations — particularly those intended to make sure real independence and protect minority shareholders — will not be fully realized,” he said.
Mr. Pizarras urged the SEC to review the matter as a part of broader efforts to strengthen board independence and align governance standards with international practices.
Copies of the letter were also furnished to Shell Pilipinas President and Chief Executive Officer Lorelie Q. Osial and SEC commissioners.
Mr. Chua told BusinessWorld his nomination underwent due diligence, including legal and financial review.
“I take my election as an independent director in any company very seriously,” he said in a Viber message. “My actions ultimately are the true test of my independence.”
The corporate’s share price rose 11 centavos to P9.11 each on the local bourse.