Shell Pilipinas defends board selection after complaint before SEC

By Alexandria Grace C. Magno, Reporter

SHELL Pilipinas Corp. said it would address through the proper 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 corporate governance procedures.

The company defended the nomination of former Shell Pilipinas Country Chairman Edgar O. Chua as an independent director, saying his previous role in the company did not disqualify him under the rules.

“We believe that Mr. Edgar O. Chua’s previous position as an officer of the company which ended nine years ago is not a disqualification and does not 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 does not expect the issue to affect its operations, financial condition or business outlook.

The statement came after shareholder and independent director nominee Jordan M. Pizarras asked the SEC to review alleged irregularities in 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 company’s top executive from 2003 to 2016.

“Under existing SEC rules and corporate governance standards, an independent director must be free from any relationship that could interfere, or be perceived to interfere, with the exercise of independent judgment,” he said in the letter.

Mr. Pizarras also raised concerns over disclosures indicating that Mr. Chua had reportedly been part of the nomination committee while also being considered for election as an independent director.

“This creates the anomalous situation where a nominee participates in 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 company.

Mr. Pizarras said the company’s ownership structure, where a controlling shareholder holds most shares, allows majority shareholders to significantly influence the election of independent directors.

“While this is allowed under existing rules, it weakens the purpose of having independent directors as safeguards for minority shareholders,” he added.

He said the issues raised reflect the gap between “formal compliance” and “substantive adherence” to corporate governance standards.

“While the company appears to comply with procedural requirements, there are indications that the spirit of the rules — particularly those intended to ensure genuine independence and protect minority shareholders — may not be fully realized,” he said.

Mr. Pizarras urged the SEC to review the matter as 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 company’s share price rose 11 centavos to P9.11 each on the local bourse.