There is a growing trend for corporations to appoint a chairman emeritus in the corporation.  “Emeritus” comes from a Latin word meaning “earned” or “merited,” signifying prestige, distinguished experience and accomplishments. In most cases, the chairman emeritus once served as chairman of the board but is now associated with the business in an honorary and advisory status. It could happen that said chairman, on his own volition or upon the consensus of the stockholders,has stepped down but has been retained as a valuable member of the organization. Officially, he is no longer a member of the board and has no voting rights. He may still be given the privilege to attend meetings and have his voice heard thereat.The position of chairman emeritus is not provided for in the Revised Corporation Code.  However, the bylaws may provide for the creation of that position. The legal basis is Section 46 of the Revised Corporation Code allowing the bylaws of a corporation to provide for “other matters that may be necessary for the proper and convenient transaction of its corporate affairs.”  Not being a director or officer of the corporation, the chairman emeritus is not subject to regulatory processes like the submission of bio-data, and the reporting or confirmation of appointments.

There is the view, however, that companies should be very careful in naming a chairman emeritus. In a webinar organized by the Management Association of the Philippines, a resource person from the International Finance Corporation said that the presence of a chairman emeritus could be “incredibly disruptive” to the flow of a board meeting; that such meeting is meant for the betterment and long term success of the corporation and not to satisfy the ego of the founder; and that while the chairman emeritus usually has no direct say to the decisions made by the board of directors, someone who holds this position can still sway the thinking of others (ABS CBN News).

Interestingly, when banks submit their bylaws to the Bangko Sentral for approval, part of the assessment on the banks’ governance would be the review of the responsibilities of the chairman emeritus, in case such position is provided for in the bylaws. In an actual case I am familiar with, a bank successfully justified the proposed position in the following manner.According to the bank, the creation of the position of chairman emeritus supports the duty of care that directors owe the corporation since the board could be appropriately informed and will benefit from the insights of the chairman emeritus in rendering judicious actions.

            Additionally, the bank said that the appointment of a chairman emeritus follows the principles of accountability and prudence in the exercise of a director’s duty; that the presence of a chairman emeritus does not in any manner diminish the capacity of a director to render decisions based on their independent judgment after having gained all knowledge, information, and guidance available; thatthe directors will be ultimately responsible for their individual actions; and that this is even strengthened by the presence of independent directors who represent no vested interests and are likewise obliged to exercise independent judgment. In fine, the bank concluded that the chairmen emeritus position complies with good governance and even strengthens the same by harnessing the experience of seasoned executives for the benefit and growth of the corporation.

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The above comments are the personal views of the writer. His email address is [email protected]