United Microelectronics Corp (UMC,
"Taiwan technology companies to pay relatively low salaries and have attracted some of the world's best managers and technologists," he wrote in a recent article. "The bonus system has won recognition from global investors," he wrote.
Some investors are concerned that US and other overseas regulators will force the companies to count stock bonuses as costs, eroding profit. The US Securities and Exchange Commission previously decided not to deem as a cost stock options, which are used by American technology companies such as Intel Corp.
"My biggest question is about tax accounting," said Mark Herskovitz, who has UMC shares among the US$1 billion in assets he manages for Dreyfus Corp. "International accounting bodies may force Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and UMC to count options as a cost."
The premium on UMC's American depositary rights has slipped to 14 percent more than the price of the underlying Taiwan-listed shares from 42 percent a year ago. The premium on ADRs in TSMC, Taiwan's largest chip company, slid to 16 percent from 52 percent.
UMC's total stock bonuses account for 5.1 percent of the company's outstanding shares, and the loss to investors from stock bonuses is less than the impact of a bad one-day drop in the shares' market price, Tsao said.
Tsao said UMC's bonus system, copied by other companies in Taiwan, rewards workers more directly than the stock options used by US rivals. Bonus stock can be sold more quickly than options, which have a lockup period.
Tsao also dismissed criticism of stock bonuses by TSMC Chairman Morris Chang (
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