Cabinet turns attention to corporate governance

The Cabinet is expected to issue its first white paper on corporate governance next month at the earliest, providing guidelines for local companies to improve their management and financial transparency, a government official said yesterday.

"Corporate governance is becoming a major issue among investors, especially after the surfacing of several financial scandals such as WorldCom Inc and Enron Corp," said Hu Chung-ying (胡仲英), economic research director at the Council for Economic Planning and Development, which drafted the white paper.

"We need to take prudent steps to ensure there is little or no risk of corporate meltdown," Hu said.

The white-paper draft will be sent to the Cabinet for approval next month. It proposes establishing an independent board of directors and audit committee members, consolidating financial statements, reconstructing merger and acquisition regulations and introducing solid accounting principles.

Lawrence Liu (劉紹樑), an attorney at Lee and Li who helped draft the paper, also underlined the importance of corporate governance during his speech at an APEC Symposium on small and medium-sized enterprises yesterday.

"In this era, corporate governance is not only a matter between companies and investors, but an issue that is highly relevant to a country's competitiveness," Liu said. "I believe more foreign investments will flood in after we enhance accountability among companies."

Ownership concentration is the main obstacle to implementing the policy in Taiwan, as most Tai-wanese, even many Asian companies, are family-owned enterprises, Liu said. As a result, such companies should first improve their personnel framework to avoid possible conflicts of interest when undertaking corporate governance, he said.

In addition to internal change, Liu pointed out that a few business regulations should be modified to cater to the reform, including improvements in merger and acquisition environments, exit mechanisms including restructuring and insolvency, listing policies, financial disclosures and others.