Giants join against Diana Chen

In an effort to collect letters of proxy prior to an upcoming board-reshuffling row, the government yesterday decided to side with KGI Securities Co (中信證券), the biggest shareholder in China Development Financial Holding Corp (中華開發金控) with a 6 percent stake.

"The government hopes to join forces with KGI in order to maximize the number of government-owned seats on the board," Chen Mu-tsai (陳木在), chairman of the Bank of Taiwan (台灣銀行), told a press conference yesterday.

The government currently controls over 7 percent of the shares in China Development.

The decision came one day after China Development chairwoman Diana Chen (陳敏薰) backtracked on a government proposal aimed at resolving the row over the board election slated for April 5. Chen owns less than 1 percent in China Development.

After Chen pulled out of the deal, Minister of Finance Lin Chuan (林全) said the ministry would leave the decision on formulating the new board to the Bank of Taiwan and International Commercial Bank of China (中國商銀), which hold the majority of the government's China Development holdings, as long as the state's interests were protected.

The state-owned Bank of Taiwan and International Commercial will take charge of negotiating with KGI tomorrow in order to come up with a new board-seat plan. After the re-allocation plan is finalized, both partners, with a combined stake of over 17 percent, will nominate candidates, Chen Mu-tsai said.

According to its previous proposal, the government hopes to secure a minimum of eight seats on the new board, one of which would have been allocated to an independent boardmember. However, after Diana Chen decided she was not satisfied with the one seat allocated to her Lilontex Corp (理隆纖維) on Wednesday, Chen Mu-tsai said that the government's chances of winning more than 10 board seats may increase.

The incumbent Diana Chen made no comment about the government's decision yesterday. Yet she seemed determined to secure her position by openly accusing the company's "new shareholders" of attempting to manipulate the yet-to-be-reshuffled board's makeup while ignoring the upcoming shareholder's meeting.

Although no names were mentioned in her letter, which was addressed to all China Development shareholders, she appeared to be pointing the finger at the company's two biggest shareholders -- the finance ministry and KGI -- in her capacity as chairwoman by running half-page advertisements on the front pages of major Chinese-language newspapers yesterday.

"New shareholders' [previous] attempts to re-allocate the new board's [21] seats were unlawful and ineffective, posing a threat to the company's stability," Chen said. "Whether I will be re-elected as the chairwoman is a decision to be made by every shareholder."

She urged the company's shareholders to respect corporate governance principles and elect the most qualified chairperson.

Benny Hu (胡定吾), chairman of subsidiary China Development Industrial Bank (開發工銀) and the top member of Chen's management team, yesterday chose to side with the government.

"I support and respect the ministry's intention [to mediate the potential conflicts]," Hu told TVBS.