China Development Financial Holding Corp (中華開發金控) chairwoman Diana Chen (陳敏薰) suffered a setback in her bid to hold onto the reins at the company after she last week refused a government-initiated proposal to re-allocate board seats according to shareholdings. But pundits say the reshuffle row may hurt corporate governance principles as well as Chen.
"The company's major shareholders have abused the power given to them in accordance with their shareholdings by attempting to carve up the board on their own before the shareholders' meeting in April," said Chu Hau-min (朱浩民), a finance professor at National Chengchi University.
China Development, the nation's fifth-largest financial services company by market value, is scheduled to hold a shareholders' meeting on April 5 to elect a new board.
KGI Securities Co (
Chu, who doubles as the principle at the Tainan-based Hsing Kuo University, said that the highest principle of corporate governance is the separation of professional management and ownership, which China Development has long failed to respect.
"It has long been an inappropriate fact that China Development, which has a highly fragmented shareholding, has always fallen in to the hands of small-time shareholders, who own just a tiny stake," Chu said.
Sharing a similar view with Chu, Hsieh Chin-ho (謝金河), executive director of the Chinese-language monthly Wealth Magazine, said the management control in China Development, ever since former chairman Liu Tai-ying (劉泰英) was in office, has been highly politicized in light of its close relationship with the government.
But talking from the perspective of real business politics, Hsieh added that China Development's upcoming board reshuffle will turn out to be "a real race of shareholding competition and the biggest shareholder winner will take all."
To mediate potential conflicts, Finance Minister Lin Chuan (林全) on Feb. 22 called for a meeting to facilitate a consensus among major shareholders to jointly conduct a proxy solicitation while finalizing the new makeup of the 21-member board.
Under the ministry's original proposal, KGI and affiliated companies will get eight of the seats on the board, while Chen will have only one seat allocated to Lilontex. The government will get eight seats and four other companies will each get one seat.
After calling the government's move to intervene in the company's board reshuffling illegal, Chen pulled out of the deal on Monday and decided to go her own way by soliciting support from the company's 600,000 individual shareholders to secure her position.
Infuriated by Chen's plans to ask shareholders to give her their proxy votes in the April vote for a new board, the government decided to join together with KGI for the proxy. They submitted a list of 18 board-member candidates and three supervisor candidates to the Securities and Futures Institute on Friday.
Both Hsieh and Chu yesterday refused to assert that Chen's chance of getting re-elected is already slim since there's another month for her to collect letters of proxy before the vote. They said the presidential election in March may also pose a challenge to the partnership between the DPP government and the pro-KMT Chinatrust Financial Holding Co (
RSS