The Financial Supervisory Commission's seven-member board yesterday held its second meeting, proposing revisions to laws including the Securities Transaction Law (證券交易法) and the Accounting Law (會計法) in a bid to prevent corporate financial irregularities.
Beginning in January 2006, all listed companies will be required to install independent board directors to enhance internal corporate governance principles, the commission's vice chairwoman Susan Chang (張秀蓮) said yesterday.
The new revisions stipulate that a quarter of the boards of all listed companies must be independent directors tasked with monitoring the company's management and financial performance, Chang said.
Furthermore, at least half the board members must be free of family ties or business relationships with company management, she said.
Currently, only newly listed companies are required to hire at least two independent board members and one supervisory board member although some reputable companies have already hired independent board members on a voluntary basis.
The new revisions also request listed companies to either establish an auditing committee, on which will sit a minimum of three independent board members, or hire supervisory board members which include at least one member without any family ties or business connections to the board and other supervisory board members.
To reinforce certified accountants' legal responsibilities, the commission's proposed revisions to the accounting law also impose clear penalties to accountants who are involved in any financial irregularities.
According to Chang, individual accountants who violate the law, depending on the seriousness of the case, will be punished with verbal warnings, a maximum fine of NT$3 million, a suspension of business for no longer than two years or the permanent revocation of their license.
Any individual accountants who receives a total of four one-year business suspensions will be disbarred forever under the proposed revisions.
Accounting firms which violate the law, depending on the seriousness of the case, will also be punished with verbal warnings, a maximum fine of NT$30 million, a business suspension of no longer then six months or having their licenses permanently revoked.
Should any financial irregularities occur, top management of the company at fault including chairmen, presidents and accounting managers will have the same obligations and responsibilities as the accountants to compensate for losses incurred.
The revisions must be submitted to the legislature for passage before they can take effect.
On Tuesday, Standard & Poor's Ratings Services said in a statement that corporate governance standards in Taiwan remained below international best practices.
"It is clear that certain statutory authorities and professional groups are trying to raise Taiwan's corporate governance standards, but the pace is slow," S&P said in the statement. "The road ahead appears difficult in view of Taiwan's family companies' resistance to the spirit and letter of corporate governance reforms."
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