Thu, Sep 23, 2004 - Page 11 News List

Good corporate practices are needed, say analysts

MANAGEMENT After the series of financial scandals that swept through the private sector, a new focus on corporate governance would be beneficial, experts say

By Amber Chung  /  STAFF REPORTER

Corporate governance, currently a red-hot issue in Taiwan, is crucial for companies to raise their competitiveness beyond conventional production and marketing, industry analysts said yesterday.

"The issue of corporate governance is of great concern to the private sector and the government right now," Ko Chen-en (柯承恩), director-general of the Corporate Governance Association Taiwan (中華公司治理協會), said at a conference organized by the Council for Economic Planning and Development (CEPD) yesterday.

To strengthen competitiveness, companies must improve their upper management structure in addition to a focus on production and marketing ... Corporate governance is pivotal on this point," Ko said.

The eruption of a series of financial scandals has been haunting the local bourse and sparked speculation that more scandals may surface.

Local chipmaker Procomp Informatics Co (博達科技), which failed to explain its default on a NT$2.98 billion loan payment and identify the whereabouts of NT$6.3 billion in cash, was the first villain in the scandals that have shaken the nation's stock market.

A second scandal surfaced when the high-tech product maker Info-disc Technology Co (訊碟科技) failed to explain its US$77.75 million worth of remittance; while Summit Computer Technology (皇統科技) inflated sales by NT$3.7 billion between 2001 and this year to beef up its financial books.

The nation's poor performance in transparency also dragged down its ranking to sixth place this year from fourth last year in the Corporate Governance Watch report published last week by CLSA Ltd, in conjunction with the Hong Kong-based Asian Corporate Governance Association. Singapore, Hong Kong and India were rated the best in corporate governance practices.

Another panelist, Joseph Lee (李存修), a finance professor at National Taiwan University, cited a survey conducted by the consultancy firm McKinsey & Company Inc involving 200 institutional investors worldwide. Three-quarters of respondents thought that a company's corporate governance was equally important as their financial performance.

Investors were willing to pay a premium of between 20 percent and 30 percent to companies which have a good corporate governance reputation, according to the survey.

Conference keynote speaker Harvey Chang (張孝威), president of Taiwan Cellular Corp (台灣大哥大), said that the operator's efforts in improving corporate governance had paid off.

"We have seen a significant rise in both our share prices from the lowest point of around NT$17 [in April last year] and our foreign investment ratio to over 30 percent now, from 6.88 percent last year, after we simplified the re-investment structure and enhanced transparency and independence of board meetings," Chang said.

The company's shares closed up 1.23 percent at NT$32.9 on the TAIEX yesterday.

The government has made corporate governance reform a priority among listed companies, the financial service industry and utilities, CEPD chairman Hu Sheng-cheng (胡勝正) said.

Premier Yu Shyi-kun also yesterday pushed for the passage of amendments to the Corporate Law (公司法), the Securities and Exchange Law (證交法) and Certified Public Accountant Law (會計師法) in this legislative session, Hu added.

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