Tue, Jan 04, 2005 - Page 10 News List

TSMC proposes `restricted stock' incentive program

By Lisa Wang  /  STAFF REPORTER

Taiwan Semiconductor Manufac-turer Co (TSMC, 台積電), the world's largest contract chipmaker, has proposed adopting a new restricted stock mechanism as part of a broader incentive program to lure high-tech talent.

TSMC's move comes after new regulations limited the distribution of stock bonuses for employees of Taiwan's listed companies. The rules come into effect this year, and analysts expect it to aggravate a brain drain.

"We did file a proposal to the government ... for high-tech firms to offer more incentives to employees. That [giving restricted stocks] is one of the options," said TSMC spokesman Tseng Jih-hao (曾晉皓) in a phone interview with the Taipei Times yesterday.

TSMC has suggested to the Securities and Futures Bureau that the sale of bonus shares be prohibited during a timeframe agreed to between the company and its employees.

In response to TSMC's proposal, the stock regulator said it is evaluating the feasibility of restricted shares, a practice seldom adopted by foreign companies. New regulations would be needed to support it.

Local electronics companies have in the past offered huge stock bonuses as incentives to retain engineers, and therefore needed to issue new shares for the bonus offering.

The practice, however, fueled complaints from shareholders, as it dilutes earnings per share.

The new rules stipulate that only money-making companies are allowed to give stock bonuses, and the amount can account for up to half of earnings.

To comply with the new restrictions, some electronics companies, including TSMC, decided to increase the proportion of cash dividends to limit dilution of the companies' equity base.

But, the policy, which aims to boost financial transparency, will make it more difficult for chipmakers to retain workers, said one analyst with KGI Securities (中信證券), who requested anonymity.

People are shifting their focus to the flat-panel industry as the growth potential [is slowing] from the maturing semiconductor industry, he said.

Spokesman for VIA Technologies Inc (威盛電子), William Lee (李君偉), acknowledged the policy change makes high-tech firms less attractive, to a certain degree, when recruiting workers.

"But, we are working on other incentive programs, including stock options, to offset the impact," Lee said.

VIA Technologies decided not to give stock bonus to its employees this year as the chipset maker posted a loss of NT$1.67 billion, or NT$1.35 a share, for 2003.

To reduce the impact to the least, VIA Technologies plans to raise monthly salaries by an average 15 percent and an unspecified increase in annual bonus depending on their job perfomrance, Lee said.

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