FSC rule on company heads draws flak

The private sector yesterday expressed strong opposition to the Financial Supervisory Commis-sion's (FSC) new rule, announced on Thursday, forbidding the heads of financial holding companies from chairing other non-financial enterprises.

The new rule will take effect in January next year, although there will be a grace period of up to three years for company chairmen and presidents to complete their tenures at non-financial enterprises.

The rule is expected to bring about a series of management reshuffles in financial-service companies' re-investment arms, and could affect Daniel Tsai's (蔡明忠) role at Taiwan Cellular Corp (台灣大哥大) and Taiwan Fixed Network (台灣固網), and Eugene Wu's (吳東進) role at Great Taipei Gas Corp (大台北瓦斯).

According to the local Chinese-language media, Tsai, who is currently chairman of Fubon Financial Holding Co (富邦金控), doubles as chairman of his 10 non-financial re-investments, while Wu, who is chairman of Shin Kong Financial Holding (新光金控), is in charge of 24 non-financial businesses.

Chinatrust Financial Holding Co (中信金控) chairman Jeffrey Koo (辜濂松) heads four non-financial businesses, while Hua Nan Financial Holding Co (華南金控) chairman Lin Ming-cheng (林明成) has four non-financial businesses.

Critics of the commission's new rule said it would trigger a "figurehead" business culture, since heads of financial holding companies will appoint new company chairmen at their non-financial enterprises, most of which are family-run businesses.

Fubon, in particular, raised concerns over the legality of the new rule, saying that the government should first clarify the rule's scope by profiling so-called non-financial businesses. The company urged the commission to respect companies' organizational arrangements.

Fubon said that most chairmanships at non-financial businesses are not executive in nature, according to the Chinese-language media.

Yeh Yin-hua (葉銀華), a professor of finance at Fu Jen University, said it was necessary to restrict the heads of financial holding companies' role at non-financial businesses.

"They should focus on management of their core financial businesses," which will be facing great challenges in future as the domestic market is liberalized further, Yeh said.

The local financial sector has benefited greatly from the government's relaxation of restrictions in recent years to extend participation in financial-related sectors such as the securities-brokerage and trust-investment sectors, he said.