As a dispute between the Financial Supervisory Commission and chipmaker United Microelectronics Corp (UMC, 聯電) heats up, shareholder rights and interests are being sacrificed to infighting.
UMC, the second-largest made-to-order chipmaker in the world, on Wednesday spent millions of NT dollars on ads panning regulators over a NT$50,000 (US$1,500) fine it received for late disclosure, a punishment the company said was improper.
It argued that the revision of financial statements required under US accounting standards, which eventually led to an additional loss of nearly NT$10 billion, was not relevant to local investors.
The data was posted in English at 5:30am on Dec. 14 on the foreign Web site Business Wires, which all investors could access, and therefore UMC had decided not to repeat the disclosure, the company said.
Describing local media as lacking connections with the external world, UMC criticized Taiwanese reporters as "not hard-working and diligent enough to find out information for themselves."
The company seems to have forgotten that it is a publicly traded organization's obligation to provide shareholders with full access to information on such matters.
Doesn't the late disclosure -- not made until five hours after Taiwan's market regulator demanded it -- incur risks for local investors, who were ignorant of the news and therefore could not prepare a response, while also allowing foreign investors in the know an opportunity given the discrepancy?
A lack of transparency and impartiality in disclosure seriously jeopardizes shareholder rights, especially when up to 70 percent of them are retail investors who do not enjoy access to as many sources as institutional investors.
The sudden dip in UMC shares within minutes of the late disclosure on Dec. 14 demonstrated that the impact on the company's more than 900,000 local shareholders was no less significant than that on foreign investors.
Its threat to delist -- possibly not approved by the board and therefore possibly not conforming to corporate governance principles -- hurt the market on Wednesday, which hurt investors a second time.
The chipmaker, which grew and flourished courtesy of government subsidies, should bear in mind shareholder rights. Honesty at the outset is the best policy for defending integrity and a corporate reputation, rather than excuses and accusations in the aftermath.
Meanwhile, the Financial Supervisory Commission, which has said "we will make a strong response" over UMC's possibly legal but ethically questionable act, has softened.
The financial watchdog has hinted that UMC managers sold shares at "a sensitive time" after receiving the US regulator's demand for revision. It seemed in two minds about a further probe into the matter now that the company's head will step down.
The commission, which has vowed to establish a healthy investment environment, should conduct a thorough investigation to address suspicions among affected members of the public. If the results suggest there has been illegal trading then justice can be enforced, whereas if there has been no unlawful activity, UMC's name can be cleared.
Otherwise, the uncertainty will impact on the company's share price in future. The authority's unfulfilled pledge to deal with dissident companies will merely cultivate an environment in which the abuse of power will hit innocent investors even harder.
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