The management of Mega Financial Holding Co (兆豐金控) will be shaken up this week, as the Ministry of Finance will not seek to retain its majority of board seats at a shareholders' meeting on Friday, a ministry source said yesterday.
"The government will secure seven out of 15 board seats in an alliance with some foreign shareholders," a source from the ministry task force that governs state shareholdings in financial institutions said yesterday.
The ministry currently controls a 22.78 percent stake and eight board seats in the nation's third-largest financial group by assets, according to ministry data.
The official said that of the remaining eight seats, one will go to an independent board director and seven will be taken by private shareholders, including Chinatrust Financial Holding Co (
The decision was made after intensive talks with both foreign and private shareholders yesterday, the source said.
Regarding the chairmanship, the official said the government would support a capable management team and government-appointed board members would remain in a position to dominate Mega Financial's board meeting.
The official's remarks came amid rising speculation that the government's passive attitude meant it would lose control of the board to private rivals, and that this was aimed at bypassing a legislative resolution that requires state representatives to seek the chairmanships of financial institutions if the government has a majority of board seats.
Doing so could protect the current chairman, Cheng Shen-chih (
The legislative resolution was dubbed the Cheng Shen-chih clause, as three years ago the majority state representatives on Mega Financial's board backed Cheng -- who was said to have close ties with President Chen Shui-bian (陳水扁) -- to take the helm in the capacity of a private shareholder. Cheng has a negligible shareholding in the company.
In response to the speculation over its motives, the ministry said in a statement that the planned reduction in board director seats resulted from changes in the company's shareholder structure, as the number of retail investors had decreased while institutional shareholders and foreign investors had raised their holdings over the past three years.
Foreign investors hold a 23.15 stake currently, up from 5 percent previously, while Chinatrust Financial controls a 15.63 percent stake and is expected to obtain three to four seats, the ministry said.
Other reports have said that to safeguard his chairmanship, Cheng has allied with Chinatrust Financial, which seeks to take over the state-controlled financial group in the coming years, and has actively solicited proxy votes.
In response to the reports, Mega Financial in a statement yesterday denied that the management had teamed up with foreign investors to support a certain financial conglomerate.
No one was capable of manipulating the selection of the board, as the company had an enormous capitalization of NT$111.6 billion (US$3.43 billion) and more than 300,000 shareholders, the statement read.
Any significant issues were required to be reported to the ministry's task force governing state shareholdings for approval before discussion in the board meeting, it said.
As a result, it would be impossible for Cheng to surrender the financial group unilaterally to rivals, it added.
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