Mon, Jun 26, 2006 - Page 12 News List

Analysts slam Cabinet's moves in boardroom fight

By Jackie Lin  /  STAFF REPORTER

The unexpected boardroom tussle at Mega Financial Holding Co (兆豐金控) on Friday was an attempt to save the government's "face," analysts believe.

Although the government managed to win majority on the board by making two directors resign, too much compromise and political manipulation have left analysts concerned whether public rights and interests can really be safeguarded.

"They just put on a show in order to solve a political problem," said Thomas Lee (李桐豪), a professor of money and banking at National Chengchi University, in a telephone interview on Saturday.

The government secured seven of Mega Financial's 15 board seats. The number of private directors dropped to six after two, including an independent director, offered to resign following the board election.

Prior to Friday, opposition lawmakers and some bank labor unions had called for Premier Su Tseng-chang (蘇貞昌) and Minister of Finance Joseph Lyu (呂桔誠) to step down if the government lost its majority on the board of the nation's third-largest financial services provider. The government won eight board seats three years ago.

While the crisis appears to have been temporarily resolved, the chance the government can really dominate Mega Financial's operations are slim because private board director Cheng Shen-chih (鄭深池) retained chairmanship of the board, Lee said.

"Taiwan's state shareholding management mechanism is quite weak," Lee said. "Mega Financial's government-appointed directors could have staged a walkout during the board election and nominated their own chairman."

Politics, however, overrode everything. Vice Premier Tsai Ing-wen (蔡英文) admitted at a press conference on Friday evening that Cheng's staying on as chairman was the result of a deal between private and state shareholders.

Charles Yeh (葉銀華), director of the Graduate Institute of Finance at Fu Jen Catholic University, said he was surprised by the election results. But the government's effort to retain majority power despite its 22.78 percent stake is understandable, he said.

"Only when the government gains the final say on the board will it have more bargaining chips to demand good prices for future share sales," Yeh said.

But he said the political manipulation in the boardroom election should be criticized, referring to the resignation of independent director Wu Rong-i (吳榮義).

Foreign investors had recommended Wu, a former vice premier and former president of the Taiwan Institute of Economic Research (台經院), to be on the board as an independent director.

He came in second in the director election, second to Cheng.

"If he planned to quit, he shouldn't have been listed as a candidate. Apparently his role was not independent at all, it was only to help the government achieve its goal," Yeh said.

The establishment of an extra independent director was only announced last week.

On June 16, a Ministry of Finance source told reporters that the government might get just six seats on the board but would try to solicit support from foreign investors to gain a seventh.

The comment triggered a barrage of criticism in the media condemning the ministry's failure to do more to secure its power over the board.

Last Monday, the ministry said it thought it could secure seven seats, following intense negotiations with foreign shareholders. Of the remaining eight spots, one was go to an independent director, as required by law and supported by foreign investors, and the other seven were to be taken by private shareholders, including Chinatrust Financial Holding Co (中信金控), which has a 15.63 percent stake in Mega Financial.

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