Analysts slam Cabinet's moves in boardroom fight

But after it was disclosed that Wu, who is said to have close ties with Koo family which owns Chinatrust Financial, would serve as the independent director, the ministry and the Cabinet came under attack again from the media and lawmakers.

Critics demanded the government do more to assert its power and avoid doing anything that would benefit Chinatrust Financial.

The drama played out in the media all last week, while the government tried to convince private shareholders to give up one board seat.

Then came the suggestion from former minister of finance Lin Chuan (林全), who had faced a similar situation with the board election for Chang Hwa Commercial Bank (彰化銀行) three years ago. At that time he also had called on one of the private directors to step down.

As the bank's largest shareholder, the government held seven seats while private shareholders had gotten eight seats thanks to proxy votes before the government was able to even things out.

Since the government has retained a majority on Mega Financial's board, its directors must be professional and courageous in monitoring the company's operations and strengthening corporate governance, Yeh said.

He emphasized that it was not a problem having private directors as chairmen of state-controlled companies as long as they were professional.

"The government representatives should work harder to supervise Cheng's management team. They shouldn't be afraid of Cheng, since he has a negligible [less than 0.01 percent] shareholding," Yeh said.

Both Yeh and Lee warned that a decision reached at Mega Financial's general meeting on Friday -- allowing directors to keep their positions in similar companies -- could harm the firm's interests.

The resolution, which was endorsed by the government's shareholders, would benefit the four directors representing Chinatrust Financial, whose business overlaps that of Mega Financial in securities and banking.

They said the move would allow Chinatrust Financial to obtain confidential information and pave the way for it to launch a takeover bid for Mega Financial.

Analysts have urged the government to back up its promise to map out measures to close loopholes in corporate governance regulations and ensure that shareholders' interests are not sacrificed.