Starting on Jan. 1, companies will be required to list their employee bonus shares as expenses in their financial books, as the nation aims to better conform to international accounting standards and practices.
Taiwanese companies have long issued bonus shares to boost morale and reduce turnover. This practice is particularly popular among high-tech companies where salaries tend to be lower than their counterparts in the West and Japan.
But such a practice raises ethical questions since bonuses are paid, not by the company itself, but by the issuing of new shares, which dilutes the share price of every stockholder. Industry analysts also criticize the practice since it is vital in allowing Taiwanese firms to have a relatively low cost structure compared to their foreign rivals.
With that said, the new accounting regulation is expected to have the greatest impact on companies with high-priced stocks and lucrative share-bonus systems.
For those businesses, salary increases may not be enough to cope with the impact of expenses. Analysts warn that many technology company employees who are used to working long hours may decide to switch professions or go into business for themselves after the new regulations are implemented.
Shih Ching-fen (史靜芬), chief operations officer at Penpower Technology Ltd (蒙恬科技), said in a recent interview that companies with high-priced stocks may offer more cash dividends to lessen the impact.
Penpower, based in Hsinchu, is a provider of handwriting and voice recognition technologies, as well as biometric solutions.
Shih said that Penpower does not expect to lose employees under the new regulations because it did not use a high dividend policy to attract staff, but rather offered higher salaries.
Epistar Corp (晶圓光電), the nation's largest maker of light-emitting diode chips for mobile phones, is preparing to offer more cash-profit sharing in lieu of stock-profit sharing as well as issuing stock options to employees, vice general manager Rider Chang (張世賢) said
Asked whether the company would take other measures to retain employees (such as salary increases), Chang said Epistar would wait and see what happens at other high-tech companies next year.
Epistar's board last month approved plans to raise NT$9.2 billion in funds by issuing 60 million shares at NT$120 per share and to issue NT$2 billion in five-year convertible bonds with a coupon rate of zero. The company plans to use the proceeds for capacity expansion and a facility purchase.
With technology companies struggling to find qualified employees, the new regulations could prompt adjustments in the salary structure throughout the technology sector.
Asked whether the change in regulations might encourage some employees to start their own business, Chang said that would depend on the nature of the industry.
He said that the upstream sector of the LED industry is very concentrated, with few manufacturers given the high entry barrier.
The downstream market may offer some niche opportunities, he said, but added that the capital and market access thresholds were still relatively high.
Within the integrated circuit (IC) design industry, which is not capital intensive but requires a high degree of technically skilled workers, some employees have privately said they hope to work hard before the expensing system is implemented, then switch to less stressful jobs and prepare to retire.
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