The Financial Supervisory Commission yesterday gave an overview of upcoming changes aimed at bolstering corporate governance through tougher regulation of major stakeholders of financial institutions.
The commission is set to tighten restrictions, barring responsible persons at financial institutions from holding concurrent key positions at other financial firms.
“The change addresses potential conflicts of interest when key people at financial companies are knowledgeable about and actively involved in the management of competitors in the industry,” FSC Chairman Wellington Koo (顧立雄) told a news conference in Taipei.
To ensure fair competition and to foster innovation in the financial sector, restrictions on concurrent engagements would be extended to responsible people at banks and financial holding companies, as well as interested parties, such as spouses and second-degree relatives.
For instance, Sylvia Peng (彭雪芬), spouse of Taishin Financial Holding Co (台新金控) chairman Thomas Wu (吳東亮), would be barred from concurrently serving as a director on the board of Shin Kong Financial Holding Co (新光金控) on behalf of a family-owned investment holding company, the commission said.
To improve oversight, financial companies that own assets worth NT$1 trillion (US$33.44 billion) and have a five-member board of directors would be required to give at least three seats on the board to industry experts, Koo said, adding that for every three seats added to the board of directors, one must be allocated to an industry expert, up from one in every four.
If a board of directors has more than 13 seats, at least five must be occupied by industry experts, to ensure diversity among directors and supervisors, Koo said.
The change would make it more difficult for companies to swap out their board appointees at investee companies, Koo said, adding that having a highly professional board of directors that is not subject to frequent shuffles would go a long way toward improving governance and compliance.
However, the change would not be imposed on state-run financial companies, as they are under additional supervision by the legislature and the government, the commission said.
Changes to the rules on concurrent engagements are expected to come into force by July 1 next year, it said.
Meanwhile, the commission said it would also tighten controls on proxy solicitation following a series of high-profile proxy fights over the past year.
Proxy solicitors must be a shareholder in the target company for at least one year and hold a stake of more than 0.005 percent of shares in circulation, up from a previous requirement of 0.002 percent, Koo said, adding that the change would take effect on Jan. 1 next year.
“The use of proxy solicitation has harmed governance as it allows major shareholders to yield influence that is disproportionate to their ownership of a company,” Koo said.
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