Pity Hsieh Sheng-fu (謝生富). As chairman of Taiwan Fertilizer (台肥), a state-run company that had
recently been privatized, he did what any other manager would do: he attempted to increase shareholders' returns. The fact that he chose four newly established subsidiaries to accomplish this by way of lending them money with which they could ramp the parent company's share price was by no means a new tactic among publicly listed companies, either. But he was singled out for censure by eagle-eyed members of the media, which led to his being fired, along with the rest of the company's board of directors and supervisors.
Yet, assuming that this was the reason for his dismissal, it is a good thing that Hsieh met his fate this way. What he was doing was, regardless of common practice, wrong. And it holds out promise that his example will send a warning to the managements of other state-owned companies coming to the market in the near future.
What the case has also exposed, however, is the difficulties facing the government in implementing its privatization program. And it also remains far from clear that Hsieh was indeed dismissed for reasons that were altruistic, rather than political.
To be sure, it would be a stretch of the truth to call Taiwan Fertilizer a private company. The Ministry of Economic Affairs no longer holds a majority stake in the firm, but it still has a controlling stake. This has given its management the best of both worlds: no effective oversight, either officially by the legislature or practically by private-sector shareholders, but the connections and the resources of the government to employ in pursuing business opportunities.
This is not to say that a mechanism for oversight of newly privatized state-run companies does not exist; indeed, perhaps the core of the present controversy lies within the gray area between the economics ministry's Commission of National Corporations, which runs the state-owned sector, and the finance ministry's Securities and Futures Commission, which is the supposed watchdog of publicly listed companies. Both are pointing fingers at each other over who should take the blame for Taiwan Fertilizer's wrongdoings.
The commission has at least acted swiftly and decisively by removing the company's management and sending in a fresh team. But these new managers were chosen from the ranks of the economics ministry, which should hardly assure minority shareholders of the merits of privatization. Also, rumors are swirling that Hsieh was the target of a political assassination plot launched by speculators who had been short-selling the company's stock and got burnt by his manipulation of the share price.
Hopefully, the new management has been installed as a band-aid solution to a transitory problem. They should be quickly phased out as the government releases more shares in the company. Unfortunately, little faith exists that this will happen, given the past and present record of the government's privatization efforts.
What is sorely lacking in the entire process is transparency. Basically, control of state-owned companies appears to be passing from the inefficient few to the privileged few. As one analyst with a multinational investment bank told this newspaper recently, his assessment of the privatization process was that it was a case of "passing control of state-owned companies from the legislature to the legislators," ie that well-connected politicians were shifting public assets from their desktops to their briefcases.
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