Thu, Sep 14, 2006 - Page 8 News List

What if Taiwan were a corporation?

By Darson Chiu 邱達生

The ongoing campaign against President Chen Shui-bian (陳水扁)claims that the people should rise up and depose the president. The idea has caused me to reflect on the ultimate check on the management of any company -- that the board of directors can discharge the CEO when necessary.

In corporate governance, the board instead of shareholders has the power to expel the man in charge. If we assume that Taiwan is a big corporation, then citizens are shareholders and people who live in Taiwan regardless of having the right to vote are stakeholders. When a group of shareholders does not think very highly of their CEO, the board certainly needs to conduct an investigation and decide whether or not to replace senior management. In the spirit of good corporate governance, following the listed rules and valuing the existing mechanism are universal principles.

The OECD principles of good corporate governance issued in 1999 have been recognized as the worldwide benchmark for companies and governments to design their organizational plans. The principles consist of several major components: the need to plan an effective corporate governance framework, guarantees of the rights of all shareholders, and clarity and transparency in the role and responsibilities of stakeholders and the board of directors.

The definition of an effective corporate governance framework is a structure that promotes transparency and efficiency, is consistent with legal requirements and specifies responsibilities of different supervisory and managerial levels. Good corporate governance should be able to protect and assist the exercise of shareholders' rights.

All shareholders, irrespective of their demands or opinions, need to be treated equally under the corporate governance framework. A sound corporate governance plan should identify and ensure the rights of all stakeholders through relevant legal structures and mutual agreements. Once the stakeholders are identified, the governance framework should help corporations and stakeholders work together to maximize their mutual interests. In addition, a sound corporate governance plan should ensure that the board can provide strategic guidance for the company and effectively monitor the management.

The OECD principles are a crucial reference for many nations and companies. In the US, the 2002 Sarbanes-Oxley Act provides for the independence of the board of directors and auditors of all listed companies. The functions of independent directors include assessing corporate social responsibilities, ensuring the company's compliance with legal requirements and monitoring managerial integrity and efficiency. Independent directors ensure the rights of shareholders and information disclosure. These legal requirements help ensure that corporations have a good start to create an effective corporate governance framework.

On the subject of the board's responsibilities, the OECD principles stress that the supervisory board should ensure independent advice, monitor management and take stakeholders into account. The corporation must create appropriate ethical standards to protect stakeholders and shareholders. The decisions made by the management will influence the goals and ethical behavior of any organization.

High ethical standards should inform the board's goals. It must accept responsibility with respect to the environment, ensure safety in the company's operations, create healthy work conditions, eliminate discrimination and share all necessary information.

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