The prosecution of a series of high-profile corporate scandals and accounting abuse cases in the last two years -- involving technology firms such as Procomp Informatics Co, Infodisc Technology Co, Summit Computer Technology Co and Pacific Electric Wire and Cable Co -- initially shattered investor faith in management integrity and corporate governance in Taiwan. But after a few months, many investors became complacent that the markets had survived yet another blow. They shrugged off complaints about huge losses and went back to check on their other stocks, betting more money on seemingly unaffected companies.
A major issue, however, is that few investors considered whether the corporate fraud cases that came to light were endemic -- the tip of the iceberg rather than a few "bad eggs." No one bothered to ask if the financial misdealings at the bad eggs had an affect on the general health of financial markets and the government's supervisory mechanism.
And then came the prosecutors' charges in July against President Chen Shui-bian's (
While investors looked on in concern, Lin Chung-cheng (
No doubt this spate of incidents will further destroy investor confidence in management integrity and corporate governance. The most recent cases are also likely to hurt the authority of Chen's administration and the credibility of the Democratic Progressive Party in the run-up to the mayoral elections next month -- a scenario exacerbated by Friday's announcement that first lady Wu Shu-jen (
But investors should realize that the corporate fraud cases and the corruption charges against government officials are inevitable. They might appear to be isolated events, but the problems have been going on for so long now that it is more accurate to think of them as systemic. They are part of the nation's flawed financial system, as well as a reflection of the developing culture of arrogance and greed among corporate executives and political figures. Those who broke the law were both wealthy and well educated, but they didn't feel satisfied with what they had; they just wanted more.
A fast and effective prosecution of financial crimes is one of the ways to help get this derailing train back on track. Other reform measures such as legislation on party assets and lobbying, as well as amendments to the laws governing political donations and public functionary assets disclosure are also desperately needed to ward off possible wrongdoing.