As companies struggle through the worst economic environment in decades, several are turning to the government for financial aid. But this kind of government help has triggered growing criticism in light of the high salaries and perks enjoyed by corporate executives whose companies are on the brink of collapse.
In response, the legislature’s Economics Committee passed the first reading on Thursday of a draft amendment to the Company Act (公司法) that would require companies receiving more than NT$1 billion (US$30.3 million) in aid to tell lawmakers face-to-face how they will restructure their businesses with the help of government funding.
Companies that receive between NT$100 million and NT$1 billion in aid would need to submit their plans to the legislature for review.
The amendment would also allow the agencies that oversee the bailout funds to impose limits on compensation for corporate executives and forbid companies from laying off employees during a specified bailout period.
Under the Company Act, the owners of a company seeking government funding, the board of directors, the supervisors and high-ranking management are all included under the definition of “executives.”
The Economics Committee also agreed in a separate resolution to restrict companies from launching overseas investment projects during the bailout period for fear the firms could squander the funds.
This draft amendment comes at a time when the global economic downturn is taking its toll on the domestic, export-oriented economy.
Last month, the nation’s export orders sank to a historic low of US$22.80 billion and the drop in orders meant exporters faced liquidity difficulties as well as difficulties repaying debt.
That resulted in more business closures and downsizing, which translates to rising unemployment. Government figures show that the jobless rate hit a five-year high of 4.64 percent last month. The aim of government aid is to help ailing companies weather their difficulties and prevent further layoffs.
But the draft amendment would give lawmakers too much power by requiring some companies to brief them in person, accompanied by administrative agencies. There is a risk that some lawmakers may seek to profit from the bailout projects and compel the government agencies involved to tweak the terms of rescue.
Companies applying for aid should be reviewed by the agencies, which should make a decision based on an objective and professional assessment rather than the legislature’s will.
It only takes a few dishonest lawmakers to abuse such powers. In this scenario, legislators could steer government aid toward some companies that in reality should not be bailed out, while ignoring other companies in desperate need of aid.
Accountability and transparency are imperative, not only on the corporate side but also on the legislative side. Checks are required to ensure that company executives and lawmakers alike use taxpayers’ money in a responsible manner — especially when their decisions can have a major impact on the economy.