CTBC Financial Holding Co announced on Oct. 31 that it would acquire Taiwan Life Insurance Co. CTBC plans to buy a 100 percent stake in the life insurance company through a share swap scheme. Initially, it will keep both CTBC Life Insurance and Taiwan Life, and retain the latter’s more than 6,000 employees, keeping their salaries and business operating system unchanged for two years.
Since CTBC is planning to merge the two insurance brands after the two years, the buyout could spark another wave of mergers in the financial industry. However, unlike previous mergers, this is likely to promote share participation among financial institutions on either side of the Taiwan Strait, backed by the proposed cross-strait service trade agreement.
For CTBC, obtaining a ticket to China’s life insurance industry through the buyout is a key incentive. Taiwan Life is one of four Taiwanese life insurance companies that have joint ventures in China. Founded in 1947, the 66-year-old company has total assets of NT$430 billion (US$14.5 billion). The deal can help CTBC meet the China Insurance Regulatory Commission’s rules on foreign investment in the insurance industry.
This buyout is just the beginning. The trade agreement will loosen regulations on mutual share participation in the banking, insurance and security sectors. Once the agreement comes into effect, a series of financial institution mergers are likely.
For the about 400,000 Taiwanese employees in the domestic financial sector, there are concerns that there will be more layoffs and labor conditions will worsen following a new wave of mergers. Take CTBC for example: Although it promises that both salaries and the business operating system will remain unchanged for two years, what will happen afterward?
Taiwan Life will be the third insurance company that CTBC has acquired. It says that it wants to recruit more sales staff, but after the two insurance brands are merged, their internal systems are likely to be integrated. Will this affect employees? Will labor conditions change after the two operations are integrated? If CTBC transfers some employees to China, the impact on their lives and families might become a thorny issue.
Lin Jia-he (林佳和), assistant professor in the College of Law at National Chengchi University, quoting Article 16 of the Business Mergers and Acquisitions Act (企業併購法), says: “Any surviving company, newly incorporated company or transferee company shall serve a written notice expressly describing labor conditions to any and all workers staying after the merger according to the negotiations between the existing and the new employers. All workers shall notify the new employer on whether they accept the conditions in writing.”
Existing and new employers are thus able to lay off whomever they want. As for those who choose to stay, employers can change the labor conditions after the merger. This completely ignores employees’ collective bargaining right, which allows employers to exploit them.
In the past, waves of financial institution mergers translated into waves of layoffs. Even if the total number of workers remained unchanged, companies sometimes took the chance to lay off senior workers to save on personnel costs.
Not long ago, the Democratic Front Against Cross-Strait Trade in Services Agreement held a press conference to push for an amendment to the act to protect workers’ collective bargaining right during the merger process. The ruling and opposition parties should make the amendment a precondition for the legislature’s review of the service trade agreement.