On the same day that tens of thousands of labor rights activists attended a variety of demonstrations in Taipei on International Workers’ Day on Friday, the legislature approved an amendment to the Company Act (公司法) requiring companies to establish profit-sharing plans in their charters.
The revised Article 235 in the Company Act states that companies must increase employees’ salaries by a fixed percentage based on the companies’ annual profits. The amendment is expected to benefit employees of about 644,000 firms, according to the Ministry of Economic Affairs.
Supporters of the amendment said that making employers share profits with employees, either in cash or as shares, would be a powerful incentive for employees to work harder, adding that the increased productivity would raise the companies’ overall profits.
While the amount of distributable profits for employees would be left to the discretion of a company’s management, advocates of the amendment said the move signaled a government push for social justice as the nation attempts to achieve a more equitable distribution of wealth.
However, some critics of the amendment highlighted the inadequacy of the revised law to punish companies if they fail to allocate earnings to employees, as the amendment does not include penalties for violations. Moreover, companies can allocate just a tiny share of the overall profits to employees to comply with the law, as long as company charters do not specify the amount or proportion of profits to be distributed to employees, they said.
Therefore, if the authorities concerned, such as the Ministry of Economic Affairs and the Ministry of Labor, fail to carry out their oversight duties effectively, there are many ways for companies to get around the law, and the benefits to employees would be mere lip service.
The apparent inadequacy of the revised act raises debates over to what extent the government should be able to interfere with corporate management. If shareholders do not agree with the boardroom’s pay raise initiatives, they can sell their shares as a way of protesting corporate decisions, but then who is to be blamed? The reason that the revised law is to be implemented in such a “flexible” way — meaning no penalties for violations, and no fixed percentage of annual profits to be distributed — is to disguise the fact that lawmakers know the legislation is useless.
Issues regarding lost jobs, stagnant wages and rising levels of income inequality are complicated and stem from years of weak economic development and poor government policies. Such issues have great resonance in society, particularly among members of labor unions and the younger generation, who have criticized companies for poor enforcement of corporate governance in terms of increasing employee morale and fostering their identification with the organization. It has also prompted lawmakers to draft amendments to the Company Act, the Factory Act (工廠法), the Labor Standards Act (勞動基準法) and the Small and Medium Enterprises Development Act (中小企業發展條例) to mandate pay raises for employees.
However, that there appeared to be a difference of opinion among politicians across party lines over three other law amendments just highlights how difficult it is to make a compelling case in favor of wage earners, if the issue involves government interference in the functioning of companies and, unfortunately, if the revisions create tension between employers and employees.
No one can be sure how effective the amendments might be, but one thing that is certain is that politicians have for years tended to advocate populist policies ahead of elections. They have claimed that they were doing the right thing without appearing to be hypocrites. However, the fact is, they were.
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