The saga over the control of Mega Financial Holding Co took an unexpected turn yesterday, when two private directors tendered their resignations, thereby preserving the government's control of the nation's third-largest financial services provider just hours after the government had lost its majority in a board election.
The government now holds seven seats on the board of Mega Financial, while private shareholders hold only six, down from the eight they won in an election yesterday, Liu Teng-cheng (劉燈城), director general of the Ministry of Finance's National Treasury Agency, said yesterday evening.
Private director Chien Hung-wen (簡鴻文), who is chairman of Barits International Securities Co, and independent director Wu Rong-i (吳榮義), who is a former vice premier and former president of the Taiwan Institute of Economic Research (TIER), offered to resign immediately after the board meeting yesterday evening, Liu said.
Liu, who is in charge of the ministry's Government Shareholding Management Unit, was speaking at a press conference held at the Executive Yuan, accompanied by Vice Premier Tsai Ing-wen (蔡英文), Minister of Finance Joseph Lyu (呂桔誠) and Cabinet Spokesman Cheng Wen-tsang (鄭文燦).
Although Wu was recommended by foreign investors as an independent director, he has been deemed a covert private director considering his close ties with Chinatrust Financial Holding Co, which holds a 15.63 percent stake in Mega Financial.
Before the press conference, the ministry appeared set to lose its majority control of Mega Financial, which has NT$2.13 trillion (US$65.1 billion) in assets, in yesterday's board reshuffle.
The expected loss of government control of Mega Financial has sparked searing criticism about the ministry's inability to defend its power.
Before the resignations yesterday, the government, which controlled a 22.78 percent stake in Mega Financial, won just seven out of 15 board seats -- one less than it held before -- and three out of five supervisor positions at the company's shareholders meeting yesterday.
Smaller rival Chinatrust Financial grabbed four board seats and one supervisor spot. The remainder went to Wu, Chien, sports shoemaker Pou Chen Corp and Mega Financial's current chairman Cheng Shen-chih (鄭深池) who also won the most ballots.
Cheng Shen-chih, a private shareholder, was later re-elected as the financial service provider's chairman for another three years, although none of the government's seven representatives voted for him.
Mckinney Tsai (蔡友才), the government-appointed director and acting president of Mega Financial, secured 100 percent support to serve as the company's president, Liu said.
Liu emphasized that Mega Financial will not hold a board re-election as regulations stipulate that would only be required if the more than half of the board seats were vacated.
The 13-seat board will be responsible for Mega Financial's operations for the next three years, he added.
"The Cabinet is not completely satisfied with the outcome but it has met our goal," said vice premier Tsai Ing-wen.
In an unusually harsh tone, Tsai urged chairman Cheng Shen-chih, who is said to be a good friend of President Chen Shui-bian (
"Cheng should remember that today's election outcome [by which he became chairman] actually comes from the government's long-term cultivation and support ... He will be under the closest moral supervision from relevant agencies and the public," she said.
Asked whether this means that the Cabinet will not consider Cheng Shen-chih a government-appointed board director, the vice premier only said that the nation's legal structure was not ideal and that the government has high expectations for the chairman.
In an effort to calm public outcry and criticism from the media about what they described as the government's passive attitude toward safeguarding its power over Mega Financial, she said a report would be drafted to sort out responsibility for the situation.
In addition, she promised that the government will strengthen corporate governance, adjust the management of Mega Financial and review flawed regulations governing the solicitation of proxy votes, transparency of merger processes and sources of capital used for mergers.
"We will work for the healthy development of financial holding companies and will not compromise with specific conglomerates," she said.
Chairman Cheng Shen-chih has offered to quit the chairmanship of Chiao Tung Bank (
He will also not chair the merged entity.
Mega Financial's union welcomed the dramatic turnabout later yesterday.
"We are glad about the outcome," said Tsai Chiu-far (蔡秋發), chairman of ICBC's labour union. "Our insistence has achieved a triumph."
The union will continue to monitor the performance of the government-appointed representatives as well as those private board directors who harbor takeover plans in the future, Tsai said.
The union will continue to strive to put a representative of labor on the board, since there are now two vacancies, he added.
But the government didn't escape criticism from legislators.
PFP caucus whip Lee Hung-chun (李鴻鈞), said the Executive Yuan could have avoided the whole situation and negotiated on the case earlier.
"But the Democratic Progressive Party [DPP] government always makes abrupt changes as soon as its policy or decision is denounced by the public," Lee said.
DPP caucus whip Ker Chien-ming (
Chinatrust Financial announced in February that it would buy up to a 10 percent stake in Mega Financial, paving the way for a future acquisition.
The merger will serve the interests of investors and the fragmented financial sector since the two financial players will be able to become more efficient and achieve better economies of scale, said Shirley Yang (
Additional reporting by Jewel Huang
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