Forum calls for corporate governance model

The government should encourage Taiwanese firms to allow board members to supervise the performance of their companies' management -- a so-called internal corporate governance system -- pundits said yesterday.

"Other than practicing self-discipline, a proper mechanism should also be set up by corporations to safeguard the interests of all stakeholders by allowing their board members to supervise manage-ment," said Ko Chen-en (柯承恩), dean of National Taiwan Univer-sity's School of Management.

Ko made the comments yesterday at the launch of the Citigroup University Lecture Series, which was organized by the university and Citigroup (花旗集團) with the aim to educate college students about the future trend of Taiwan's financial markets.

Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions regarding corporate affairs.

Everyone from shareholders, employees, creditors and even the government have a stake in corporate well-being, said the treasurer of Fubon Financial Holding Co (富邦金控), Victor Kung (龔天行), who took part in the lecture series' inaugural forum.

Ko said that the government should design a sound legal and market mechanism so that strong commercial rules can be designed as role models for others to follow in the future.

While corporate governance is a new managerial concept in Taiwan, many western enterprises have been utilizing the concept to increase corporate competitiveness.

Pundits at the meet said that the pursuit of corporate governance usually introduces more transparency in professional management, greater access to corporation information and supervisory functions -- all of which results in the maximizing of long-term value.

"For the past 10 years in the US, corporate governance has allowed investors to be able to effectively punish ill-performing management in order to maximize future development," said Eric Chen (陳聖德), the country corporate officer of Citibank, Taiwan.

But Chen added that he is concerned about the difficulties of transplanting corporate governance into Taiwan's conservative corporate culture.

He said that shareholders in western countries, for example, tend to file lawsuits against acts of misconduct that have damaged corporate interests as a way to protect their own interests.

However, in Taiwan most shareholders will be unwilling to take legal action against managerial misconduct because the justice system lacks personnel who are specialized in financial and economic matters, Chen said.

In addition, the lack of access to corporate information -- and time-consuming and expensive legal processes -- will also smother any interest in legal options, he added.

"Even if they win the lawsuit, it's only advantageous to future management teams, not to the shareholders themselves," Chen said.

Sharing a similar view, Ko stressed that the government should create a judicial environment that will facilitate the pursuit of the corporate governance model -- by, for instance, regulating the make-up of corporate boards by inviting independent board members.