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Editorial: Shareholders should take control

The recent raids on three listed companies suspected of insider trading reflect an urgent call for better corporate governance as authorities step up their investigations of internal fraud and insider trading by corporate executives.

The latest raid on Inventec Appliances Corp last week -- following those on Veutron Corp and BenQ Corp last month, as well as Rebar Asia Pacific Group and Asia Pacific Broadband Telecom Co in January -- show that after years of promoting good corporate governance, the eradication of corporate malpractice has only been skin-deep.

The government has been pushing to establish tougher rules to protect shareholders' interests and rights, along with stricter punishments for corrupt directors and auditors, since the financial scandals involving Procomp Informatics Ltd and Infordisc Technology Corp in 2004.

Good corporate governance should be the main driving force in the bids to improve the performance of the nation's capital markets, to further enhance the value of Taiwanese shares and to better safeguard the rights of shareholders and investors.

But the recent spate of insider trading probes show that the nation still has a long way to go on in reforming its corporate governance policies and laws despite some improvements.

Now demands for the development of more "activism" by shareholders to help push for and accelerate better corporate governance have become an issue, both in academic circles and in practice.

Shareholders, especially institutional investors, have long blindly sided with company executives' initiatives, allowing directors and major shareholders to instigate investment plans or dispose of corporate assets as they please.

When shareholders don't agree with these initiatives, they generally decide to sell their shares as a way of protesting the corporate decisions, but few of them have ever publicly taken a stand against a company's management.

In Japan, the concept of shareholder activism has recently gained more recognition as international investors have claimed bigger stakes in Japanese companies. That Pentax Corp's proposed merger with Hoya Corp was killed off by shareholders last week was just an indication of the trend toward more shareholder involvement in the country.

In the US, a similar "shareholder revolt" was seen last month during Take-Two Interactive Software Inc's management reshuffle, when institutional investors took the chance to gain a bigger say in the company's business plans.

One case where shareholders will be able to exercise their rights is Asia Pacific Broadband's shareholders' meeting due to be held on April 30, when acting chairman Springfield Lai (賴春田), who was appointed by the government, will be seeking support from individual shareholders in his battle against shareholders supported by the Wang clan.

The mentality of shareholders may not change overnight, but the call for corporate management to be more transparent and accountable is slowly being heard, and the upcoming voting season -- when approximately 1,200 listed companies are required by the regulator to hold their annual general meetings before June 30 -- presents a key test for shareholders' commitment.

What is sad, however, is that some shareholders may find it difficult to exercise their rights this year, as some 300 listed companies have decided to hold their annual general meetings simultaneously on June 13, while another 300 will hold theirs simultaneously on June 15 -- a dirty trick to prevent large numbers of shareholders from being able to attend the meetings of all the companies in which they invest.
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