United Microelectronics Corp (UMC, 聯電) Chairman Robert Tsao (曹興誠) yesterday criticized his bigger rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) Chairman Morris Chang (張忠謀), for the latter's recent change in attitude toward a stock bonus scheme.
In a speech delivered at the 2004 Taiwan Venture Forum yesterday, Tsao said the stock bonus scheme is a proven system that helps the nation's high-tech companies hold onto their employees.
PHOTO: CNA
But there are concerns by investors and regulators that excluding such grants as a cost allows companies to inflate their profits while hurting return on equity. Still, Tsao defended the scheme as the best solution to attain a lower employee turnover rate.
In late October, Chang said that the expenses incurred by stock bonuses do place a burden on earnings and could distort a company's bottom line. He said that TSMC was still seeking a better solution to retain talented employees and safeguard shareholders' interests.
As a result, TSMC said last week that its board was proposing a revised stock dividend policy, calling for future dividend distributions to be made preferably by way of cash.
Stock dividends won't exceed 50 percent of the total distribution, the company said in a statement.
But Tsao yesterday raised doubts about Chang's stewardship. He said that stock bonuses should be granted to rank-and-file employees instead of senior level management, but as far as he knew Chang received the majority of TSMC's dividend distribution.
"TSMC and Morris Chang are the biggest beneficiaries of the stock bonus scheme, and we believe that he should come out to defend the system. But he hasn't," Tsao said.
"After he [Chang] criticized the system ... we thought he might cancel the grants. But in contrast, he worked to issue the dividend, with himself receiving the greatest amount. Therefore, I question his credibility," Tsao said.
The new rules requiring firms to count stock bonuses as part of their costs, are expected to be implemented next year, a Chinese-language business daily reported last month, citing unidentified government officials.
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