Just as the media had predicted, the government shareholders were defeated and the Koo family won two-thirds of the seats in China Development Financial Holding Corp's recent board of directors election. While the government would have been annoyed at losing this battle for executive power over China Development, it should be more concerned about losing a greater war because it lacks a clear understanding of what role it should play in the privatization process.
In the privatization of publicly owned companies or financial institutions, there is always a transitional stage in which the company is privatized in name, but is in fact still largely under government control. How should the government exercise its rights as a shareholder during this stage? The government has never had a consistent or firm position on this, and the authorities managing government shares tend to sway in whatever direction public opinion leans. Each case is dictated by different principles, but when the government is represented on a board of directors, it is often unclear whether the chairman represents the interests of the government or those of the private shareholders.
Private shareholders attach considerable importance to the board of directors and insist on their management rights. That private shareholders are willing to fight hard to defend these rights is often given as a reason for the government's defeat in board elections. Unless the government has some kind of hold over the big private shareholders, it cannot beat them. In this light, the government's most recent defeat is hardly surprising.
The government is being forced by public opinion to maintain seats on company boards because of the perceived threat posed by scheming consortiums. This is also the hole in privatization policy that the government doesn't dare address. The government even seems to think that privatization means turning companies into consortiums. When its reputation is dragged through the mud, the government more often than not chooses to take refuge in rhetoric, rather than taking a stand. Sometimes, its position on management and leadership rights seems to contradict the stated goal of privatization. The government ends up battling private shareholders and competing in hard-fought board elections.
When looking back at the government's fight for seats on the boards of firms like China Development, Hua Nan Financial Holdings, Mega Holdings and Waterland Financial Holdings, it is apparent that its staffers worked themselves to the point of exhaustion, even taking the approach of free marketeers and pursuing proxy votes. Despite all this, the government lost its board seats. And despite accusing its opponents of acting illegally, it was powerless to stop them.
The problem is that the government lacks any real motivation for this fight. Principles are in place to determine the suitablity of major shareholders in financial holding firms. Does the authority that manages the government's shares comply with these principles? If not, why does the government need to have more than half of the board's leadership positions? Isn't that also against the principles set by the agency in charge? If private shareholders don't qualify as major shareholders, do government shareholders just replace them? A financial institution has to motivate its intentions in buying another financial institution - whether it is for quick monetary gain or for long-term investment. So for what reasons does the authority handling the government's shares continue to hold these shares? If private shareholders are obliged to conform with these principles, then so is the authority that handles the government's shares.
Apart from the problems inherent in the referee trying to be a player, what the government is not clear on is why, when it claims to want privatization, it still seeks to control the management. Why doesn't the government just sell its shares as soon as possible?
No matter if it is the first or the second round of financial reforms, most people acknowledge that Taiwan's financial institutions are in need of consolidation. But this consolidation is bound to lead to the subject of privatization. Yet, there have so far been no policymakers who have addressed and explained away the doubts of the public. Just what is the government hoping to get out of this struggle for corporate power? It is hard to come by an answer to this question that is not just populist, as the government is not really addressing or solving this issue.
The public is waiting for the government to take a stand against privatization policies being dragged through the mud. In policymaking it is not enough to just have an aim, it is also necessary to explain this aim, and the government needs to be more transparent. Only by regaining support for its policies can the government take the right course and avoid getting entangled in dirty battles it cannot win.
Chou Tein-chen is professor and dean of the College of Management at Shih Chien University.
Translated by Anna Stiggelbout
For the Chinese Communist Party (CCP), China’s “century of humiliation” is the gift that keeps on giving. Beijing returns again and again to the theme of Western imperialism, oppression and exploitation to keep stoking the embers of grievance and resentment against the West, and especially the US. However, the People’s Republic of China (PRC) that in 1949 announced it had “stood up” soon made clear what that would mean for Chinese and the world — and it was not an agenda that would engender pride among ordinary Chinese, or peace of mind in the international community. At home, Mao Zedong (毛澤東) launched
With a new White House document in May — the “Strategic Approach to the People’s Republic of China” — the administration of US President Donald Trump has firmly set its hyper-competitive line to tackle geoeconomic and geostrategic rivalry, followed by several reinforcing speeches by Trump and other Cabinet-level officials. By identifying China as a near-equal rival, the strategy resonates well with the bipartisan consensus on China in today’s severely divided US. In the face of China’s rapidly growing aggression, the move is long overdue, yet relevant for the maintenance of the international “status quo.” The strategy seems to herald a new
To say that this year has been eventful for China and the rest of the world would be something of an understatement. First, the US-China trade dispute, already simmering for two years, reached a boiling point as Washington tightened the noose around China’s economy. Second, China unleashed the COVID-19 pandemic on the world, wreaking havoc on an unimaginable scale and turning the People’s Republic of China into a common target of international scorn. Faced with a mounting crisis at home, Chinese President Xi Jinping (習近平) rashly decided to ratchet up military tensions with neighboring countries in a misguided attempt to divert the
The restructuring of supply chains, particularly in the semiconductor industry, was an essential part of discussions last week between Taiwan and a US delegation led by US Undersecretary of State for Economic Growth, Energy and the Environment Keith Krach. It took precedent over the highly anticipated subject of bilateral trade partnerships, and Taiwan Semiconductor Manufacturing Co (TSMC) founder Morris Chang’s (張忠謀) appearance on Friday at a dinner hosted by President Tsai Ing-wen (蔡英文) for Krach was a subtle indicator of this. Chang was in photographs posted by Tsai on Facebook after the dinner, but no details about their discussions were disclosed. With