On Thursday, the Cabinet approved draft legislation for the supervision of corporate bodies. The law, if promulgated, would open 165 government-subsidized foundations — including the Chiang Ching-kuo Foundation, the Taiwan Postal Association and the Taiwan Telecommunication Industry Development Association — to management assessments.
The draft legislation proposes that the boards of these institutions ensure their finances and personnel are in order, and allows a grace period of 18 months to ensure everything is functioning as it should, or risk being dissolved by their supervising institutions.
While the proposal is an important step toward improving the management of corporate bodies, it should not be used as a tool for government interference.
Since the start of this year, the government has provided financial assistance to 165 foundations, with NT$250 billion (US$8.16 billion) in contributions, accounting for more than one-eighth of the government’s total budget, Directorate-General of Budget, Accounting and Statistics (DGBAS) statistics showed.
Many of these foundations have special conditions, with 122 receiving more than half of their funding from the government, relying on contract-based services provided to government departments for 70 to 80 percent of their revenues, the DGBAS said.
These institutions are very much a part of the government machine, essentially performing as go-betweens.
However, the lack of democratic oversight has led to accusations that the government is hiding behind private-sector protections.
The Legislative Yuan’s Budgetary Research Center’s assessment report on this year’s central government budget said that government-funded foundations often drift from their original purpose to serve the public interest and become investment companies, operating outside their remit.
The areas these foundations have started investing in are leading to generous corporate remunerations and high personnel costs, which is difficult to justify given their purpose, the report said.
Foundations that get less than half of their funding from government subsidies, but at which more than half of their total annual revenue comes from government or brokerage fees, are not required to submit budgets for legislative review, leading to inadequate oversight of their finances, the report said.
For these reasons, the government is to be commended for its intention to address these issues with the draft legislation, including clauses to prevent overt profiteering, stipulating that boards and watchdogs be in principle non-paid positions to avoid the problem of double salaries.
However, there is a real danger that too much power would be put in the hands of supervisory bodies if the rules were to allow them to dissolve foundations at will.
The reason for this is that many government-funded foundations work in the public interest, so any process leading to their dissolution must be undertaken with the utmost caution, preferably having passed legislative review and approval.
In addition, it makes no sense to list foundations that before the legislation is promulgated only receive 20 percent of their funding from the government as merely requiring supervision, as mabny have less than 20 percent government funding, but get more than 50 percent of their annual revenue or brokerage fees from the government.
These corporate bodies ought to be included in a government investment report — similar to the Beteiligungsbericht required in Germany — compiled by the DGBAS and submitted for review and oversight by the legislature, to mitigate malpractice.
The government should regard the foundations over which it exerts some control as subsidiaries helping to promote the government or communicate with the legislature or society, facilitating the needs of governance, improving its performance, or even to write off its public relations expenditure.
In addition, the government should make better use of the stipulations in articles 26 and 27 of the Control Act (監察法), allowing Control Yuan members or individuals acting on their behalf — with the correct identification — to enter institutions or companies and inspect their records when the need arises.
It could also use the stipulations in Article 79 of the Audit Act (審計法) if it wants to audit “enterprises jointly operated by the government and private interests and those private organization that receive government subsidies in a manner prescribed in this law” to bolster democratic oversight of government-subsidized foundations.
Lin Terng-yaw is a lawyer.
Translated by Paul Cooper
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