The Ministry of Finance’s victory last week in retaining a majority on the Chang Hwa Commercial Bank board of directors was not unexpected, but it will increase tensions between the state-run lender’s major shareholders: the ministry and Taishin Financial Holding Co.
It also demonstrates that both sides have continued to neglect shareholders’ interests and corporate governance guidelines, as the past three years have seen more resources earmarked for litigation to defend not only the bank’s management rights, but also their legal ownership to it, with less being used to help improve the competitiveness of an institution that was founded in 1905.
Over the past decade, Taishin Financial, which has a 22.5 percent stake in the bank, and the ministry, which holds about 20 percent, have never been at peace with one another regarding the make-up of the bank’s nine-member board or with Taishin Financial’s plan to merge Chang Hwa with its banking arm, Taishin International Bank.
The supposedly ideal match between Chang Hwa Bank, strong in corporate lending, and Taishin International Bank, with its consumer banking and wealth management expertise, never materialized. Instead, the boardroom showdowns between the two sides — one in 2014 and another on Friday — show they are simply not on the same page on how to handle the development of Chang Hwa Bank.
Over the years the pair have made moves based solely on their own interests. They know all too well that conciliation cannot come without concession and concession cannot come without pain, but they refuse to yield.
Despite its success in the latest boardroom clash, the ministry will probably win the battle, but lose the war in terms of damage to the public’s faith in the government’s credibility and the growing doubt about public-private partnerships.
Last month, a ruling by the Taiwan High Court confirmed that a contractual relationship does exist between the ministry and Taishin Financial regarding their 2005 deal and therefore the ministry should support Taishin Financial’s quest to gain majority control of Chang Hwa’s board.
However, the ministry’s decision last week to contest the court’s ruling and the government’s apparent backing of the state shareholders’ proxy solicitation ahead of Friday’s board election have become all too common with public-private partnerships in this nation: There is no respect for the original contract.
The disputes between the ministry and Taishin Financial are unlikely to be solved soon, as they will be in the hands of judicial authorities for the next few years and are likely to continue to mar the two sides’ relations until the next board election in three years.
However, the loss of trust between the private and public sectors is such a critical issue that Taiwan should not take it lightly.
There are no winners. Pressure must be brought to bear on the ministry or Taishin Financial to force them to begin real negotiations and work toward ending their disputes once and for all, rather than allowing a second-rate drama by the second-rate players to continue for countless more seasons.
If, after such talks, the two sides still cannot see eye to eye, but still have an unwavering commitment to Chang Hwa, then the ministry should buy back Taishin Financial’s Chang Hwa shares, or the company should buy more Chang Hwa shares on the open market or through private placement.
Other workable solutions would also be welcomed, but no more just keeping to the “status quo,” please.
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