This month, the Financial Supervisory Commission announced it would amend regulations on financial reports and prospectuses issued by publicly traded companies to expand disclosure of salaries of board directors and supervisors. This so-called “fat cat” amendment aims to improve the transparency of information on directors’ remuneration, pushing more listed companies to share profits with their employees and encouraging reasonable remuneration for directors, the commission said on Aug. 1.
Fat cat company executives such as directors, supervisors and managers enjoy high salaries and bonuses, but run companies poorly. If a publicly traded company is on the financial regulator’s fat cat list, it implies a potential problem in the firm’s corporate governance.
Taiwan has implemented fat-cat measures since 2020, as the financial regulator encouraged companies to set reasonable remuneration for their directors. Based on current regulations, listed companies under six conditions are required to reveal information on executive remuneration, such as companies whose average annual wages are less than NT$500,000 (US$15,724). This year, 652 listed companies are subject to disclosure requirements, the commission said.
The commission expanded the disclosure requirements in its proposed amendment, with listed companies in three new conditions also required to disclose executive remuneration. They are profit-making companies whose employees have not received pay raises; companies whose profits have declined, but their directors’ salaries have increased; and companies that are positioned in the bottom 35 percent in corporate governance evaluations. It is expected that another 253 listed firms would be subject to disclosure requirements next year, the commission said.
Clearly, the disclosure requirements would allow investors to check the remuneration information and understand listed companies better, enabling employees to fight for benefits by using the information. This could boost corporate governance at listed firms.
However, the commission’s efforts so far do not add up to a cap of fat-cat pay, as the measures focus on transparency in information disclosure, rather than directing firms to allocate wages fairly. The expanded disclosure requirements might lead more listed companies to reveal their fat-cat remuneration, but they do not mean executives cannot earn more and lose control of their boardrooms.
This reflects the influence of the economy in traditionally conservative and business-friendly Taiwan on the subject of executive remuneration, which does not offer the government an opportunity to intervene in the allocation of wages at private-sector companies. Although policymakers have continued to call for listed firms to share profits with employees and raise wages, it remains unknown how big the effect of the fat-cat amendments would be, let alone that only listed firms would be obliged to conform to the disclosure requirements.
Moreover, more disclosures are unlikely to dispel the controversy over pay imbalances in Taiwan, as several loss-making listed companies still paid huge salaries and bonuses to their directors last year, with flat-panel maker AUO Corp leading the way by paying NT$22.82 million per person on average. Meanwhile, Hotai Motor Corp, which posted the largest losses among listed firms on the Taiwan Stock Exchange last year with losses per share of NT$35.39, paid NT$3.35 million to each of its directors on average.
The regulator’s fat-cat list is aimed at creating pressure on some companies that perform poorly, while their directors still receive disproportionate salaries.
However, more measures are needed to raise people’s awareness and generate broader debate in our society and therefore magnify the effect of dealing with the fat-cat salaries and the unfair pay phenomenon.
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