Taiwan Ranks in Fourth Place in Corporate Governance in Asia
Thanks to a vigorous push by the Taiwan Stock Exchange (TWSE), Taiwanese listed companies have made substantial progress in corporate governance in recent years, greatly boosting investors’ confidence and interest in the market.
Currently, for example, over half of listed companies have embraced e-voting, a huge 86% increase over the level in 2015, and nearly half of listed companies have included a nomination mechanism for directors and supervisors in their corporate charters, 34% more than a year ago. At the shareholders’ meetings of over 70% of listed companies, the voting on motions is conducted on an item-by-item basis, and among these companies, 93% post resolutions from the shareholders’ meetings on the TWSE Market Observation Post System on the same day.
As of June 2016, 35% of listed companies had instituted auditing committees and 87% of them–20% more than a year earlier–have appointed independent directors. Many listed companies now provide corporate information in English – 30% of them for notices, 21% for meeting manuals, and 16% for annual reports for shareholders’ meetings–greatly augmenting the information transparency.
Moreover, as of September this year, 262 listed companies had published 2015 CSR (corporate social responsibility) reports, and the number is expected to top 280 by the end of the year. These figures compare with 171 for the 2014 CSR reports and 109 for 2013. Fully 97% of the 2015 CSR reports were compiled according to the internationally adopted Global Reporting Initiative (GRI) Guidelines and 51% were certified by a third party, significantly boosting the comparability and quality of the reports.
As a result, in the 2016 evaluation of corporate governance in Asia conducted by the Asian Corporate Governance Association (ACGA), Taiwan ranks fourth place among 11 Asian markets–behind only Singapore, Hong Kong, and Japan–and up two notches from sixth place in the previous evaluation in 2014. Established by CalPERS (the California Public Employees’ Retirement System), the Asian Development Bank, and Lombard/APIC, ACGA has been the most important body promoting corporate governance in the region. ACGA’s 2016 evaluation covered the five aspects of corporate-governance norms and practices, effectiveness in law enforcement, politics and the institutional setting, accounting and auditing, and corporate-governance culture.
This remarkable performance has resulted from the government’s strenuous efforts in promoting corporate governance starting from 2003, when the Executive Yuan issued its “policy guidelines and action program for intensifying corporate governance.”
In December 2013, the Financial Supervisory Commission (FSC) issued a “blueprint for strengthening the nation’s corporate governance,” which included concrete plans in five areas: forging corporate-governance culture, promoting shareholder activism, upgrading the function of boards of directors, disclosing key corporate-governance information, and strengthening legal procedures.
In addition, in October 2013 TWSE established a Corporate Governance Center to take charge of promoting corporate governance among listed companies. Further, in June this year, it published “guidelines for engagement by institutional investors in corporate governance.” Scores of institutional investors have subscribed to the guidelines, pledging to urge listed companies to upgrade their corporate governance. These institutional investors include government funds (such as the Chunghwa postal fund, labor insurance fund, national development fund, and pension fund for public functionaries), insurance companies, pension funds, and some foreign funds such as Robeco Asset Management of Holland.
The promotion of corporate governance is part of TWSE’s active drive to restore the confidence and interest of investors in the local bourse following the global financial tsunami of 2008, which was a major reason for the contraction in trading volume to the current daily average of below NT$80 billion. In the opinion of TWSE chairman Shih Jun-ji, the normal trading scale of the local bourse–including the TWSE and the OTC (over-the-counter) market–should surpass NT$100 billion-$120 billion daily. Shih assumed the chairmanship on August 1 from his previous position as a minister without portfolio. A scholar in finance, he was formerly a chairman of the FSC.
Also for the purpose of stimulating interest in the market, TWSE has been seeking to promote innovative financial products, notably ETFs (exchange traded funds), which are specific index-based mutual funds, while also eradicating insider trading and lifting unnecessary controls and improving the trading system, in conformity with international norms.
“At the helm of TWSE, I view my core objective as maximizing its profit by boosting the trading value, rolling out innovative financial products, and providing value-added information and other services,” stresses Shih.