Reorganization of a Taiwanese Corporate Icon

Tatung was once a pillar of Taiwan’s industrial landscape, yet a succession battle led to declining performance and brought the company to the brink of collapse. Photo: CommonWealth Magazine

Tatung is a household name in Taiwan and was a major player in the country’s industrial rise. Yet this century-old enterprise has fallen on hard times, its property the only remaining asset of value. What caused Tatung’s downfall, and will it be able to rise again?

It only took a couple of hours for the Lin family to lose management control of Tatung, a company it had stewarded for over a century.

On the morning of October 21, a group of activist investors known as the “market faction” scored a decisive victory at an extraordinary shareholders meeting, where their members were elected to seven of the nine seats on the company’s board of directors.

It was the first time in Taiwan that outsiders had gained an absolute majority of board directors. The only seat remaining in the hands of the “company faction,” which represented the Lin family, was won by Tatung Chairwoman Lin Kuo Wen-yen.

At a press conference after the meeting, new director Wang Kuang-hsiang, the head of the market faction, said that Eastern Broadcasting Co. Chairman Lin Wen-yuan would step in as the new Tatung chair. On November 2, Lin was unanimously elected chairman.

How did the Lin family, who founded Tatung in 1918 when Taiwan was under Japanese colonial rule, eventually lose management control of the company?

Established by Lin Shang-chih under the original name “Hsieh Chih Business Enterprise,” Tatung began as a construction company whose projects include the Executive Yuan building in Taipei.

After the end of World War II, the business expanded into electrical appliance and equipment manufacturing, and Lin’s son, Lin Ting-sheng (widely known as T.S. Lin), took over from his father. Tatung became one of the first 16 publicly listed Taiwanese companies in the late 1950s, the beginning of a golden era.

At the time, Tatung’s electric rice cooker became a symbol of the company’s excellent Taiwan-made products. T.S. Lin, regarded as a key figure in Taiwan’s industrial development, also devoted himself to education, setting up the Tatung Institute of Technology in 1956. It was renamed Tatung University in 1999.

Many of Taiwan’s foremost industrial talents attended Tatung University, including some top executives at leading manufacturers such as bicycle maker Giant Manufacturing and electronics companies Pegatron Corp. and Hon Hai Precision Industry Co. Tai Cheng-wu, current CEO of Hon Hai subsidiary Sharp Corp. of Japan, is one of the school’s alumni. His first job was at Tatung, and at a press conference this year unveiling Sharp’s 5G phone, Tai became emotional when asked about Tatung’s management feud. He expressed his gratitude to Lin Ting-sheng for his support.

Tatung shareholders meetings traditionally were held in the Shang Chih Building at Tatung University. However, the October 21 meeting took place at the Dazhi Denwell Hotel in the northern part of Taipei, portending the end of the Lin family’s reign.

Tatung shareholders vote for directors at an extraordinary shareholders meeting on October 21. Photo: CommonWealth Magazine

The Lin family valued tradition, and T.S. Lin’s successor was to be chosen from among his five sons. However, his offspring ended up undermining the succession process and harming the company. Since 2000, the Tatung Group has turned a profit only six times and has struggled to retain its longstanding reputation as a standard bearer for “buying Taiwanese.”

W.S. Lin (Lin Wei-shan), T.S. Lin’s oldest son, took over as Tatung’s president in 1972, but had to wait until his father died before formally succeeding him as the company’s chairman. Within two years, he was implicated in a case of embezzling Tatung funds, which he used to make a personal investment in a company called Nature Worldwide Technology Corp. Litigation in the case would last 10 years.

The second son, W.T. Lin, was originally responsible for Tatung’s overseas business. He later returned to Taiwan to set up his own company, eager to chart his own course.

T.S. Lin also had three sons from a second wife. The oldest, Lin Chen-hua, was mired in debt and faced being sued by creditors. He was not involved in Tatung’s core operations.

While Tatung’s core business was stable, its subsidiary Chunghwa Picture Tubes, which manufactured display panels, was consistently losing money. It was not until Lin Cheng-yuan, the second son from the second wife, took over as CEO and made it profitable venture that for a period of time it was Tatung’s golden goose.   

The flat panel industry soon fell victim to cutthroat pricing competition, however, creating operating problems for Chunghwa Picture Tubes and eventually leading to Lin Cheng-yuan’s indictment in the U.S. in 2015 on charges of price fixing. In 2003, Lin Cheng-yuan resigned from the company, citing health reasons. He was succeeded by his younger brother, Frank Lin, who resigned in early 2007 and was replaced by W.S. Lin.

Just as his sons were abandoning the family business, T.S. Lin died in 2006. That year, the power struggle taking place among the patriarch’s successors would begin bubbling to the surface.

Last line of defense

In 2006, a new election for Tatung board directors and supervisors was held. At that time, rumors emerged that half-brothers W.T. Lin and Lin Cheng-yuan would team up with Robert Tsao, honorary chairman United Microelectronics Corp., to win control of the company. Speculation again surfaced in 2008 that Frank Lin would join hands with former China Development Financial Holdings President Benny Hu in what some suggested was a revenge play emblematic of Shakespeare’s Hamlet. The two gambits were successfully blocked largely because of the presence of W.S. Lin’s wife, Lin Kuo Wen-yen.

Lin Kuo, who married into the Lin family when she was 28, became known as the “Iron Lady” for her shrewdness and strong personality. After T.S. Lin had a stroke in the early 2000s, she assumed the role of vice president, attending public events and speaking on behalf of the company while her husband sat quietly at her side.

Lin Kuo Wen-yen, nicknamed the “Iron Lady” of Tatung, served as the company’s chair-person until she was ousted in early November. Photo: CommonWealth Magazine

In 2018, when Tatung celebrated its 100th anniversary, W.S. Lin tendered his resignation, and a year later he was imprisoned for embezzlement and breach of trust. Lin Kuo took over as chairperson, and the same year the Tatung Group posted a loss of NT$23.3 billion, the biggest in the company’s history.

On June 30, 2020, Tatung brazenly blocked shareholders from exercising their right to vote, and the Taiwan Stock Exchange demanded that the company provide a public explanation of the situation. At the resulting press conference, Lin Kuo tried to deflect questions from reporters by claiming she did not understand what was being asked. She also appeared to consult with her lawyer on how best to answer when the questions were repeated.

It was also Lin Kuo who recruited former China Steel Chairman Lin Wen-yuan (no relation) to serve as an outside director and repel challenges to her rule of the company. Over the years she had fought off at least five bids for management control without ceding a single board seat.

That streak ended in October when Lin Wen-yuan, now chairman of Eastern Broadcasting Co., shifted his support to the “market faction,” effectively ending Lin Kuo’s reign of more than a decade.

In an interview, Lin Wen-yuan explained why he ultimately agreed to take over as Tatung chairman. “The founding Lin family no longer has the legitimacy to manage Tatung,” he said.

Up until the day before the extraordinary shareholders meeting, Lin Kuo had still not abandoned hope. As the market faction had the backing of shareholders who maintained more than half of Tatung’s total shares, her only option was to ask the Ministry of Economic Affairs (MOEA) to suspend the meeting. To do so, she reiterated a longstanding accusation that the market faction was backed by Chinese capital, which would constitute a violation of the Business Mergers and Acquisitions Act.

To Lin Kuo’s dismay, the Securities and Futures Bureau responded that there was no evidence to back her claim. The MOEA then rejected Tatung’s appeal.

But Lin Kuo had what she hoped would be one final ace up her sleeve. The company faction decided to throw its support behind former Ernst & Young Taiwan chairman James Wang, helping him win the most votes of any independent director. By law, the director with the highest vote total becomes the convener of the board and is responsible for calling board meetings. In theory, the convener could repeatedly try to delay the meeting scheduled for October 28 in order to avoid replacing the incumbent chairman. In addition, independent directors can call extraordinary board meetings.

If Tatung could gather evidence that the market faction had in fact colluded with Chinese investors, thereby weakening its voting rights and delaying a board vote for chairman, it could call another extraordinary shareholders meeting to win back management control.

After the October 21 meeting, however, Lin Kuo issued a statement that appeared to conflict with her original motive. In it, she said: “No matter what happens in the future, I will, as always, work with Tatung’s management team and do everything I can to safeguard Taiwan’s national and information security and protect Tatung’s century-old foundation.”

Though the October 28 meeting was postponed, James Wang rescheduled it for a few days later. Announcing the new date, Wang said that from that day forward there would no longer be a “company faction” or “market faction,” but that all stakeholders would belong to the “Tatung faction.”

At the meeting on November 2, Tatung’s nine-member board of directors voted unanimously to elect Lee Wen-yuan as the new chairman and to appoint Lin Kuo Wen-yen as Tatung’s honorary chairperson. The appointment would allow her to maintain an office at the company headquarters, where she would continue to be afforded a high level of courtesy. Lin Kuo expressed her approval of the board’s decision.

Although Tatung’s power struggle is now resolved, it will be hard-pressed to relive its glory days. The company’s consolidated sales in 2019 totaled NT$35.4 billion, down more than 40% from a year earlier and the lowest since 1997.

Wang Kuang-hsiang dispelled rumors that he was seeking the vice chairmanship. He did not provide any clues about how the new board plans to overhaul Tatung’s core businesses, perhaps reflecting the market faction’s lack of experience with the heavy machinery and electronics products that are a key source of revenue for the company.

Nevertheless, he was open about how Tatung’s property holdings could be developed. He said that the company would look into the government’s incentive program for redeveloping old buildings, and cited Tatung’s property on RenAi Road in central Taipei as a possible candidate. Another important asset is the company’s headquarters and Tatung University campus on Zhongshan North Road.

The academic institution that T.S. Lin established to help industry serve the country could well become just another number on Tatung’s financial statements, one more major change facing a company that was once among Taiwan’s industrial vanguard.

This article, written by Chohan Yang, first appeared in CommonWealth Magazine and is reprinted with permission from the publisher. Translation from the original Chinese was done for CommonWealth by Luke Sabatier.

Leave a Reply

Your email address will not be published. Required fields are marked *