Corporate governance refers to a mechanism for guiding and managing a business that helps fulfill the responsibility of the company management, protect the legal rights of shareholders, and safeguard the interest of other stakeholders. Good corporate governance should provide with proper incentives that instigate a company’s board of directors (the Board) and its management to accomplish operational goals in ways that produce the greatest interest for the company and all shareholders. Good corporate governance should also help transform a company’s management structure and provide an effective oversight mechanism to encourage the company to better use resources, improve efficiency and, in turn, increase its competitiveness to reach the end of better social welfare.
Taiwan has been educating public companies on the importance of corporate governance since 1998. The Executive Yuan formed the “Corporate Governance Reform Task Force” on January 7, 2003 to study various issues of corporate governance for drafting the “Corporate Governance Policy Doctrine and Action Plans”, which then became the basis of promoting corporate governance. Under those action plans, the Taiwanese government promoted and implemented various policies, such as practices enhancing the independence of the Board, incentives for incremental establishment of functional committees in corporate boards, issues of corporate governance best practices, measures promoting electronic voting, improvements on the decision-making process and disclosure of related party transactions, introduction of investors protection measures, and more transparent corporate information.
While implementation outcomes of the corporate governance measures mentioned above are fruitful, the Taiwanese government found that neighboring countries have faster pace in their reforms on corporate governance, and which triggers the Taiwanese government to pay more attention to this trend. According to the CG Watch 2010 issued by the Asian Corporate Governance Association (ACGA) which evaluates corporate governance practices in Asian countries, Taiwan was ranked 4th, showing that Taiwan’s efforts in pursuing good corporate governance have been recognized by relevant entities. In addition, Taiwan has consecutively ranked 13th for 3 years in the Global Competitiveness Report compiled by World Economy Forum (WEF), indicating that Taiwan maintains a great level of competitiveness. However, the CG Watch 2012 issued by the ACGA ranked Taiwan down from the 4th to the 6th. The report reveals that while Taiwan gradually implements reforms in corporate governance, its pace was behind other evaluated Asian countries.
In light of aforementioned evaluation results from the CG Watch 2012, Taiwan aggressively reviews the international trends of corporate governance development and facilitates its implementation of relevant measures based on the growing need of Taiwan’s capital market to maintain its regional competitiveness. The Organization for Economic Cooperation and Development (OECD) outlines 6 reform priorities for taking Asian corporate governance to a higher level and reminds Asian countries to work on implementation so that it can keep pace with amendments of laws and regulations, and that principles of corporate governance can be fulfilled. In addition, in recent years, certain companies were found using corporate resources inappropriately for proxy fights or infringing shareholders’ rights. Those ill cases indicate room for improvement on corporate governance in Taiwan and an urge for companies to take serious initiatives to pursue good corporate governance. To enable clear and better understanding on the future policy and plans for good corporate governance in Taiwan, the Taiwanese government issues the Roadmap as a guidance. The Roadmap is also designed for helping businesses grow in a healthy and sustainable way so that they can increase market confidence and Taiwan’s international competitiveness.
Corporate Governance Roadmap 2013(Download, modified P.32 on August 15, 2014)