The Financial Supervisory Commission recently drafted amendments to the Financial Holding Company Act (金融控股公司法) and the Banking Act (銀行法), aiming to curb improper interference by major shareholders in the operations of financial holding companies and banks. Last week, the commission said it would submit the draft to the Executive Yuan for review this month and expected further deliberation in the Legislative Yuan later this year.
The commission unveiled the draft amendments in April, inserting a new Article 16-1 into the Financial Holding Company Act and a corresponding Article 25-1 into the Banking Act. Since then, it has held two public hearings to collect feedback from concerned parties and gauge public opinion. Under its previous drafts, the commission would have the power to punish major shareholders who improperly interfere in the operations of a holding company or bank by fining them up to NT$50 million (US$1.56 million), restricting their voting rights or ordering them to sell their shares.
Major shareholders can strongly influence a board of directors and directly intervene in company operations in terms of personnel, finance, business and investment. In the financial industry, though, the regulator expects major shareholders to communicate and interact with companies in which they own stakes through their representatives on the board, rather than getting information directly from management or engaging in any form of meetings with responsible executives.
The draft legislation responds to two cases last year when the commission imposed sanctions on Shin Kong Financial Holding Co and China Development Financial Holding Corp respectively for failing to comply with corporate governance requirements and for allowing major shareholders to improperly interfere in company operations. It also comes as the commission early last month meted out punishments to CTBC Financial Holding Co for similar violations.
Yet after discussions with legal experts and financial professionals, the commission last month decided to limit the punishment to fines only, as it wanted to avoid violating the principle of legal certainty. For example, it seems difficult to define major shareholders’ conduct as intervention in gray areas like lunch meetings with company executives. Some experts also said the proposed divestment orders might infringe on shareholder property rights, according to the commission.
The commission’s previous draft has faced strong objections from the financial industry and there is still a long road ahead in separating management and ownership within the nation’s financial institutions, even though the commission started this push nearly six years ago.
Without voting rights restrictions and equity divestment orders, can the draft legislation constrain the conduct of shareholders who control a financial holding company or bank, instead of its management? Will a fine of NT$50 million effectively curb major shareholders interfering in a financial company? In response, the commission last week said it still hoped to receive public support by achieving its policy goal in stages.
To prevent those in power from improperly exercising power, there must be strong checks and balances. Regardless of the scope of punishment, the commission must keep in mind that precise, rigorous and determined legislation is key to curbing major shareholders’ improper interventions. Only then can it convince the public and continue implementing policy goals. If the commission dropped the equity divestment requirements due to fears of stock market impacts, it could still look at other ways to restrict the voting rights of major shareholders, as the outcome of this measure is major shareholders likely losing control of the company, but not stock investors.
In their New York Times bestseller How Democracies Die, Harvard political scientists Steven Levitsky and Daniel Ziblatt said that democracies today “may die at the hands not of generals but of elected leaders. Many government efforts to subvert democracy are ‘legal,’ in the sense that they are approved by the legislature or accepted by the courts. They may even be portrayed as efforts to improve democracy — making the judiciary more efficient, combating corruption, or cleaning up the electoral process.” Moreover, the two authors observe that those who denounce such legal threats to democracy are often “dismissed as exaggerating or
The Chinese Nationalist Party (KMT) caucus in the Legislative Yuan has made an internal decision to freeze NT$1.8 billion (US$54.7 million) of the indigenous submarine project’s NT$2 billion budget. This means that up to 90 percent of the budget cannot be utilized. It would only be accessible if the legislature agrees to lift the freeze sometime in the future. However, for Taiwan to construct its own submarines, it must rely on foreign support for several key pieces of equipment and technology. These foreign supporters would also be forced to endure significant pressure, infiltration and influence from Beijing. In other words,
“I compare the Communist Party to my mother,” sings a student at a boarding school in a Tibetan region of China’s Qinghai province. “If faith has a color,” others at a different school sing, “it would surely be Chinese red.” In a major story for the New York Times this month, Chris Buckley wrote about the forced placement of hundreds of thousands of Tibetan children in boarding schools, where many suffer physical and psychological abuse. Separating these children from their families, the Chinese Communist Party (CCP) aims to substitute itself for their parents and for their religion. Buckley’s reporting is
Last week, the Chinese Nationalist Party (KMT) and the Taiwan People’s Party (TPP), together holding more than half of the legislative seats, cut about NT$94 billion (US$2.85 billion) from the yearly budget. The cuts include 60 percent of the government’s advertising budget, 10 percent of administrative expenses, 3 percent of the military budget, and 60 percent of the international travel, overseas education and training allowances. In addition, the two parties have proposed freezing the budgets of many ministries and departments, including NT$1.8 billion from the Ministry of National Defense’s Indigenous Defense Submarine program — 90 percent of the program’s proposed
RSS