The Asian Corporate Governance Association (ACGA) on Dec. 13 released its latest Corporate Governance Watch report, which ranked Taiwan third alongside Singapore among 12 Asia-Pacific markets this year, trailing only Australia and Japan. Taiwan moved up one notch from the previous rankings released in 2020, with its total score rising 0.6 points to 62.8, the nation’s highest.
In what has been the biggest shakeup to the rankings since the association began compiling the reports in 2003, Japan climbed from fifth place in 2020 to second this year, while Hong Kong dropped from second to sixth.
Other markets that gained ground include India, moving up to sixth place alongside Hong Kong, and South Korea climbing one place to eighth. Thailand fell one spot to ninth, while China, the Philippines and Indonesia remained unchanged at the bottom in 10th, 11th and 12th place respectively.
Corporate governance, the standards of conduct and procedures for managing a firm, provides the legal framework for efficient operations and is crucial for companies to raise their competitiveness and maximize shareholder value. Well-designed corporate governance creates a robust environment for companies to flourish and pursue sustainable development.
This year’s report covers seven categories: governance and public governance, regulators, corporate governance rules, listed companies, investors, auditors and audit regulators, and civil society and media.
Taiwan ranked second in three categories — governance and public governance, regulators and auditors and audit regulators. It also showed significant progress in corporate governance rules, which the ACGA attributed to Taiwan in 2021 setting up a new commercial court to handle corporate and securities-related disputes, as well as this year lowering the threshold for reporting substantial shareholding from 10 percent to 5 percent.
The association also praised Taiwan for revising its corporate governance blueprints after the Financial Supervisory Commission (FSC) initiated a corporate governance strategy in 2013, including last year launching the Sustainable Development Road Map for Taiwan Stock Exchange and Taipei Exchange-listed companies and this year’s “action plans.”
However, Taiwan scored relatively low in the investors, and civil society and media categories. In the former, Taiwan collected only 40 points compared with Australia’s 69, while in civil society and media, it scored 62 points to Australia’s 82.
The FSC attributed Taiwan’s low score in the investors category to weak engagement by institutional investors with companies compared with other markets. The commission also said that Taiwan’s lackluster performance in civil society and media showed it had room to improve, such as by promoting the effectiveness of corporate governance or reporting and explaining corporate scandals.
It is not that the local media have not performed their duty to monitor publicly traded companies. On the contrary, many listed companies simply do not interact with the media, with some even declining requests to report on their firms. For instance, journalists were able to attend listed companies’ earnings conferences and interact with executives directly before the COVID-19 pandemic, but that changed as companies shifted to online meetings and decreased their interactions with the media.
If things continue like this, it would be difficult for Taiwan to make gains in that category. After all, firms’ openness in their interactions with the media is as important as their financial transparency with shareholders.
The prospects of making Taiwan a healthy market in terms of corporate governance require not just the efforts of the public sector, but also contributions from the private sector.
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