Taiwan’s long-awaited update to the 2013 Corporate Governance Roadmap is now available for review and public comment, the Financial Supervisory Commission Republic of China (FSC Taiwan) confirmed in a briefing.
On March 27, FSC Taiwan announced the first draft of its New Corporate Governance Roadmap (2018-2020) (PDF). The Roadmap seeks to update and modernize the corporate governance framework applicable to the Taiwanese capital markets, bringing the regime in line with international best practices.
Highlights of the Roadmap include:
- Deepening corporate governance and corporate social responsibility (CSR) culture.
- Enhancing board functions.
- Promoting shareholder activism.
- Strengthening information transparency.
- Augmenting regulatory enforcement.
Commission Chair Wellington Koo stated that these measures are intended to create a progressive and investment-friendly environment for investors.
That means embedding governance structures and concepts across the market; for example, setting new board independence rules, including enhanced representation when board leadership is not independent, and expanding requirements for audit committees in order to promote oversight and internal controls. To supplement the board, any listed companies whose paid-in capital is at least NT$10 billion stand to retain at least one corporate governance professional by 2019 to reinforce governance norms.
It also means encouraging transparency through earlier disclosure, in English to accommodate foreign investors; and getting tough on regulatory compliance, with the Roadmap calling on the Taiwan Stock Exchange and other authorities to enhance enforcement, including adding a legal basis for penalties.
The changes don’t just impact companies. As part of a push to encourage shareholder activism, the FSC is also targeting local institutional investors, specifically banks and insurers, and trying to increase their attendance at shareholder meetings of the companies they invest in. Banks and insurers have a goal of attending 30% and 40%, respectively, of their investee meetings in 2018, rising to 50% in 2019 and 70% by 2020. Forcing investors to attend meetings is an unusual approach to promoting a culture of engaged governance — and one that may come as a surprise to those investors, given the short notice to meet 2018 goals.
There will be annual implementation reviews and rolling amendments, and a number of agencies have been tasked with promoting the measures; however, the Roadmap doesn’t go into much detail on how all of this will be enforced. Nonetheless, with the FSC calling for significant changes, and many goals coming due this year, it’s an ambitious plan. Regardless of what gets achieved in 2018, there’s a new sense of urgency in Taiwanese governance.
Katherine is an analyst covering the Taiwan market.