Dismal voting requirements and a lack of independent directors have earned Taiwan a weak corporate governance grade, according to a new report.
In its first white paper on Taiwan, released Thursday, the Asian Corporate Governance Association (ACGA) makes recommendations on how Taiwan can improve its governance, which-- according to the ACGA-- lags behind Singapore, Hong Kong and Japan.
Institutional investors at Taiwanese companies find it hard to vote in an informed manner at shareholder meetings, and independent directors are not considered mandatory for firms listed in Taiwan.
‘Taiwan remains a difficult and challenging market for long-term global institutional investors who are seeking to act responsibly, vote their shares and engage with companies,’ the report from the Hong Kong-based ACGA said. ‘Governance practices at most listed companies have some way to go to match global standards,’ the report adds, noting that Taiwan nevertheless has raised the bar on corporate governance for listed companies over the years.
The prevalence of family-owned business and the mind-numbingly slow legislative process reduce the opportunity for long-term investors to carry out business in the country, the report states, noting that governance has been ‘inconsistent.’
To attract more foreign investment and make capital markets more ‘internationally competitive,’ Taiwan should align its governance framework with global standards, the report recommends.
Taiwanese regulators should start reviewing the shareholder voting system, allow foreign institutions to distribute proxies to other investors, and permit a split voting system, according to the report. Also, companies should attempt to hold general meetings at different times throughout the year to avoid the problem of having too many take place during a short time period.
Companies should appoint a minimum of three independent directors and build audit committees that consist of independent directors, the association suggests.
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