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On Dr. Tze-lung Chen’s New Book The Group’s Corporate Governance and Prevention of Financial Crime

Will Taiwan ever get serious about corporate governance?

The Financial Supervisory Commission announced on June 19 that it is dismissing Ho Shou-chuan as chairman and board director of Sinopac for the current detention for suspected violations of corporate governance rules. Is this just another example of how Taiwan has a long way to go before Taiwan’s corporate governance is up to snuff?

FSC criticized for too slow to respond to Sinopac scandal

According to a report, the FSC listed 4 and 6 major wrongdoings committed by SinoPac and its staff, respectively. However, the FSC only issued a “correction” to Sinopac, which was constantly being criticized as too lenient and an abdication of the FSC’s responsibility. NPP Legislators Huang Kuo-chang recently criticized Lee Ruey-tsang Chair of the FSC for being too slow to act and unwilling to respond.  He also slammed the FSC for not holding Sinopac’s independent directors and supervisors accountable.

Deficiencies of Corporate Governance in Taiwan

In his latest bookThe Group’s Corporate Governance and Prevention of Financial Crime”, Dr. Tze-lung Chen, Director of the European Union Law Research Center, takes a close look at the impact of Taiwan’s poorly performed corporate governance and the barriers that have hindered progress in corporate governance reform.

Published in March by National Taiwan University Press, the publication re-examines the adequacy of Taiwan’s corporate governance. It identifies inadequacies of Taiwan’s present judicial system and urged the country to head toward corporate governance reforms. Chen observes that the banking organizations enter into novel, complex financial transactions, driven almost entirely by business line managers, without adequate review by authorities.

The author points out that the current corporate governance regulations cover many different types of companies within the financial sector, yet still insufficient for preventing large-scale, complex corporate fraud and white-collar crimes. Taiwan’s Financial Supervisory Commission will be looking for a dramatic improvement on its corporate governance regulations, making it mandatory for listed firms and financial institutions to appoint independent directors as well as seeking greater transparency and accountability.

The book proposes a plan to develop parallel investigations in all serious financial crime cases. Parallel investigations are simultaneous civil and criminal investigations, with both tax assessment and criminal prosecution purposes and goals. The author asserts that in contrast to the presently implemented trace evidence techniques, the use of parallel investigations would be beneficial to Taiwan’s financial crime investigations for it makes evidence collection prompt and complete, and it helps prosecutors obtain convictions in the shortest time.

Furthermore, the publication discusses some previous notable cases of corporate scandals between 2010 and 2016. For instance, the Tatung Co chairman Lin Wei-shan financial scandal and the Mega Bank scandal. In 2016 New Power Party Executive Chairman Huang Kuo-chang criticized the Financial Supervisory Commission’s review was inadequate and cursory to force Mega International to take responsibility for its actions.

Despite FSC’s poor performance which made the Taiwanese people felt tremendously disappointed, there are moves to improve the Taiwanese financial crime laws/corporate governance and these changes need to be hurried up. The FSC will need to get serious about raising the standards of corporate governance of financial institutions to combat fraud and financial crime involved businesses and corporations of a large, complex nature. Corporates need stronger incentives to clean up their balance sheets, and further enhance transparency and greater accountability in corporate governance.

Information: You can purchase Dr. Tze-lung Chen’s new book The Group’s Corporate Governance online at YESASIA, books.com.tw, and sanmin.com.tw.

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