Table of Contents

Corporate Governance after the Financial Crisis

Corporate Governance after the Financial Crisis

Edited by P. M. Vasudev and Susan Watson

The financial crisis of 2008–09 raises questions about the assumptions that underpin corporate governance. Shareholder value and private ordering may not in fact be the best means of promoting efficiency and corporate responsibility and the mechanisms used to ensure management accountability may not be effective. In this fascinating study, experts from around the world draw on the experience of the financial crisis to explore topical issues ranging from shareholder primacy and the corporate objective to the stakeholder principle, business ethics, and globalization of corporate governance principles. The chapters are provocative, acknowledging that our understanding of fundamental questions of corporate governance is still developing and demonstrating that the corporate governance debate is far from over.

Chapter 9: How Public Regulation Changes Corporate Governance Practice – Corporate Board Reform in Taiwan

Yu-Hsin Lin

Subjects: business and management, corporate governance, law - academic, company and insolvency law, corporate law and governance


Yu-Hsin Lin INTRODUCTION This chapter takes the example of the legal transplantation of US-style independent directors into Taiwan and explores how public regulation affects (or does not affect) corporate governance practice. Taiwan’s corporate law traditionally follows a two-tier board system where the board of directors is the decision-making institution and the statutory supervisor is the monitoring institution. However, most statutory supervisors of Taiwanese public companies have long been controlled by the controlling shareholders and failed to act as corporate monitors. Since 2002, Taiwan has gradually introduced independent directors into corporate boards in order to strengthen the internal governance of public companies. As of September 2011, 43.92 per cent of the companies listed on the Taiwan Stock Exchange (TSE) had at least one independent director on their board. In other words, 56.08 per cent of TSE-listed firms chose not to have any independent directors. Only 6.8 per cent of TSElisted companies had established audit committees to replace statutory supervisors. In summary, few Taiwanese public companies have made a complete switch to the US-style board structure. The majority of firms have stayed with the original structure and preferred not to have independent directors on their boards. This chapter focuses on companies that, whether voluntarily or not, introduce independent directors onto their boards and assesses the effectiveness of these new independent directors. 211 M2860 - VASUDEV 9780857931528 PRINT.indd 211 24/02/2012 08:06 212 Corporate governance after the financial crisis THE CORPORATE BOARD REFORM Board Structure Corporate board structure around the world has two...

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