A CRITIQUE STUDY ON INDEPENDENT DIRECTOR

• Main Authors: CHI-LUNG HSU, 許繼隆
• Other Authors: none
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/04118252303494503085

碩士 === 東吳大學 === 法律學系 === 98 === It is infeasible that thousands of shareholders come together to dictate the corporate business decisions in the modern public companies, so a centralized group, so-called “the board of directors”, should manage them. Individual directors can deviate from their legal duties without keeping the interests of shareholders. To effectively safeguard their investment, shareholders must have access to an accountability mechanism, that is, shareholders can elect supervisors and directors in a dual structure system in Taiwanese companies, which is historically originated from the Japanese Commercial Code in 1899. While, the electoral mechanism for supervisors is prevalently nominated and elected by the controlling shareholders in Taiwanese listed companies. Consequently, the supervisors in local companies are viewed as rubber stamps. They seldom represent the benefit of minority shareholders. Therefore, it is necessary to change the electoral mechanism for supervisors, rather than offering the other regulation of independence directors from U.S.A. as an option, because the controlling shareholders would still control the independent directors, just like the same situation with supervisors before. Facing to heavily centralized shareholders make-up in Taiwan listed companies, what is the solution? This essay is skeptical about the effect of inclusion of independent directors’ regulation that is adopted by U.S.A. since a few years ago. The major reason is that most public companies consist of dispersed shareholders in U.S.A. Additionally, supervisors are separated from board of directors under a dual structure of this management system in Taiwanese companies, which this is quite significantly different from the so-called “unitary board”--the independent director system in U.S.A. More than this, there are not any other regulations about nomination committees or compensation committees in the Amendment of the Securities and Exchange Act of 2006 in Taiwan, which are quite different from U.S.A. experiences. Accordingly, This essay argues that the inclusion of independent directors cannot solve the problem of agency costs in Taiwan, not to mention that it could lead to other agency costs. Besides, there are still many debates about the effect of independent directors in U.S.A. today, so that it is not such a “perfect” regulation for the corporate governance. Currently, the controlling shareholders manipulate the electoral mechanisms of both supervisors and independent directors. In order to avoid these shortcomings, this essay designs a new electoral mechanism. This new “Voting” is a majority voting that increases opportunities to get at least one representative of supervisors from the minority shareholders. The supervisors would not engage in process of decision making in the board. Where as this, they will not decrease the effect because the board of directs is best understood as a collegial body using consensus-based decision making. Rather, independent directors are not the sole mechanism by which management’s performance is monitored. Compared to independent directors, supervisors are much better not only to maintain the conventional system but also to audit by each one of them. Furthermore, the directors are asked to hold the fiduciary duties, and they should keep “independence” in the board. In sum, it is suggested that the regulation of independent directors in Taiwan should be discarded.