SFIPC again urges listed firms which elect directors/supervisors via block voting to revise articles of incorporation to switch to cumulative voting i

According to Article 21 of “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies”, listed companies should hold directors elections in a fair, just and transparent manner and should use cumulative voting to fully reflect the opinions of shareholders. Meanwhile, to promote corporate governance and protect the rights of common shareholders, the Ministry of Economic Affairs has proposed an amendment to Article 198 of the Company Act to limit cumulative voting as the only method to elect directors and supervisors. The bill is being reviewed by the Legislature.

Currently, certain companies still have articles of incorporationthat either call for or permit the election of directors and supervisors through block voting (see table below), which favors those majority shareholders acting as company representatives. A board elected this way results in autocracy, fails at its supervision and checks-and-balances functions, causes the transparency of company operations to diminish, and does not reflect the spirit of corporate governance.

For listed companies that practice block voting or that plan to change their articles of incorporation to adopt block voting during their shareholders’ meetings this (2011) year, the SFIPC, as a shareholder, has either sent letters or participated in their shareholders’ meetings to call for the use of cumulative voting or to express its opposition to the companies’ plans to adopt block voting. Among these firms, Tatung, Yem Chio, and Achem Technology have changed their articles of incorporation during their shareholders’ meetings for this year (2011) to practice cumulative voting.

As the election of directors and supervisors is closely linked to corporate governance and draws the attention of investors and regulatory agencies, the SFIPC again urges firms which elect directors/supervisors through block voting to switch to cumulative voting to promote corporate governance. Prior to the passage of the amended Company Act, the SFIPC will continue to practice shareholders’ activism and pay close attention to this issue. It also recommends that investors take corporate governance into consideration when making investments.