2003/WFDSA/HK Dr. Jaw 1

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Corporate governance and ethics:

Perspectives from TaiwanProfessor Dr. Yi-Long Jaw

National Taiwan University

Yljaw@mba.ntu.edu.tw

September 29, 2003

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OutlinesOutlines

• Corporate Governance

• Business Ethic

• WFDSA’s Code of Ethics

• Perspectives from Taiwan

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Cases and Lessons (Maximizing whose wealth?)Cases and Lessons (Maximizing whose wealth?)

• Enron, WorldCom, Xerox (USA)

• Kennex,Chung-Hsin Bank, Sunrise Construction Co. (Taiwan)

Misconduct by CEO or chairman of the board (might get away)

Falsified financial statement over years

At the expense of other investors and employees (including management)

Corporate GovernanceCorporate Governance

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new agendanew agenda

• Internal Auditing: whistle blower

• External auditing: accounting firms and CPAs (Certified Public Accountant)

• Independent board directors

Corporate GovernanceCorporate Governance

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Board of directorsBoard of directors

• 2001 Statistics by SFI shows: they held 20% of voting shares in contrast to 55% of seats on board for public companies.

• Newly listed company is encouraged to appoint 2 independent directors and 1 independent supervisor as of 2002/2/22

Corporate GovernanceCorporate Governance

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M. Iskander and N. Chamlou, "Corporate Governance: A Framework for Implementation,“the World Bank, 2002 http://www.worldbank.org/html

/fpd/privatesector/cg/docs/gcgfbooklet.pdf

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Business PerspectivesBusiness Perspectives

• Government Regulation: to prevent or to remedy market failure and governance failure

• Transaction Cost Theory: to organize operations between market or hierarchy

• Agency Theory: to align the goals and behavior between principals and agents

Corporate GovernanceCorporate Governance

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Business DecisionsBusiness Decisions

• Legal requirement market mechanism hierarchy arrangement values

Market mechanism: between firms (rivalries, vertical or horizontal counter parties and partners)

Hierarchy arrangement: branch, affiliate, joint venture, licensing or franchise, contracting

Values for board members and management

Corporate GovernanceCorporate Governance

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Values (looking internally)Values (looking internally)

Corporate culture, pledge, cornerstones

Business Ethics (looking externally)Business Ethics (looking externally)

Social responsibility, codes of conducts, codes of ethics

Values and Business EthicsValues and Business Ethics

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1. Responsibility to customers

2. Responsibility to employees

3. Responsibility to stockholders

4. Responsibility to creditors

5. Responsibility to the environment

6. Responsibility to the community

Ethics and responsibility –Ethics and responsibility – a stakeholder approach a stakeholder approach

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1. Toward consumers

2. Toward direct sellers

3. Between direct sellers and companies

4. How to file a code complaint

5. Code Administrator directory

WFDSA’s Code of Ethics

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Consumer first

Sellers/ Distributors/ Dealers/ Consultants next

Then, market mechanism / competition

Environment: Green business

Community: minorities, retarded, diversity

On WFDSA’s Code of Ethics

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Independent director or supervisor

For public companies and private companies

Rubber stamp or devil’s advocate

Obligations and rights / liabilities

Implementation

Initiatives on committee or research task

Pre-board meeting interaction

Perspectives from Taiwan

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Ethics

To employees

To the countries where we do business

(To the world we live in)

Values

Of Management / Leaders

Integrity, respect for the potentials of others, willingness to help, admiration for success

Perspectives from Taiwan

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Thank you !

謝謝你 !