Proposal to Tighten Disposition of Shares Held by Company Directors

It has been criticized that directors in Taiwan’s public companies have a high tendency to pledge a substantial portion of their shares in the company.  The problem with this is that when the stock prices fall, they are easily susceptible to calls for additional security for their loans with the bank. As a result, they would make an effort to artificially maintain stock prices, which can result in deterioration of the company’s financial condition or distorted stock prices. Therefore, it is proposed that if a director pledges more than 50% of his shares in the company, he will forfeit the voting power of the shares to the extent his pledged shares are over the 50% threshold. Currently, Taiwan's Company Act provides that in a public company, if a director sells more than 50% of his shares he held at the time he was elected to directorship, he is automatically discharged as a director by law.