Baichuan Forum on Corporate Governance on Oct. 19th., 2017: How to Recreate Climax? When Taiwan Semiconductor Manufacturing Company’s Corporate Governance Mindset Meets Disney’s Inventive Mickey Mouse
Activity day:2017-11-27 
Published At:2017-11-27 
Views:1379  2017-11-27 updated
The Baichuan Forum’s most important session “Corporate Governance Seminar” organized by National Taiwan University’s EMBA Alumni Foundation and the 13th EMBA Student Union was held on October 19. Ms. Lora Ho, CFO of Tawan Semiconductor Manufacturing Company (TSMC) and Professor Ye Yin-Hua, Jiaotong University Institute of Finance, were invited to the seminar for a summit talk, hosted by Lu Qiu-Ling, Associate Dean of College of Management, NTU.

Ms. Lora Ho is an alumnus of the EMBA 2000 class and also the sitting chairperson of the Tao-Chu-Miao Alumni Association. She came back to share her experience in TSMC, talking about “corporate governance and corporate social responsibilities”. Ye Yin-Hua is a visiting professor of the EMBA programs, who was just elected for the best enlightenment award by the EMBA students, and joked that he would teach advance version that had not been taught in the class, and would use group-wide supervision to take the alumni in the audience to walk toward a new realm of corporate governance.

What is “corporate governance”?
Before the talk began, Associate Dean Lu Qiu-Ling pointed out, “Let’s first define the corporate governance: It’s all mechanisms that offer reasonable compensation to stakeholders and maximize shareholders’ interests, under the scope of compliance. The stakeholders comprehensively include employees, suppliers, customers, communities, stock exchange institutions, competent authorities, and so on.” Lu also raised introspection: “Will corporate governance be a false issue?” When the boss has the final say, who would care about corporate governance? Is corporate governance really helpful for the business?

Mutually beneficial future: Corporate social responsibilities (CSR) are in the DNA of TSMC
In one word about corporate governance, Lora Ho said, “It’s to prevent major shareholders and corporate managers from feathering their own nests.” She said that good corporate governance began with a good board of directors, and as the chairperson of the board and the board directors were responsible for the corporate governance, the chairperson’s mindset mattered, and his willingness to be governed and supervised as well as to execute governance was critical.

The board of directors undertakes six major duties: supervising and directing management, performance assessment (review of high-rank managers’ compensations), strategies review, ratification of major affairs (mostly capital expenditure), and CEO appointment. TSMC holds quarterly two-day board meetings for audit committee, remuneration committee, board agenda and strategy discussions. 

TSMC’s principle of corporate governance is honesty and integrity. To shareholders, the essence of corporate governance is return on investment (ROI), and the dividends released from 2004 to 2017 totaled NT$1.2 trillion. To employees, however, the corporate governance means a good working environment that offers balance between work and living, and the TMSC is working to improve efficiency and reduce the employees’ working hours. To the society, doing no evil is the basic requirement, and yet doing the good is a welcome plus.

The generally recognized public charity is just part of CSR. TSMC takes the framework personally formulated by Morris Chang, president of TSMC, which connotes honesty and integrity, environmental reinforcement, and caring for the disadvantaged, inclusively in the economic, environmental and social aspects. For example, TSMC made a total of NT$15 billion environment-related investment in 2016, dedicated to energy saving, carbon reduction, water saving, and waste reduction. The result is a drop of water is recycled 3.5 times, with a 95% recycling rate. In addition, to support domestic industries, TSMC plans to increase its productivity up to 70%, so as to help with industrial localization, and this is also a critical part of TSMC’s CSR.

Defining the Scope of Corporate Governance, and Using Plus and Minus Mathematics to Reach a New Peak
What should we do with corporate governance? Professor Ye Yin-Hua argued that corporate governance version 1.0 was mostly about “anti-fraud”, such as protecting shareholders’ interests, ensuring information transparency, and increasing responsibilities of corporate responsible persons. Ye further contended that combining corporate governance and business strategies was the only way to resonate with corporate management so as to get the corporate culture fulfilled. And he shared his corporate governance version 2.0, talking about how to “raise benefits”.

Li Ka-shing, Hong Kong's richest man, took the means of restructuring and spin-off on his conglomerate to give the investors a better understanding of the corporate values and solve the issues of discount phenomenon. He also unambiguously separated his businesses into real estate and non-real estate sectors, so as to reduce the risk of real estate fluctuations the subsidiaries may face in the future. After the restructuring, the company’s stock value went up over 12%.

Yet, the plus-and-minus strategy concerns merger activities. According to Professor Ye, 50% of merger deals ends up in failure, and the most difficult situations a management team may encounter is how to clearly define synergy. A merger requires cash, while synergy is like a sky rainbow, elusive. He took the Disney case as an example. In 2006, Disney spent US$ 7.4 billion to procure Pixar, and then further procured PowToon and Lucasfilm, making the company more than just Mickey Mouse; instead, with Toy Story, Iron Man, Mighty Thor, and Captain America joining the rank, Disney has now become the base camp of kids’ dreams. Its huge overseas markets allow the cartoon characters to generate even higher values. As a result, its 2012 revenue reached NT$42 billion.

Professor Ye defined the essence of mergers as: “Fully grasp your synergy, and without it you’ll become insane.” On the plus-and-minus strategy, Ye gave an example of Formosa Plastics Group selling Inotera Memories to Micron. He reminded that procuring was not the only thing mattered, and selling was equally important. He added that the corporate governance 2.0 used the plus-and-minus strategy to enlarge or extend the existing competitive niche to facilitate entry into a domain with higher growth potential. So, let your Mickey Mouse become an inventive one.

The selfless sharing and enthusiastic Q&A in the forum gave a recharge momentum to the high-level business leaders in the audience, making it a warm and fruitful talk