Amid an escalating row with Taiwan's financial regulators, United Microelectronics Corp. Chairman Robert Tsao (曹興誠) announced yesterday that he would step down next March as chairman of the world's second largest contract chipmaker.
In show of dissatisfaction with the government and some legislators' criticism of an open letter released by the UMC Wednesday to protest a fine imposed by the Cabinet-level Financial Supervisory Commission, Tsai said he planned to tender his resignation at the company's board meeting next March, in a statement issued to UMC shareholders later yesterday.
The announcement was Tsao's latest act of retaliation in a row with the government over a fine imposed for the UMC's late disclosure of a revision of the firm's loss under the U.S. Generally Accepted Accounting Principles (GAAP) for the years 2002, 2003 and 2004.
Late Wednesday, FSC Spokesman Lin Chung-cheng (林忠正) further revealed that it would investigate whether any UMC employees were involved in any insider trading, as the Taiwan Stock Exchange had found that some UMC managers had sold the company's shares at a "sensitive" time after the company received the U.S. Securities and Exchange Commission's letter on September 26 advising it to revise its financial statements.
Tsao said in yesterday's statement that he hoped his plans to resign would forestall further criticism of the company.
"After I announce my resignation, I hope that I will be the only target of future criticism from outsiders and the sole target of government suppression," the 59-year-old Tsao declared.
Tsao also promised that in order to remain in solidarity with UMC stockholders and avoid a fluctuation of stock prices, he would not sell his UMC stocks for at least next two years.
According to Tsao, the incumbent Chief Executive Officer of UMC, Jackson Hu would succeed him as chairman. Tsao told UMC shareholders that he has confidence in Hu's ability.
In response to the U.S. Securities and Exchange Commission's request, the UMC revised its 2004 net loss from NT$4.7 billion to NT$14.2 billion under U.S. accounting rules on December 14 in the U.S., but the company did not make a similar revision in Taiwan simultaneously, claiming it thought that it was not necessary to do so.
Instead, the company reported the new statement five hours later, which was two hours after the Taiwan stock market opened, to the TSE and Taiwanese shareholders at the request of the FSC and was fined NT$50,000 by the financial authority for late disclosure.
The UMC protested in a written statement published in major newspapers Wednesday that the fine was unreasonable and it threatened to de-list from Taiwan's bourse, if indeed Taiwan has become a nation of "disorder."
The UMC claimed that under Taiwan standards, the firm's profit for 2004 of NT$32 billion would not change because of the revision, therefore, the it had decided not to report the revision to local investors and local financial regulators.
But the FSC and the TSE both rejected the argument, saying that because of the close links between the Taiwan and U.S. stock markets, the late disclosure would not only have affected UMC share prices in both markets, but also harmed Taiwanese investors' interests.
People First Party Legislator Christina Liu argued that the whole situation was unusual and asked the FSC to investigate the matter.
Foreign investors oversold UMC stocks on the Taiwan stock market on September 29 but overbought UMC's
ECBs on the same day, she said.
Taiwan Solidarity Union Legislator Lo Chih-ming (羅志明) concurred with Liu, adding that UMC Vice Chairman Peter Chang (張崇德) had sold 2,160 UMC shares at a price of NT$20 on September 28, and after that the stock price began to drop.
But Tsao called on the FSC to stop slandering UMC employees with charges of insider trading, adding that the UMC and its employees never violate the law.
In response to Tsao's latest announcement yesterday, FSC spokesman Lin said it was regretful that Tsao had decided to resign over the dispute. The company's late disclosure of its statements would not blot out Taso's contribution to Taiwan's electronics industry, Lin said.
Lin and FSC Chairperson Kong Jaw-sheng both emphasized that the FSC would investigate whether or not UMC had engaged in insider trading. They also revealed yesterday that the commission would send a formal letter to its U.S. counterpart requesting assistance to investigate the September incident concerning UMC.