The separation of ownership and management in Taiwan's public companies: An empirical study

Since Berle and Means [(1933). The Modern Corporation and Private Property. New York: Macmillan] raised the issue of separation of ownership and control some 70 years ago, corporate governance remains one of the most popular research topics in disciplines ranging from law and economics to management. With the increasing importance of larger firms in the private sector of developing countries the evolution of firm governance structure is a key research topic in management and international business studies. By analyzing how the relationships between public companies' CEOs and controlling families change, this research assesses if there is increased separation of ownership and management in public firms domiciled in Taiwan consistent with normative governance practice in the West. To accomplish this, the manuscript identifies and examines five key relationships between CEOs and firms' controlling families, employing data on 159 Taiwan public corporations. The study generally examines whether nonfamily-related professional CEOs increase in Taiwanese firms after they go public. The results proved consistent with the hypotheses. Most public companies in Taiwan are still controlled by families, yet the CEO position has been shifting towards nontraditional, professional relationships, albeit somewhat tentatively. Privately held firms, in contrast, were not hiring more unrelated CEOs. This suggests that firm governance in Taiwan is being influenced by the institutional pressure of the initial public offering in spite of cultural proclivities that might militate against such a reduction of family control over their firms.