Evaluate the Effect of Limiting the Employee Bonus Shares: Evidences from IC Design Houses
Date Issued
2006
Date
2006
Author(s)
Lin, Chin-Peng
DOI
zh-TW
Abstract
For the reason of solving the problem which the employee bonus share is too high to impact on shareholder equity a lot in many public companies in TSEC (Taiwan Stock Exchange Corp.) and GTSM (Gre Tai Securities Market), the FSC (The Financial Supervisory Commission, Executive Yuan), under the pressure of representative of the foreign capitals, decreed the new law on Dec. 9, 2004 and have been effective since January 1, 2005. The new regulation in this new law is that the market value of employee share bonus, including the form of stock shares and cash, will never be allowed to over the half of company’s after-tax net income or total distributable earning.
In this thesis, I would like to study if the above regulation can reach the FSC and foreign capitals’ target to limit the employee bonus shares in some reasonable area to high stock price IC design house, and to avoid the equity be diluted too much at same time through the implementation of above regulation.
In conclusion, we found that above limitation totally fail to reach the target for that kind of IC design house which is strong, stable and big enough, like MediaTek in currently (2003 to 2006), but it does work for some IC design houses which are smaller but growth faster in both of revenue and profit, like AAT,RichTek,PixArt and MediaTek in past(1999 to 2002). It comes into being the new competition environment that benefits the bigger, stronger and stable IC design house, but harm the smaller and growth faster IC design house. It not only can not reach the original target to above anterior company but also unfair to above posterior company.
My suggestion for the above regulation is that don’t compare employee bonus share to after-tax net income or total distributable earning, but compare to dividend. It means that we can take a reasonable percentage from shareholder stock dividend to employee stock bonus, as well take another reasonable percentage from shareholder cash dividend to employee cash bonus. In this way, we can reach the target to limit the employee bonus share on reasonable level and avoid the equity be diluted too much. Also, it will provide the fair competition environment to different scale company and the reasonable distribution for earning among three sides of shareholder, management team and employee. As to how many percentages we should take, not within the discussing area of this thesis.
Subjects
IC(Integrated Circuit)
TSEC (Taiwan Stock Exchange Corp.)
FSC (The Financial Supervisory Commission
Executive Yuan
GTSM (Gre Tai Securities Market)
Type
other
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