Taiwan's Top Corporate Citizens 2010
The Social Responsibility Race Heats Up
In CommonWealth Magazine's annual survey of Taiwan's top corporate citizens, Delta Electronics edged TSMC by the slimmest of margins for the top spot, an indication of just how fierce a battleground corporate social responsibility has become.
The Social Responsibility Race Heats UpBy Ching-Hsuan Huang
From CommonWealth Magazine (vol. 452 )
Twenty years ago, a Taiwanese researcher at Intel Corporation named Miin Wu returned home to start a business, injecting Taiwan's fledgling semiconductor sector with a jolt of innovative energy.
Twenty years later at the IEDM (IEEE International Electron Devices Meeting), billed as the "microelectronics Olympics," Wu's company Macronix International demonstrated its R&D prowess by presenting six technical theses, the most of any Taiwanese company or academic or research institution.
"If a company wants to survive over the long term, it must rely on R&D, and it has to stay ahead of others," says the Macronix International founder and president. Although Wu's company has suffered big setbacks, he has never compromised on investing in R&D and science education. The company even sponsors competitions to encourage budding scientists.
"Through the Macronix Golden Silicon Award for university students and the Macronix Science Awards for high school and vocational students, I hope to inspire young people with this concept, and through these people, to slowly impact the way people throughout Taiwan think about R&D," Wu says.
At the end of July, the Macronix Golden Silicon Awards will be presented for the 10th time. Wu places an extraordinary emphasis on these awards, to the point of carefully reviewing the judges' scores for each entrant.
Chen Liang-Gee, a professor in National Taiwan University's Department of Electrical Engineering, who has helped students participate in the competition a number of times, said of the award: "The scope of this award was designed around students, respecting their involvement in innovation. Micronix is very ambitious and wants to push the students higher in the semiconductor field."
Macronix Finally Cracks the Top 10
The spirit emphasized in CommonWealth Magazine's survey of Taiwan's top corporate citizens has been about the social momentum created when companies are engaged over the long run, wield their influence, and have top executives stress corporate social responsibility ("CSR") and personally participate in related activities. (Table 1)
In 2005, Macronix International suffered a net loss, and only this year did it fulfill the CommonWealth survey threshold of not having posted a loss for three consecutive years. Having captured the spirit of the survey, the company catapulted into the top 10 among big companies for the first time.
The dark clouds from the economic meltdown triggered by the global financial crisis made it nearly impossible for companies last year to see clearly into the future. Consequently, some companies reduced their CSR commitments. But this year's list of Taiwan's top-ranked corporate citizens indicates that, even as the overall business environment worsened, some enterprises remained fully invested in CSR and were rewarded with greater recognition by Taiwanese and foreign investors, shareholders and employees.
Delta Electronics: Near Perfect Corporate Commitment
Delta Electronics, which edged past Taiwan Semiconductor Manufacturing Co. (TSMC) to take the top spot in the corporate citizenship rankings for the first time, has not only seen its share price hit a new high, but foreign investors also hold a bigger stake in Delta Electronics than in any other Taiwanese listed company.
Concern over the Earth's future is never far from the mind of company chairman Bruce Cheng, and his desire to improve the natural environment has helped forge Delta Electronics' corporate image as Taiwan's most environmentally friendly company. Of the four criteria used to rank companies in the survey, Delta had a near perfect score in the "corporate commitment" category, which helped push it past perennial favorite TSMC.
Wistron Corporation, Cathay Financial Holding Co., and Chinatrust Financial Holding Co. are three other newcomers in the top 30 among large companies that, like Macronix, have suffered through loss-making years but incorporated the values of environmental protection and social participation as they rebuilt themselves.
"In the past, we weren't making money, so we didn't have the credentials to talk about what we were thinking of doing. Now we have greater capabilities, so we should carefully think about how to get involved in society," Simon Lin, Wistron's chairman and CEO, has said.
Medium-sized Companies: Top Three Stay the Same
In the CommonWealth survey of medium-sized companies, Sinyi Realty, Hiwin Technologies and Everlight Chemical Industrial Corporation remained in the top three spots for the third consecutive year. Even though their revenues remain below NT$10 billion annually and they were severely put to test by the financial crisis, they remained benchmarks of corporate citizenship, as they continued to fulfill their corporate social responsibility. (Table 2)
But the same could not be said of everybody. Because of the steep economic downturn, 27 percent of respondents to this year's survey said they resorted to unpaid leave to cut costs, while 37 percent said they laid off workers.
Even TSMC, which has the reputation of being "Asia's best employer," had its image dented after laying off workers based on the inappropriate use of its performance management development (PMD) system. Chairman Morris Chang appeared personally in the line of fire to invite the company's former workers back into the fold.
A spate of labor-related controversies – unpaid leave, the run of suicides at Foxconn Technology's (Hon Hai Group) factory complex in southern China, and the alleged illegal labor practices of touch-screen supplier Young Fast Optoelectronics – not only hurt the companies' own image and competitiveness but also pulled down the corporate social responsibility of the entire industry's supply chain. The incidents turned big companies such as Apple Computer and HTC into targets of verbal attacks, an indication that enterprises can afford less than ever to take their significant economic and social influence as corporate citizens for granted or ignore the high expectations society has of their responsibility.
In contrast to the ineptitude companies showed in handling labor issues, their efforts to protect the environment have shown marked improvement over previous surveys.
In recent years, the attention given to the topic by investors and the "Al Gore effect" have pushed environmental problems to the forefront of public policy discussion and made the environment a leading issue around the globe.
Global Enterprises Going ‘Green'
The Carbon Disclosure Project (CDP), which acts on behalf of 534 institutional investors who manage US$64 trillion in assets, was created to gather information on emissions and use it to influence policy, investment, and financial decisions. It requests major companies around the globe to disclose information on their emissions output, and posts on its website the names of those enterprises that refuse the challenge, making each company's attitude toward emissions disclosure an important factor in guiding investors. Ultimately, the group resorts to concrete action rather than rhetoric or slogans to pressure corporate behavior.
Even China, in its 12th five-year plan, will make its top priority abandoning the "black development" model, which favors unbridled growth, and promoting a "green transition."
With environmental and "green" issues emerging as hot topics, it is no surprise that most companies ranked high in this year's survey showed considerable improvements in the area of environmental performance.
"This year, the environmental performance of all the companies was pretty good," says Chuen-Shan Chen, the head of Chung Hua University's College of Humanities and Social Sciences, who served as one of the judges in the survey.
There is one company, however, that has regressed.
Formosa Plastics on the Defensive
In recent years, the Formosa Plastics Group has not only started to take its greenhouse gas inventory, but has also listed energy conservation and carbon reduction as an important task. After group deputy chief executive officer Susan Wang brought the company's Center for Environment, Safety and Health directly under her command, the group also increased the importance of public communications. But it continues to be plagued by pollution and heavy water consumption problems. Environmental protection agencies fined the Formosa Plastics Group 20 times for a total of NT$9.61 million in 2009, and, along with those fines, a controversy over sending mercury waste overseas for disposal has seriously undermined the company's environmental and social image, and dropped it in the rankings of corporate citizens from 13th to 30th.
The survey judges all felt that they wanted to "let Formosa Plastics feel pressure."
On July 25, a heavy oil leak at Formosa Plastics' naphtha cracker complex in Mailiao triggered a gas explosion. The next morning, dense smoke was still billowing from the complex's No. 2 oil refinery, blanketing the skies above with a layer of gray. Just 18 days earlier, on July 7, a fire broke out in the company's No. 1 alkene plant after liquid leaked from a burst pump seal at the base of a distillation tower.
Within 20 days, the Mailiao complex experienced two major safety accidents that not only seriously harmed the environment but also Formosa Plastics' competitiveness. The fires could cost the company tens of billions of Taiwan dollars, and Su Chih-fen, the head of Yunlin County in which Mailiao is situated, has vowed to fine it the maximum NT$1 million a day under local air pollution laws. The group may also be forced to call off the fifth-phase expansion of the petrochemical complex for which it hoped to win approval by the end of the year.
These incidents clearly showed the impact of an enterprise not fulfilling its social responsibility.
Nearly Half of Foreign Companies Are New Faces
Competition in the CSR rankings of foreign companies in Taiwan was particularly fierce this year, with four of last year's top 10 supplanted by newcomers.
"Taking on social responsibility is not something done separately but must be considered as part of a company's core operations. Then the company can use its core competence to give back to society through its regular operations. That is the real spirit of corporate responsibility," says Daniel C.Y. Chu, a senior executive vice president with the GreTai Securities Market.
When GreTai approves new companies to list on the over-the-counter market, it must disclose their CSR- related information, which it hopes will help move listed companies toward the ultimate goal of complete disclosure.
Multinational companies operating on Taiwan are especially good at disclosing CSR-related information and are extremely active in the field. (Table 3)
IBM Taiwan, which took over the top spot in this year's foreign corporate citizen ranking from Citibank Taiwan by a narrow margin, has used its core competence to organize a "Little Explorer" program. The initiative is trying to reduce regional and economic divides by distributing kits targeted at children aged 3-7 that include a personal computer, related instructional software and systematic teacher training. These kits offer children in disadvantaged groups, remote schools or NGOs the opportunity to learn about and get exposure to basic information technology.
Citibank Taiwan has long pushed to implant financial planning education in the county's schools, offering diverse financial planning programs designed for different groups.
Third-place Bayer Taiwan has extended its expertise in science to get involved in science education.
"This is the area (where) we feel we have a lot of confidence and know-how. And we can contribute!" says Bayer Taiwan CEO Steffan Huber.
He feels that grade school students, in particular, are the future of scientific development, and helping them understand science can stir in them the desire to explore further.
In this high-level race for top corporate citizen, Taiwan's enterprises do not "beat" each other. As they learn from and influence one another, the ultimate winner is society as a whole.
Translated from the Chinese by Luke Sabatier
About the Survey
CommonWealth Magazine's 2010 Survey of Taiwan's Top Corporate Citizens referenced international indicators and evaluation methods used by the United Nations, the OECD, and the Dow Jones Sustainability Index to select Taiwan's best corporate citizens based on four major categories: corporate governance, corporate commitment, social participation and environmental protection.
Corporate governance mainly gauges a board of directors' independence and the company's transparency, and also takes into consideration the Securities and Futures Institute's "Information Transparency and Disclosure Rankings" and each company's return on equity (ROE).
Corporate commitment includes a company's commitment to consumers, how it nurtures and treats its employees, its relationships with the supply chain, and its commitment to innovation and R&D. Social participation gauges whether a company has taken a long-term interest in a specific issue and has had an impact.
Finally, environmental protection refers to whether a company has specific environmental protection and energy conservation objectives and methods. Even more important is whether the company reviews the results on an annual basis and makes progress.
The process was divided into three stages. In the first stage, CommonWealth Magazine looked at all publicly listed companies (including those on the Taiwan stock exchange, the over-the-counter market and the emerging market) and chose those that had posted profits for three consecutive years. Foreign companies in Taiwan were chosen from CommonWealth Magazine's survey of Taiwan's Top 1000 Enterprises or recommended by experts and scholars. In all, 1,031 publicly listed companies and 151 foreign companies were identified as possible candidates in the first stage.
In the second stage, based on questionnaires returned by the companies, 118 enterprises (54 large-sized companies, 27 medium-sized companies, and 37 foreign companies) where chosen as finalists. In the final stage, a panel of 12 judges with high public credibility and social standing selected the CommonWealth Magazine Top 50.
Companies classified as "large companies" were those with revenues of over NT$10 billion, while other domestic companies were classified as "medium-sized companies." Foreign companies were grouped separately.
Survey period: May 13, 2010 to July 12, 2010