Abstract
After examining the scandals of the First Securities Investment Trust Corporation in Taiwan, those of Toyota and Olympus in Japan, and the financial crisis that swept through the global capital market, we seem to be able to find that internal information flow might be a deter-minant prerequisite for the well-functioning of internal corporate gov-ernance mechanisms, including internal controls, legal compliance pro-grams and risk management mechanisms, as well as the legal duty to monitor. This article, from the perspective of organizational behavior, analyzes the steps in the process of a board’s decision making in order to know what role internal information flow within a corporation plays in the board process. Through this analysis, this study demonstrates that ensuring independent information gathering channels to provide the board with a variety of governance information might be a key factor in strengthening the internal monitoring mechanisms of corporate govern-ance in Taiwan. In addition this study examines failures of internal in-formation flow both in Taiwanese corporations adopting traditional company auditors while establishing independent directors, and in those with audit committees replacing company auditors. To prevent similar failures, this study makes three reform proposals: first, directly control-ling internal and external auditors by corporate monitors, including in-dependent directors, audit committees or company auditors; second, reinforcing whistle-blowing systems; and third, vesting the aforemen-tioned corporate monitors with access to assistance or advice from ex-ternal legal or other professionals. Overall, as risk management becomes a core issue for regulators internationally, we need to pay attention to how to fortify independent information channels for corporate moni-tors. In this way they can be more prepared to monitor the risks faced by corporations, thereby contributing to Taiwan’s progress in corporate governance.