Corporate Governance

Operations

ITEM IMPLEMENTATION STATUS DIFFERENCE FROM CORPORATE GOVERNANCE PRACTICE PRINCIPLES FOR TWSE/GTSM-LISTED COMPANIES AND REASONS
YES NO DESCRIPTION
Does the Company set and disclose corporate governance code of practice according to corporate governance practice principles for TWSE/GTSM-Listed companies? v The Company has set a corporate governance code of practice, for the protection of shareholders’ rights, to strengthen the functions of the BOD, respect the interests of stakeholders, enhance the transparency of information and relevant rules.
Detailed information can be found on the Company’s website.
No difference
Equity structure and shareholder rights
Has the Company set internal operating procedures to deal with shareholder proposals, doubts, disputes and litigation matters, and does it implement these in accordance with its procedures? v The Investor Relations Department is dedicated to processing shareholder proposals or disputes. No difference
Does the Company have a list of those who ultimately control the major shareholders of the Company? v The Company keeps track of of the shareholding status of directors, managers, and major shareholders holding more than 10%, and provides disclosure according to law.
How does the Company establish its risk management mechanism and firewalls involving related enterprises? v The Company has established appropriate internal risk control mechanisms and firewalls, pursuant to the rules for specific companies or groups related business operations and financial transactions, supervision measures for subsidiaries, procedures for endorsement and guarantee, operational procedures for lending funds to others and procedures for asset acquisition & disposal. Business relations between affiliated enterprises have been evaluated by an independent third party to prevent violations of unlawful transactions.
Has the Company set internal standards to prohibit the use of undisclosed insider information to trade securities on the market? v The Company has set operating procedures and critical control points to prevent insider trading, Company insiders are prohibited from using undisclosed information to buy and sell securities on the market.
Organization and responsibilities of the Board of Directors
Has the Company established a diversification policy for the composition of its Board of Directors and has it been implemented accordingly? v The Company has set “Corporate Governance Practical Principles” to ensure boards’ diversity. The company’s BOD (including independent directors) has adopted a nomination system.
The members of the BOD are diversified and possess manufacturing, brand channel, technological research and financial investment backgrounds for the implementation of Board diversity and create a healthy board structure. Concurrently an employee of the Company accounts for 22.22% and 33.33% of directors and independent directors respectively. 2 independent director tenure average below 3 years and 1 independent director has a tenure of 4 years. 3 directors are aged between 51-60 and 6 between 61-70 years of age.
The Company places great importance on the gender diversity of the Board, of 9 current directors, there is 1 female representation, accounting for 11%.
(Please refer to “[7] Diversity within the members of the Board of Directors” in previous pages for board members’ professions and independence).
No difference
Has the Company establish other functional committees besides the Compensation Committee and Audit Committee? v The Company set up two independent directors and a Compensation Committee, has also set up the FGSC Committee, Energy-saving Technology Development Committee, Employee Benefits Committee and Employee Retirement Reserves Oversight Committee; other functional committees will be set up depending on future needs.
Has the Company set performance assessment rules and methods for the BOD and does it perform this evaluation every year? v Since November 12, 2020, the Company’s Procedures includes “Director and Committee evaluation method”. Evaluations are conducted early, and at least once every three years by an external professional independent organization or an external scholar/expert. The evaluation also specifies aspects of evaluation for each functional committee. The company’s internal performance evaluation for the board of directors in the most recent year is carried out by the directors, using internal questionnaires.
  • The items for the self- evaluation of the board of directors include the following aspects:
    • The degree of participation in the company's operations.
    • Improvement of board decision quality.
    • The composition and structure of the board of directors.
    • The selection and continuing education of directors.
    • Internal control.
  • The items for the self- evaluation of the individual directors include the following aspects:
    • Understanding of the Company’s goals and mission.
    • Awareness of directors' duties.
    • The degree of participation in the company's operations.
    • Internal relationship management and communication.
    • Continuing education of directors.
    • Internal control.
  • The items for the self- evaluation of the functional committees include the following aspects:
    • The degree of participation in the company's operations.
    • Awareness of the functional committees’ responsibilities.
    • Improvement of board decision quality.
    • Functional committee composition and member selection.
    • Internal control.
Evaluation Results:
The results of the performance evaluation of the board of directors were sent to the board of directors and functional committees on March 30, 2021 and were used as a reference for the remuneration of individual directors and nominations for re-election. The results of the 2020 performance evaluation are as follows:
  • The overall average score of the board of directors’ performance self-evaluation is 4.84 points (out of 5); the overall average score of the individual board members’ self-evaluation is 4.82 points (out of 5). The results of the overall board performance evaluation are still effective.
  • The overall average score of the audit committee's self-evaluation is 4.85 points (out of 5).
  • The overall average score of the compensation committee's self-evaluation is 4.75 points (out of 5).
Does regularly evaluate the independence of the CPA? v The Company regularly assesses the performance and independence of the CPA through the BOD. The recommended CPA is required to provide CVs and declarations (not in violation of Ethical Standards Publication No. 10) for the BOD to discuss the appointment and independence of the CPAs. The company’s board of directors reviewed and approved on March 30, 2021: All certified public accountants meet the company’s independence assessment standards (direct or indirect financial interest with clients, excessive reliance on the source of remuneration from a single client by the firm, significant and close business relationship, etc.).
Does the Company appoint competent and appropriate corporate governance personnel and corporate governance officer to be in charge of corporate governance affairs (including but not limited to furnishing information required for business execution by directors, assisting directors’ compliance of law, handling matters related to board meetings and shareholders’ meetings according to law, and recording minutes of board meetings and shareholders’ meetings)? v In aims to implement corporate governance, assist directors, and protect investor rights; the Company has passed a resolution on 2019/05/14 board meeting and has appointed competent and appropriate corporate governance personnel. The Company has established full-time financial officer, Huang, De-cai as responsible for corporate governance related matters. Huang has accumulated over twenty years of financial manager expertise and experience. Primary responsibilities include the following:
  • Assist Independent and Non-Independent Directors to carry out their duties pursuant to the Law: Notify the board 7 days in advance before Board of Director meetings, and if matters are subject to abstaining due to conflicts of interest. Registration of the Shareholders’ Meeting dates, and notification dates according to relevant laws.
  • Creation of board and shareholder meeting minutes - 20 days after the meeting according the relevant regulations.
  • Assist Directors in assuming the position: According to the Company’s specific industry, and the profession and educational backgrounds of the Director, assist the Director in formulating an advancement plan and arrange relevant classes
  • Assist in production of materials to assist the Board of Directors to carry out their duties: Regularly inform the Board of Directors with relevant information regarding updates rules and regulations of Company’s industry and relevant corporate governance updates. Review relevant information confidentiality levels and provide the Board of Directors the necessary information, maintain the Board and Managements communication channels. Meeting with internal and external auditors to maintain Independent Director’s compliance with the Company’s corporate governance regulations, and if needed, organize relevant meetings.
  • Assist in the Board’s compliance with Laws: Report to the Board regarding the Company’s governance situation, and make sure the Company’s Shareholders’ and Board of Directors’ Meetings comply with relevant laws and corporate governance practices. Assist and remind Directors regarding the importance of adherence to laws and regulations for resolutions within meetings, and provide suggestions in the case where such laws and regulations are infringed upon. Examination of Directors’ Meeting’s resolutions post-meeting, and the release of such information. Confirming the resolutions and relevant information are according to law and correct, to protect the integrity of investors’ trading information.
  • For “Continuing education of Directors” (please refer to the table below for specific case studies).
No difference
Does the Company establish communication channels and dedicate section for stakeholder on its website to respond to important issues of corporate social responsibility concerns? v The Company has set “Stakeholder Zone” and have the contact information for stakeholders to on its website to respond to major concerns regarding corporate social responsibilities from stakeholders. No difference
Has the company appointed a professional stock affairs agency for shareholders affairs? v The Company authorized “Grand Fortune Securities Co., Ltd.” as stock service agency to handle shareholder transactions. No difference
Disclosure of information
Does the Company set up website to disclose financial operations and corporate governance information? v The Company has placed financial and corporate governance information of each year on its website. No difference
Has the Company adopted other measures (such as English website, a designated person responsible for the collection and disclosure of information, implementation of the spokesman system, the legal entities announcements uploaded to website, etc.) to disclose information? v The Company has an English website and a spokesperson, investor relations department and shareholder services department to disclose relevant information. The Company issued global depository receipts (GDR) in London, and discloses company information on its website according to the provisions of the relevant rules of the London Stock Exchange. No difference
Does the Company announce and report the annual financial statements within two months after the end of the fiscal year, and announce and report the first, second, and third quarter financial statements as well as the operating status of each month before the prescribed deadline? v The Company’s annual financial report and the first, second, and third quarter financial reports were announced and submitted within the time limit specified by the law. In addition, since June 2019, the Company’s revenue information has been disclosed in advance on the 5th of the following month. However, the annual financial report has not been announced and filed within two months after the end of the fiscal year. No difference
Does the Company have other important information for better understanding the Company’s corporate governance system (including but not limited to interests and rights of employees, care for employees, relation with investors, relation with suppliers, relation with interested parties, continuing education of directors and supervisors, execution of risk management policies and risk measuring standards, execution of customer policies, liability insurance for the Company’s directors and supervisors)? v Interests and rights of employees: The Company has always treated employees in good faith to ensure their legal interests and rights in accordance with the Labor Standards Act. Care for employees: by adopting a welfare system and good education and training, a relationship of mutual trust has been established with employees. Such as: employee benefits and community cultural and recreational activities and entertainment, health clinic grants and medical advice, the Company also provides staff quarters, rented accommodations for staff, accommodation care, parking lots, etc. Investor Relations: The Investor Relations Department was set up to specifically deal with shareholder proposals. Supplier Relationship: good relations with suppliers are maintained at all times. Relations with stakeholders: stakeholders shall communicate with the Company and put forward proposals to protect their due legal rights and interests. Continuing education of directors and supervisors: The Company’s directors are qualified with industrial professional knowledge and practice experience in operation management. Please refer to the following table for more information on continuing education (please refer to the table below for specific case studies). Execution of risk management policy and risk measuring standards: various internal regulations are established legally for various risk management and evaluation. Execution of customer policies: stable and good relations with customers are maintained with the view of creating profits. Liability insurance for the Company’s directors: liability insurance has been covered for directors. No difference
Please specify the measures adopted by the Company to improve the items listed in the corporate governance review result from Taiwan Stock Exchange's Corporate Governance Center and the improvement plans for items yet to be improved.
Evaluation Indicators Priority items to be improved and measures:
Does the Company’s independent directors adhere to “Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies” and its directed hours? The Company’s independent directors adheres to “Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies” and its directed hours.

Continuing education of Directors

TITLE NAME DATE ORGANIZER COURSE HOURS
Chairman Liu, Young-Way 2020/12/23 Securities and Futures Institute Conglomerate tax management trends in the post-epidemic era 3
2020/12/24 Securities and Futures Institute The principle and application of blockchain 3
Independent Director James Wang 2020/03/26 Independent Director Association Taiwan (TIDA) The latest domestic and international economic trends, risk assessment and response methods 3
2020/05/28 Independent Director Association Taiwan (TIDA) Shareholder activism and M&A strategies 3
2020/06/18 Independent Director Association Taiwan (TIDA) Corporate crisis management strategies and countermeasures 3
Independent Director Kuo, Tei-Wei 2020/12/29 Taiwan Investor Relations Institute Proxy fight disputes - corporate governance and independent directors' responsibilities and powers 3
2020/12/30 Taiwan Investor Relations Institute Strategies for Enterprise Operation and News Crisis Management 3
Independent Director Kung, Kuo-Chuan 2020/12/29 Taiwan Investor Relations Institute Proxy fight disputes - corporate governance and independent directors' responsibilities and powers 3
2020/12/30 Accounting Research and Development Foundation Compilation of IFRS financial report related standards and amendments to key points and common deficiencies 3

Continuing education of company executives

TITLE NAME DATE ORGANIZER COURSE HOURS
Corporate Governance Manager Huang, Teh-Tsai 2019/07/31 Securities and Futures Institute “(Independent) Directors and Supervisors and Corporate Governance Practice Workshop” 12
2020/04/23 Securities and Futures Institute “Corporate Governance Practices: Using Performance Management to Improve Operational Effectiveness” 3
2020/05/12 Taiwan Academy of Banking and Finance Corporate Governance and Remuneration Committee Operations 3

Preventing insider trading education promotion

The Company hosts educational awareness training pertaining to "Prevention of Insider Trading" and relevant regulations at least once a year. Newly appointed directors and managers will be scheduled for these courses respectively. The Company's current directors and management has undertaken the aforementioned education training on December 3th, 2020. The course includes non-disclosure related issues regarding material information, the definition of insider trading, and case studies.

Succession Planning for Board Members and Key Management

  • Selection of Directors
    For many years, the Company has been operating with high standards of corporate governance and corporate succession planning. In 1996, the independent director system was introduced, the Remuneration Committee was established in 2011, and the Audit Committee was established in 2016. In order to avoid compromising independence of independent directors, the term of office of independent directors does not exceed three terms. Optimization of the Board of Directors shall be carried out step by step by a gradual process.
    In addition to the professional background and skills, the Directors of the Company should also have expertise in the company’s business and planning. To enhance the professionalism of the Board Members and continue to improve, Directors should consider the scope beyond the professional capabilities. Director courses should be selected in relation to the nature of the Company’s industry in finance, risk management, sales, business, legal affairs, accounting, corporate social responsibility, internal control systems or financial reporting responsibilities, to ensure all Board Members have a considerable degree of industry knowledge and attain new knowledge.
    The company launched the Chairman’s succession plan in 2019 to cultivate the Company’s internal senior managers to join the Board of Directors and familiarize them with the operation of the Board of Directors, and expand their participation in the Group’s operating units, work rotation, and expatriate experience. After the full re-election of Directors in June 2019, Chairmanship of Terry Gou was successfully handed over to Liu Young-Way, the general manager of the company's S Group, and the founder Terry Gou served as a director of the company.
  • Succession Planning for Key Management
    The Company emphasizes that in addition to having certain professional skills, high-level managers must also maintain a consistently high level of ethics and integrity, with the concept of "What needs to be done, do as promised". Therefore, development of their hard and soft knowledge requires long-term cultivation and execution. The Company’s senior managers are responsible for related businesses within the organization, and use job rotation and assignments, one-on-one experience transfer and coaching; and through the management committee, deepen the understanding of the business philosophy and the cultivation of various operation and management skills were used to select key members of the succession echelon. On January 1, 2020, You, Xiang-fu; Lu Fang-ming; Chien, Yi-bin; and Chen Wei stepped down as managers. Wang, Cheng-yang; Chiang, Chih-siung; Lin, Chung-cheng; and Chu, Cheng-qing stepped in as managers of the Business Groups.
    In response to the Group’s organizational development and growth momentum, the Company will not only externally recruit outstanding high-level managers, but also continue to actively cultivate potential mid-level and high-level managers internally, strengthen individual counseling and work exchanges, and provide job rotation and assignment plans when appropriate. Enabling the selection of all-round talent, resulting in a targeted strengthening of the future management team.

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