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Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and Reference on the Principles Regarding the Independent Directors of Listed Companies
- Remuneration of independent directors
Pursuant to Article 196 of the Company Act, the compensation of directors, if not prescribed in the articles of incorporation, shall be determined by a meeting of the shareholders. Therefore, the remuneration of directors of listed companies should be prescribed by the articles of incorporation or the shareholders’ meeting. The remuneration of independent directors should vary in consideration of their respective roles, functions and contribution. A company may set a reasonable remuneration for the independent directors that is different from that of other directors in order to provide a proper incentive for the independent directors to fulfill their functions, and the level of compensation is preferably planned and agreed upon ahead of time.
- Continuing education of independent directors
Listed companies are encouraged to arrange continuing education courses for their newly elected or consecutive-term directors (including independent directors) and supervisors so that they can acquire new knowledge relevant to their roles and functions throughout their respective term of office. The continuing education of directors and supervisors may be undertaken under reference to the Guidelines for the Continuing Education of Directors and Supervisors of TWSE/TPEx Listed Companies.
- Scope of application of continuing education:
- Newly elected: Persons serving as directors, independent directors and supervisors of TWSE/TPEx listed company for the first time
- Consecutively elected: Directors, independent directors and supervisors of TWSE/TPEx listed companies who serve a consecutive term of office
- Time-wise continuity or continuous appointment by the same listed company is not a requisite for qualification under “consecutive term of office.”
- Hours of continuing education:
- Newly elected: Preferably at least 12 hours in the same fiscal year of having been elected to the office, and at least 6 hours a year thereafter.
- Consecutively elected: Preferably at least 6 hours of relevant courses a year.
- The hours of continuing education are counted accumulatively.
- Scope of continuing education courses: Courses outside the specialty of the director or supervisor while relating to corporate governance in the areas of finance, risk management, business, commerce, law, and accounting, corporate social responsibility, or courses on internal control system and responsibility of financial reporting are recommended.
- Continuing education system:
- Professional training institutions include the Securities and Futures Institute, Accounting Research and Development Foundation, Institute of Internal Auditors Taiwan, Taiwan Economic Development & Research Academy, Computer Audit Association, Taiwan Academy of Banking and Finance, and Corporate Governance Association.
- Seminars, symposiums, forums, and courses offered by the following organizations (as organizer or sponsor) that touch upon the subjects under “Continuing education courses” are considered continuing education:
- Competent authority of the industry, central competent authority, TWSE, TPEx, Taiwan Depository & Clearing Corporation, and other institutions sanctioned by the TWSE or TPEx.
- Trade associations of securities firms, accountants and attorneys.
- Workshops, discussion forums and internal training offered by listed companies or their affiliates that address the subjects under the “Scope of continuing education courses” may be counted as continuing education hours. However such hours preferably do not exceed one-third of the recommended annual continuing education hours.
- Special lectures, seminars, and symposiums organized by international organizations such as the OECD or by major securities markets around the world, attended by directors or supervisors, where the topic is in line with the scope of continuing education courses in point 3. above.
- When a TWSE or TPEx listed company engages a foreign national to serve as a director or supervisor, the company shall, in addition to having a clear understanding of the substantive content of the person’s continuing education undertaken abroad, provide a translation in English or the foreign national's native language of Taiwan’s major laws and regulations related to economics, securities, TWSE or TPEx listing, and relevant industries for reference.
- Independent directors’ right to know
Independent directors enjoy the same level of right-to-know as that of other directors. Listed companies shall notify their directors within the statutory time period of matters required to be put up for resolution by the board of directors. Prior to convening a board of directors’ meeting, a listed company shall provide the directors with sufficient information on the meeting agenda together with the meeting notice. If a director reckons that the meeting information is inadequate, he or she may ask the unit in-charge of the board of directors’ meeting to supplement with more information. If a director considers that the information on the relevant motion or measure is inadequate, the deliberation of the motion or measure may be postponed with the consent of the board of directors (Article 5 of the Regulations Governing Procedure for Board of Directors Meetings of Public Companies).
Articles 14-2 and 178 of the Securities and Exchange Actwere amended on April25,2018 to strengthen the independent director system. TWSE/TPEx listed companies are required to stipulate the scope of duties of the independent directors and empower them with manpower and physical support related to the exercise of their power. The company may not impede, refuse, or evade the performance of duties by the independent directors. As the independent directors deem necessary to the performance of their duties, they may request the board of directors to appoint relevant personnel, or may at their own discretion hire professionals to provide assistance. Therelated expenses will be borne by the company.Under amended Article 178, administrative fines may be imposed for violations of the above provisions. These amendments strengthenthe corporate government system and give independent directors a legal foundation to play a more vigorous role in corporate governance.
- Chief corporate governance officer
TWSE and TPEx listed companies are advised to have in place, according to their size, business conditions, and management needs, qualified corporate governance personnel in an appropriate number and to appoint one chief corporate governance officer as the most senior executive for corporate governance affairs. A TWSE or TPEx listed company shall appoint a chief corporate governance officer if it has paid-in capital of NT$2 billion or more or if it is a financial or insurance enterprise that is so required by the competent authority. However, if its paid-in capital is less than NT$10 billion, it is allowed to complete the appointment of the chief corporate governance officer by June 30, 2021.
A chief corporate governance officer shall be a qualified, practice-eligible lawyer or certified public accountant or have served in a managerial position for at least 3 years in a securities, financial, or futures related institution or a public company in a unit handling legal affairs, compliance, internal auditing, financial affairs, stock affairs, or the corporate governance affairs specified in Article 21 of the Taiwan Stock Exchange Corporation Operation Directions for Compliance with the Establishment of Board of Directors by TWSE Listed Companies and the Board's Exercise of Powers and of the Taipei Exchange Directions for Compliance Requirements for the Appointment and Exercise of Powers of the Boards of Directors of TPEx Listed Companies.
The corporate governance affairs mentioned in the preceding two paragraphs shall cover, at a minimum, the following:
- Handling of matters relating to board of directors meetings and shareholders meetings in compliance with law.
- Preparation of minutes of the board of directors meetings and shareholders meetings.
- Assistance in onboarding and continuing education of the directors and supervisors.
- Provision of information required for performance of duties by the directors and supervisors.
- Assistance in the directors' and supervisors' compliance of law.
- Other matters described or established in the articles of incorporation or under contract.
Further specifics regarding the chief corporate governance officer can be found in Articles 20 to 25 of the Taiwan Stock Exchange Corporation Operation Directions for Compliance with the Establishment of Board of Directors by TWSE Listed Companies and the Board's Exercise of Powers and of the Taipei Exchange Directions for Compliance Requirements for the Appointment and Exercise of Powers of the Boards of Directors of TPEx Listed Companies.
- Director liability insurance
Following the addition of Article 193-1 to the Company Act on August 1, 2018, express provisions were added to Article 16 of the Taiwan Stock Exchange Corporation Operation Directions for Compliance with the Establishment of Board of Directors by TWSE Listed Companies and the Board's Exercise of Powers and of the Taipei Exchange Directions for Compliance Requirements for the Appointment and Exercise of Powers of the Boards of Directors of TPEx Listed Companies, requiring TWSE and TPEx listed companies to purchase and maintain liability insurance for all directors and supervisors with respect to their legally required liabilities for damages arising from their performance of duties during the term of office. A listed company is required to report to the most recent board meeting on the insured amount, coverage, premium rate, and other important contents of the director liability insurance it has obtained or renewed for directors.
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