Taiwan Corporate Governance Principles – An Overview and Summary of Requirements

  • By: Staff Editor
  • Date: September 27, 2013
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Taiwan formulated these principles to establish a sound corporate governance system, and to promote the integrity of the securities market. They are applicable to companies listed on the Taiwan Stock Exchange Corporation ("TSEC") and the GreTai Securities Market ("GTSM"), collectively referred to as "TSEC/GTSM listed companies").
A TSEC/GTSM listed company should follow the following principles:
  1. Establish an effective corporate governance framework


  1. Protect shareholders' rights and interests
The corporate governance system should be established which ensures shareholders' rights of being fully informed of, participating in and making decisions over important matters of the company.
  • Shareholders' meetings should be convened in accordance with the Company Law and relevant laws and regulations and provide comprehensive rules for such meetings.
  • The board of directors should properly arrange the proposals and agenda of shareholders' meetings
  • The shareholders should be encouraged to actively participate in its corporate governance and shareholders' meetings should be held on the premise of legal, effective and safe proceedings.
  • The minutes of the shareholders' meetings should be held in accordance with the Company Law and other applicable laws and regulations.
  • The chairman of the shareholders' meetings should be fully familiar and comply with the rules governing the proceedings of the shareholders' meetings established by the company.
  • Shareholders’ rights to know and compliance with the applicable regulations regarding the information disclosure should be respected
  • The shareholders should be entitled to profit distributions by the company
  •  A sound management system should be established for finance, operations and accounting in accordance with the applicable laws and regulations
  • Where a TSEC/GTSM listed company and its affiliated enterprises enter into inter-company business transactions, a written agreement governing the relevant financial and business operations between each other should be made in accordance with the principle of fair dealing and reasonableness.
  1. Strengthen the powers of the board of directors
  • An appropriate number of board members should be determined according to the business scale, the shareholding of major shareholders and practical operational needs.
  • The board members should have the necessary knowledge, skill, and experience for performing their duties.
  • The abilities of board of directors should include
    1. ability to make operational judgment
    2. ability to perform accounting and financial analysis
    3. ability to conduct management administration
    4. ability to conduct crisis management
    5. possession industrial knowledge
    6. possession perspective of international market
    7. ability to lead
    8. ability to make decisions.
  •  A fair, just, and open procedure should be established for the election of directors
  •  Clear distinctions should be drawn between the responsibilities and duties of the chairman of the board of a TSEC/GTSM listed company and those of its general manager.
  • Independent directors equivalent to a minimum of two or one-fifth of the total directors should be appointed
  • The board of directors can set up audit, nomination, remuneration, risk management or any other functional committees
  • A professional, responsible and independent CPA should be selected as an external auditor, to perform regular reviews of the financial conditions and internal control measures of the company.
  • A professional and competent legal counsel should be selected to provide adequate legal consultation services to the company, or to assist the directors, the supervisors and the management.
  • The board of directors should meet at least once every quarter, or convene at any time in case of emergency.
  • A director should exercise a high degree of self-discipline and should voluntarily abstain from participating in discussion and voting, for himself or herself or as proxy for another director.
  • Staff personnel attending board meetings should collect and correctly record the meeting minutes in detail, and the summary, method of resolution, and voting results of all the proposals submitted.
  • Appropriate corporate department or personnel should be asked to handle matters and implement actions pursuant to the board of directors' resolutions in a way consistent with the program schedule and objectives.
  • Members of the board of directors should conduct corporate affairs with loyalty and perform this duty of care as a good administrator.
  • Yearly performance assessment of the board of directors, functional committees and each director should be conducted by self-assessment, peer-to-peer assessment, engagement of outside professional institution or other appropriate way.
  • A succession plan for the management should be established
  • Members of the board of directors should participate in training courses on finance, risk management, business, commerce, accounting, law or corporate social responsibility.
  • If a resolution of the board of directors violates law, regulations or the company's articles of incorporation, members of the board should take appropriate measures or discontinue the implementation of such resolution as soon as possible.
  1.   Empowering the Supervisors
  • A fair, impartial, and open procedure for the election of supervisor should be adopted for electing supervisors.
  • The qualifications, education, working experience, background and the existence of any other matters related to the candidates should be reviewed in advance.
  • At least one seat of supervisor should not have a spousal relationship or a familial relationship within the second degree of kinship with another supervisor or a director.
  • Responsibilities of a supervisor includes:
    • Supervise the implementation of the operations of the company.
    • Supervise the performance of duties of directors and managers
    • Should ensure enforcement of the internal control system
    • Investigate the operational and financial conditions of the company regularly
    • Understand the relevant laws and regulations; rights, obligations and duties of directors of the company; functions, duties and operations of each department;
    • Attend meetings of the board of directors to supervise the operations
    • State his/her opinion when appropriate
  • A channel for supervisors to communicate with the employees, shareholders, and stakeholders should be established.
  • Supervisors should participate in training courses of finance, risk management, business, commerce, accounting, law or corporate social responsibility

     5.       Respecting Stakeholders' Rights

  • Channels of communication with the banks, other creditors, employees, consumers, suppliers, community or other stakeholders should be maintained.
  • Sufficient information should be provided to banks and its other creditors to facilitate their evaluation of the operational and financial conditions of the company and decision-making process.
  • Channels of communication should be established with employees.
  • Employees should be encouraged to communicate directly with the management, directors or supervisors so as to reflect their opinions.
  • Attention should be paid to consumers’ interest, environmental protection of community, public interest issues and social responsibility of the company to develop normal business and maximizing the shareholder’s interest.

    6.       Improving Information Transparency

  • To ensure proper and timely disclosure of information about policies that can affect the decisions of shareholders and stakeholders, following should be established:
    • An Internet-based reporting system
    • Appointment of a personnel responsible for gathering and disclosing the information
    • Spokesperson system
  • Following information regarding corporate governance in the fiscal year should be disclosed:  - Corporate governance framework and rules
    • Ownership structure and shareholders' rights and interests
    • Structure and independence of the board of directors
    • Responsibility of the board of directors and managerial personnel
    • Composition, duties and independence of the audit committee or supervisors
    • Composition, duties and operation of the remuneration committee
    • Remuneration paid to the directors, supervisors, general manager and vice general manager in the most recent fiscal year
    • Progress of training of directors and supervisors
    • Stakeholders' rights and relationships
    • Details of the events subject to information disclosure required by law and regulations
    • Enforcement of corporate governance and other information regarding corporate governance.
  • The plans and measures to improve the corporate governance system should be disclosed through appropriate mechanisms



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