TSMC Annual Report > 2016 > Corporate Governance > Taiwan Corporate Governance Implementation as Required by Taiwan Financial Supervisory Commission

Taiwan Corporate Governance Implementation as Required by Taiwan Financial Supervisory Commission

Assessment Item

Implementation Status

Non-implementation
and Its Reason(s)

Yes

No

Explanation

1. 

Does Company follow “Taiwan Corporate Governance Implementation” to establish and disclose its corporate governance practices?

 

V

TSMC has always followed excellent corporate governance practices, provided the utmost in operational transparency and safeguarded shareholders’ equity. Although the Company does not have a formal code of practice for corporate governance, however TSMC has always been highly regarded as the industry leader in implementing comprehensive corporate governance practices. In addition, the Company also has a world-class Board of Directors. The Company believes that corporate governance is based on integrity, professional management and implementation. TSMC has been proving its excellent corporate governance in its operating performance and continued winning of domestic and international awards on best corporate governance company.

Same as explanation

2. Shareholding Structure & Shareholders’
 Rights

(1) 

Does Company have Internal Operation Procedures for handling shareholders’ suggestions, concerns, disputes and litigation matters. If yes, has these procedures been implemented accordingly?

 

 

 

(2) 

Does Company possess a list of major shareholders and beneficial owners of these major shareholders?

 

 

(3) 

Has the Company built and executed a risk management system and “firewall” between the Company and its affiliates?

 

 

(4) 

Has the Company established internal rules prohibiting insider trading on undisclosed information?

 

V

 

 

 

 

 

 

 

V

 

 

 

V

 

 

 

 

V

 

 

(1) 

TSMC has designated appropriate departments, such as Corporate Communication Division, the SEC Compliance Department, Legal Department, etc., to handle shareholder suggestions, concerns, disputes or litigation matters.

 

 

(2) 

TSMC tracks the shareholdings of directors, officers, and top ten shareholders.

 

 

(3) 

TSMC has set up internal rules in the Company’s Internal Control System and Affiliated Corporations Management.

 

 

 

(4) 

TSMC has established its “Insider Trading policy” that applies to all employees, officers and members of the Board of Directors of the Company and to any other person having a duty of trust or confidence, with respect to transactions in the Company’s securities. This policy prohibits any insider trading and the Company regularly provides internal training on this issue.

None

3. Composition and Responsibilities of the
 Board of Directors

(1) 

Has the Company established a diversification policy for the composition of its Board of Directors and has it been implemented accordingly?

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) 

Other than the Compensation Committee and the Audit Committee which are required by law, does the Company plan to set up other Board committees?

 

 

 

 

 

 

(3) 

Has the Company established methodology for evaluating the performance of its Board of Directors, on an annual basis?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4) 

Does the Company regularly evaluate its external auditors’ independence?

 

 

V

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

V

 

 

 

 

 

 

 

 

 

V

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 


V

 

 

 

(1) 

The members of TSMC Board of Directors are nominated via a rigorous selection process. It not only considers diverse backgrounds, professional competence and experience, but also attaches great importance to his/her personal reputation on ethics and leadership. Presently, the Company’s Board of Directors consists of eight members who possesses world-class managerial and/or professional experiences. We rely on each directors’ knowledge, personal insight and business judgment. One female director currently sits on the Board of Director, and a majority of our Board consists of independent directors.

 

 

(2) 

Audit Committee (founded in 2002): consists of all five independent directors; Compensation Committee (founded in 2003): consists of all five independent directors;
CSR Committee (founded in 2011): is formed by the Company’s management team and reports to the Board of Directors.

 

 

 

(3) 

As TSMC’s corporate governance concept, the Board of Director’s primary responsibility is to supervise, evaluate the management’s performance and dismiss officers of the Company when necessary, resolve the important, concrete matters and provide guidance to the management team. TSMC’s Board of Directors consists of distinguished members with a great breadth of experience as world-class business leaders or professionals and adhere high ethical standards and commitment to the Company. Each quarter’s Board Meeting is last for two days. Company’s resolutions are determined in board meeting, also business strategy and future orientation are discussed in the meeting, in order to create best interest for shareholders. Based on TSMC’s operating performance and local/international awards of best corporate governance, it certainly proves the Company’s excellent performance of Board of Directors. Also, TSMC’s audit committee performs self-evaluation and discusses future issues of concern by questionnaire on annual basis.

 

 

(4) 

The Audit Committee annually evaluates the independence of external auditors and reports the same to the Board of Directors.

None

4. 

Does the Company established a full- (or part-) time corporate governance unit or personnel to be in charge of corporate governance affairs (including but not limited to furnish information required for business execution by directors, handle matters relating to board meetings and shareholders’ meetings according to laws, handle corporate registration and amendment registration, produce (or record?) minutes of board meetings and shareholders meetings, etc.

 

V

 

The Chairman appointed the current General Counsel as the Company’s Board secretariat. TSMC’s Corporate & Compliance Legal Division, which directly reports to the General Counsel, is in charge of assisting in related affairs, including furnishing information required for business decisions by Directors, handling matters relating to Board meetings, Committees meetings and Shareholders’ meetings and recording minutes of relevant meetings, etc. The SEC Compliance Department is responsible for handling corporate registration and amendment registration. All application documents needs to be reviewed by Legal and approved by the General Counsel.

None

5. 

Has the Company established a means of communicating with its Stakeholders (including but not limited to shareholders, employees, customers, suppliers, etc.) or created a Stakeholders Section on its Company website? Does the Company respond to stakeholders’ questions on corporate responsibilities?

 

V

 

Depending on the situation, the Company’s Corporate Communication Division, SEC Compliance department, Human Resources department, Customer Service department and Procurement department will communicate with stakeholders.
We also have publicly disclosed the contact information of our corporate spokesperson and relevant departments. Also, we have a stakeholder section on our corporate website to address our corporate social responsibilities and any other issues. For details, please refer to “Corporate Social Responsibility” of this Annual Report and “2. Stakeholder Engagement” of TSMC’s CSR Report.

None

6. 

Has the Company appointed a professional registrar for its Shareholders’ Meetings?

 

V

 

We have appointed China Trust as our registrar for our Shareholders’ Meetings.

None

7. Information Disclosure

 

(1) 

Has the Company established a corporate website to disclose information regarding its financials,business and corporate governance status?

 

 

 

 

 

 

 

 

 

 

 

 

(2) 

Does the Company use other information disclosure channels (e.g. maintaining an English-language website, designating staff to handle information collection and disclosure, appointing spokespersons, webcasting investors conference etc.)?

 

 

V

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

V

 

We have appointed China Trust as our registrar for our Shareholders’ Meetings.

(1) 

TSMC discloses its financials business and corporate governance status on its website at http://www.tsmc.com (in Chinese and English). TSMC’s American Depositary Receipt (ADR) is listed on the New York Stock Exchange (NYSE). As a foreign issuer, TSMC must comply with NYSE’s rules. We have been operating in accordance with NYSE listing standards, and have been disclosing the major differences between our corporate governance practices and U.S. corporate governance practices. Please see http://www.tsmc.com/download/english/
e03_governance/NYSE_Section_303A.pdf

 

 

(2) 

TSMC has designated appropriate departments (e.g. the Corporate Communication Division, the SEC Compliance Department, etc.) to handle the collection and disclosure of information as required by the relevant laws and regulations of Taiwan and other jurisdictions.
TSMC has designated spokespersons as required by relevant regulations.
TSMC webcasts live investor conferences.

None

8. 

Has the Company disclosed other information to facilitate a better understanding of its corporate governance practices (e.g. including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors)?

 

V

 

(1) 

For employee rights and employee wellness, please refer to “Human Capital” of this Annual Report.

 

 

(2) 

For investor relations, supplier relations and rights of stakeholders, please refer to “Corporate Social Responsibility” of this Annual Report.

 

 

(3) 

For Directors' training records, please refer to “Continuing Education/Training of Directors” of this Annual Report.

 

 

(4) 

For Risk Management Policies and Risk Evaluation, please refer to “Risk Management” of this Annual Report.

 

 

(5) 

For Customer Relations Policies, please refer to “Customer Trust” of this Annual Report.

 

 

(6) 

TSMC maintains D&O Insurance for its directors and officers.

 

None

9.

The improvement status for the result of Corporate Governance Evaluation announced by Taiwan Stock Exchange



TSMC was ranked in top 5% in Corporate Governance Evaluation in 2015 and 2016. The implementation status regarding below two non-scoring items:

  • Establishment a formal code of practice for corporate governance: as the explanation of Assessment Item 1 of this table, although the
    Company does not have a formal code of practice for corporate governance, however TSMC has always been highly regarded as the
    industry leader in implementing comprehensive corporate governance practices. In addition, the Company also has a world-class Board
    of Directors. The Company believes that corporate governance is based on integrity, professional management and implementation.
    TSMC has been proving its excellent corporate governance in its operating performance and continued winning of domestic and
    international awards on best corporate governance company.
  • Training of Directors: TSMC’s Board of Directors consists of distinguished members with a great breadth of experience as world-class
    business leaders or professionals. The Company continually arranges relevant training for Directors during Board meetings, and
    Directors also participate relevant course as needed. For the details, please refer to the below table “Continuing Education/Training of
    Directors in 2016”.

Continuing Education/Training of Directors in 2016

The major training methods of Directors includes:

  • At quarter Board meetings, TSMC management regularly presents updates on the Company’s business, regulatory developments and other information to Directors;
  • At quarter Audit Committee meetings, regular regulatory update reports are provided by TSMC’s General Counsel and by the Company’s independent auditors; and
  • Directors participate relevant training courses as needed.

In addition, from time to time, Directors are invited by other parties to give speeches on corporate governance and related topics.

Name

Date

Host by

Training/Speech Title

Duration

Morris Chang

07/01

Pan Wen-Yuan Cultural and Educational Foundation

Speech: New Talent of a New Era

1 hour

10/29

Fubon Financial Holding Co., Ltd.

Speech: Corporate Governance Structure and Board Operations

2 hours

F.C. Tseng

05/05

Securities and Future Institute

Legal Liability of Directors and Supervisors in Hostile Mergers and Acquisitions

3 hours

08/04

Case Study on Employee Compensation Strategies and Tool Applications

3 hours

Stan Shih

11/10

Taiwan Corporate Governance Association

Introduction to Significant Mergers and Acquisition Agreements (Including Case Sharing)

3 hours

11/11

Industrial Sustainable Development - ICT Industry's Low Carbon Investments and Business Strategies in Response to the Paris Agreement

3 hours

Johnsee Lee

08/12

Taiwan Corporate Governance Association

Audit Committee Practices

3 hours

09/21

Taiwan Mergers & Acquisitions and Private Equity Council

2016 Private Equity Forum

4 hours

09/29

Oxford Economics

Global Economic Outlook Seminar

3 hours

Michael R. Splinter

10/09

Community College Entrepreneurial Association

Developing Entrepreneurs

2 hours

Morris Chang
F. C. Tseng
Sir Peter Leahy
 Bonfield
Stan Shih
Thomas J. Engibous
Kok-Choo Chen
Michael R. Splinter
Johnsee Lee

02/02

TSMC

“Post-Election Taiwan and its Relations with China and the US” by Dr. Chi SU, Chairman of Taipei Forum

40 mins.

08/02

TSMC

“Recent Labor Problems in Taiwan and Future Potential Impact” by Dr. Pan Shihwei, Associate Professor of Industrial Relations of Department and graduate studies of Labor Relations,
Chinese Culture University

1 hour

Note:

Selected speeches on corporate governance and related topics.

Continuing Education/Training of Management in 2016

Name/Title

Date

Host by

Training

Duration

Lora Ho
Senior Vice President and Chief Financial Officer

05/05

Securities and Future Institute

Legal Liability of Directors and Supervisors in Hostile Mergers and Acquisitions

3 hours

08/04

Case Study on Employee Compensation Strategies and Tool Applications

3 hours

Sylvia Fang
Vice President and General Counsel

05/26

Wispro IP & Legal

Sensing the Future Forum
Speech: Sensing the Future

3.5 hours

09/21

Intellectual Property Office, Ministry of Economic Affairs

Taiwan-EU Seminar on Trade Secrets
Speech: Challenges Facing Taiwan Companies Protecting Corporate Trade Secrets

8 hours

11/15

Ministry of Economic Affairs

Trade Secrets Legislation’s Impact on Industry
Speech: The Status and Predicament of Trade Secrets Protection by Taiwanese Enterprises

3.5 hours

12/09

Baker McKenzie

2016 Global Patent Seminar
Speech: Development & Challenges of Trade Secret
 Protection in Taiwan

3.5 hours

Cliff Hou
Vice President, Design and Technology Platform

05/05

Securities and Future Institute

Legal Liability of Directors and Supervisors Arising in Hostile Mergers and Acquisitions

3 hours

12/02

Professional Director's Insight into Corporate Governance and Building/Forming Effective Board of Directors

3 hours

Jessica Chou
Senior Director, Accounting Division

12/05

Accounting Research and Development Foundation

The Annual Professional Development Training for Principal Accounting Officer

6 hours

12/06

6 hours

John Liang
Director, Internal Audit

05/11

Computer Audit Association

Case Sharing of Procurement Auditing

6 hours

11/29

Securities and Future Institute

Fraud Risks in Operation Cycles

6 hours

In addition, various training programs and speech presentations were also provided by TSMC’s Legal Organization for Management and the relevant divisions, such as:

  • Ethics code and anti-bribery/corruption
  • Intellectual Property Protection
  • Export Control Compliance and Practice