Annual Reports  >  2014  >  Corporate Governance > Board of Directors
Board of Directors
繁中

Board Structure

TSMC’s Board of Directors consists of eight distinguished members with a great breadth of experience as world-class business leaders or scholars. We rely on them for their diverse knowledge, personal perspectives, and solid business judgment. Five of the eight members are independent directors: former British Telecommunications Chief Executive Officer, Sir Peter Bonfield; Co-Founder, Chairman Emeritus of the Acer Group, Mr. Stan Shih; former Texas Instruments Inc. Chairman of the Board, Mr. Thomas J. Engibous; Professor of Princeton University, Gregory C. Chow; and Chairman of National Performing Arts Center and advisor to the Taiwan Executive Yuan, Ms. Kok-Choo Chen. One of the members of the Board Directors is female. The number of Independent Directors is more than 50% of the total number of Directors.

Board Responsibilities

Under the leadership of Chairman Morris Chang, TSMC’s Board of Directors takes a serious and forthright approach to its duties and is a dedicated, competent and independent Board.

In the spirit of Chairman Chang’s approach to corporate governance, a board of directors’ primary duty is to supervise. The Board should supervise the Company’s: compliance with relevant laws and regulations, financial transparency, timely disclosure of material information, and maintaining of the highest integrity within the Company.

TSMC’s Board of Directors strives to perform these responsibilities through the Audit Committee and the Compensation Committee, the hiring of a financial expert for the Audit Committee, and coordination with the Internal Audit department.

The second duty of the Board of Directors is to provide guidance to the management team of the Company. Quarterly, TSMC’s management reports to the Board on a variety of subjects. The management also reviews the Company’s business strategies with the Board and updates TSMC’s Board on the progress of those strategies, obtaining Board guidance as appropriate.

The third duty of the Board of Directors is to evaluate the management’s performance and to dismiss officers of the Company when necessary. TSMC’s management has maintained a healthy and functional communication with the Board of Directors, has been devoted in executing guidance of the Board, and is dedicated in running the business operations, all to achieve the best interests for TSMC shareholders.

Election of Directors

The tenure of office for Directors shall be three years. Our Board members are nominated through a highly selective process that considers not only their respective professional technical competence but also their respective reputation for ethical behavior and leadership. The independence of each independent director candidate is also considered and assessed under relevant law such as the Taiwan “Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies”. The final slate of candidates is put to the shareholders for voting at the relevant annual shareholders’ meeting. Under R.O.C. law, in which TSMC was incorporated, any shareholders holding one percent or more of our total outstanding common shares may nominate their own candidate to stand for election as a Board member. This democratic mechanism allows our shareholders to become involved in the selection and nomination process of Board candidates.

Directors’ Compensation

TSMC’s Articles of Incorporation restricts the amount of compensation payable to its directors that the Company may make from its distributable earnings (defined as net income after required regulatory provisions). Over the years, TSMC directors’ compensation declined from 1% of TSMC’s distributable earnings to 0.3%, before being capped to no more than 0.3% of its distributable compensation. In addition, directors who also serve as executive officers of the Company are not entitled to receive any director compensation.

Directors’ Professional Qualifications and Independent Analysis

According to the relevant requirements set by Taiwan’s Securities and Futures Bureau, the professional qualifications and independence status of the Company’s Board members are listed in the table below.

Name/Criteria

Meet the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience

An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialists Who Has Passed a National Examination and Been Awarded a Certificate in a Profession Necessary for the Business of the Company Have Work Experience in the Area of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company
Morris Chang
Chairman

 

 

v

F.C. Tseng
Vice Chairman

 

 

v

Johnsee Lee
Director

v

 

v

Sir Peter Leahy Bonfield
Independent Director

 

 

v

Stan Shih
Independent Director

 

 

v

Thomas J. Engibous
Independent Director

 

 

v

Gregory C. Chow
Independent Director

v

 

 
Kok-Choo Chen
Independent Director

v

v

v

Name/Criteria

Criteria (Note)

Number of Other Taiwanese Public
Companies Concurrently Serving as
an Independent Director

1

2

3

4

5

6

7

8

9

10

Morris Chang
Chairman

 

v

 

v

v

v

v

v

v

v

-

F.C. Tseng
Vice Chairman

v

 

 

v

v

v

v

v

v

v

1

Johnsee Lee
Director

v

v

v

v

v

v

v

v

v

 

2

Sir Peter Leahy Bonfield
Independent Director

v

v

v

v

v

v

v

v

v

v

-

Stan Shih
Independent Director

v

v

v

v

v

v

v

v

v

v

-

Thomas J. Engibous
Independent Director

v

v

v

v

v

v

v

v

v

v

-

Gregory C. Chow
Independent Director

v

v

v

v

v

v

v

v

v

v

-

Kok-Choo Chen
Independent Director

v

v

v

v

v

v

v

v

v

v

-

Note: Directors, during the two years before being elected and during the term of office, meet any of the following situations, please tick the appropriate corresponding boxes:
  1. Not an employee of the company or any of its affiliates;
  2. Not a director or supervisor of the company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary in which the company holds, directly or indirectly, more than 50 percent of the voting shares;
  3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders;
  4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs;
  5. Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company or ranks as of its top five shareholders;
  6. Not a director, supervisor, officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the company;
  7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof, provided that this restriction does not apply to any member of the compensation committee who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Compensation Committees of Companies whose Stock is Listed on the TWSE or Traded on the GTSM”;
  8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company;
  9. Not been a person of any conditions defined in Article 30 of the Company Law; and
  10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

Audit Committee

The Audit Committee assists the Board in fulfilling its oversight of the quality and integrity of the accounting, auditing, reporting, and financial control practices of the Company.

The Audit Committee is responsible to review the following major matters:

  • Financial reports;
  • Auditing and accounting policies and procedures;
  • Internal control systems;
  • Material asset or derivatives transactions;
  • Material lending funds, endorsements or guarantees;
  • Offering or issuance of any equity-type securities;
  • Legal compliance;
  • Related-party transactions and potential conflicts of interests involving executive officers and directors;
  • Ombudsman reports;
  • Potential fraud investigation reports;
  • Corporate risk management;
  • Hiring or dismissal of an attesting CPA, or the compensation given thereto; and
  • Appointment or discharge of financial, accounting, or internal auditing officers, etc.

Under R.O.C. law, the membership of Audit Committee shall consist of all independent Directors. TSMC’s Audit Committee satisfies this statutory requirement. The Committee also engaged a financial expert consultant in accordance with the rules of the U.S. Securities and Exchange Commission. The Audit Committee annually conducts self-evaluation to assess the Committee’s performance and identify areas for further attention.

TSMC’s Audit Committee is empowered by its Charter to conduct any study or investigation it deems appropriate to fulfill its responsibilities. It has direct access to TSMC’s internal auditors, the Company’s independent auditors, and all employees of the Company. The Committee is authorized to retain and oversee special legal, accounting, or other consultants as it deems appropriate to fulfill its mandate. The Audit Committee Charter is available on TSMC’s corporate website.

Compensation Committee

The Compensation Committee assists the Board in discharging its responsibilities related to TSMC’s compensation and benefits policies, plans and programs, and in the evaluation and compensation of TSMC’s directors of the Board and executives.

The members of the Compensation Committee are appointed by the Board as required by R.O.C. law. According to TSMC’s Compensation Committee Charter, the Committee shall consist of no fewer than three independent directors of the Board. Currently, the Compensation Committee is comprised of all five independent directors; the Chairman of the Board, Dr. Morris Chang, is invited by the Committee to attend all meetings and is excused from the Committee’s discussion of his own compensation.

TSMC’s Compensation Committee is authorized by its Charter to retain an independent consultant to assist in the evaluation of CEO, or executive officer compensation. The Compensation Committee Charter is available on TSMC’s corporate website.

Compensation Committee Members’ Professional Qualifications and Independent Analysis

According to the relevant requirements set by Taiwan’s Securities and Futures Bureau, the professional qualifications and independence status of the Company’s Compensation Committee members are listed in the table below.

Name Title/Criteria

Meet the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience

An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialists Who Has Passed a National Examination and Been Awarded a Certificate in a Profession Necessary for the Business of the Company Have Work Experience in the Area of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company
Stan Shih
Independent Director

 

 

v

Sir Peter Leahy Bonfield
Independent Director

 

 

v

Thomas J. Engibous
Independent Director

 

 

v

Gregory C. Chow
Independent Director

v

 

 

Kok-Choo Chen
Independent Director

v

v

v

Name Title/Criteria

Criteria (Note)

Number of Other Taiwanese Public Companies Concurrently Serving as a Compensation Committee Member in Taiwan

1

2

3

4

5

6

7

8

Stan Shih
Independent Director

v

v

v

v

v

v

v

v

-

Sir Peter Leahy Bonfield
Independent Director

v

v

v

v

v

v

v

v

-

Thomas J. Engibous
Independent Director

v

v

v

v

v

v

v

v

-

Gregory C. Chow
Independent Director

v

v

v

v

v

v

v

v

-

Kok-Choo Chen
Independent Director

v

v

v

v

v

v

v

v

-

Note: Compensation Committee Members, during the two years before being elected or during the term of office, meet any of the following situations, please tick the appropriate corresponding boxes:
  1. Not an employee of the company or any of its affiliates;
  2. Not a director or supervisor of the company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary in which the company holds, directly or indirectly, more than 50 percent of the voting shares;
  3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders;
  4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs;
  5. Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company or ranks as of its top five shareholders;
  6. Not a director, supervisor, officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the company;
  7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof;
  8. Not been a person of any conditions defined in Article 30 of the Company Law.

Directors and Committees Members’ Attendance

Each Director is expected to attend every Board meeting and the committees meeting on which he or she serves. In 2014, the average Board Meeting attendance rate was 90% and the attendance rate for the Audit Committee and Compensation Committee’s Meetings were 80% and 95% respectively.

Board of Directors Meeting Status

Dr. Morris Chang, the Chairman of the Board of Directors, convened four regular meetings and one special meeting in 2014. The directors’ attendance status is as follows.

Title

Name

Attendance
in Person

By Proxy

Attendance Rate
in Person (%)

Notes

Chairman

Morris Chang

5

-

100%

None

Vice Chairman

F.C. Tseng

5

-

100%

None

Director

National Development Fund, Executive Yuan Representative: Johnsee Lee

5

-

100%

None

Independent Director

Sir Peter Leahy Bonfield

4

1

80%

Sir Peter Bonfield participated in the discussion through telephone at 04/11 Special Meeting, represented by proxy.

Independent Director

Stan Shih

5

-

100%

None

Independent Director

Thomas J. Engibous

3

2

60%

None

Independent Director

Gregory C. Chow

4

1

80%

None

Independent Director

Kok-Choo Chen

5

-

100%

None

Annotations:

  1. There were no written or otherwise recorded resolutions on which an independent director had a dissenting opinion or qualified opinion in 2014.
  2. Recusals of Directors due to conflicts of interests in 2014: Directors recused themselves from the discussion and voting of their compensation resolution.
  3. Measures taken to strengthen the functionality of the Board:
    Five of the eight Directors are Independent Directors. The number of Independent Directors is more than 50% of the total number of Directors.
    The Chairman and Vice Chairman of the Board of Directors are not executive officers of the Company.
    TSMC Board delegates various responsibilities and authority to two Board Committees, Audit Committee and Compensation Committee. Both the two Committees consist solely of the five Independent Directors. Each Committee’s chairperson regularly reports to the Board on the activities and actions of the relevant committee.

Audit Committee Meeting Status

TSMC’s Audit Committee consists of five members. The tenure is from June 12, 2012 to June 11, 2015.

Sir Peter Bonfield, Chairman of the Audit Committee, convened four regular meetings and one special meeting in 2014. The Committee members and consultant’s attendance status is shown in the following table. In addition to these meetings, the Committee members and consultant participated in five telephone conferences to discuss the Company’s Annual Report to be filed with the Taiwan and U.S. authorities and investor conference materials with management.

Title

Name

Attendance
in Person

By Proxy

Attendance Rate
in Person (%)

Notes

Chair

Sir Peter Leahy Bonfield

4

1

80%

Sir Peter Bonfield participated in the discussion through telephone at 04/11 Special Meeting, represented by proxy.

Member

Stan Shih

4

1

80%

None

Member

Thomas J. Engibous

3

2

60%

None

Member

Gregory C. Chow

4

-

80%

None

Member

Kok-Choo Chen

5

-

100%

None

Financial Expert

J.C. Lobbezoo

4

-

100%

Mr. Lobbezoo did not have to attend 04/11 Special Meeting.

Annotations:

  1. There was no Securities and Exchange Act §14-5 resolution which was not approved by the Audit Committee but was approved by two thirds or more of all directors in 2014.
  2. There were no recusals of independent directors due to conflicts of interests in 2014.
  3. Descriptions of the communications between the independent directors, the internal auditors, and the independent auditors in 2014 (e.g. the channels, items and/or results of the audits on the corporate finance and/or operations, etc.):
    (1) The internal auditors have sent the audit reports to the members of the Audit Committee periodically, and presented the findings of all audit reports in the quarterly meetings of the Audit Committee. The head of Internal Audit will immediately report to the members of the Audit Committee any material matters. During 2014, the head of Internal Audit did not report any such material matters. The communication channel between the Audit Committee and the internal auditor functioned well.
    (2) The Company’s independent auditors have presented the findings of their quarterly review or audits on the Company’s financial results. Under applicable laws and regulations, the independent auditors are also required to immediately communicate to the Audit Committee any material matters that they have discovered. During 2014, the Company’s independent auditors did not report any irregularity. The communication channel between the Audit Committee and the independent auditors functioned well.

Compensation Committee Meeting Status

TSMC’s Compensation Committee consists of five members. The tenure is from June 12, 2012 to June 11, 2015.

Mr. Stan Shih, Chairman of the Compensation Committee, convened four regular meetings in 2014. The Committee members’ attendance status is as follows:

Title

Name

Attendance
in Person

By Proxy

Attendance Rate
in Person (%)

Notes

Chair

Stan Shih

4

-

100%

None

Member

Sir Peter Leahy Bonfield

4

-

100%

None

Member

Thomas J. Engibous

3

1

75%

None

Member

Gregory C. Chow

4

-

100%

None

Member

Kok-Choo Chen

4

-

100%

None

Annotation:

  1. There was no recommendation of the Compensation Committee which was not adopted or was modified by the Board of Directors in 2014.
  2. There were no written or otherwise recorded resolutions on which a member of the Compensation Committee had a dissenting opinion or qualified opinion.