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The 2018 Corporate Governance Evaluation Indicators are officially announced

Publish time:2018-01-03

The Taiwan Stock Exchange (hereinafter referred to as “TWSE”) announced the 2018 (5th Round) Corporate Governance Evaluation Indicators. This version of the evaluation contains 85 indicators in 4 dimensions, which will be effective from January 1, 2018 to December 31, 2018, with the evaluation results to be released by the end of April, 2019.
 
According to the TWSE, the Corporate Governance Evaluation started in 2014, with the evaluation about to enter its fifth year. The advocacy of the system has significantly improved the quality of corporate governance practices in Taiwan. To continue to build corporate governance core values among listed companies, the 2018 evaluation entails major changes in consideration of the global corporate governance trends, newly revised domestic regulations, and the feedback received from all sectors. The changes include reference to G20/OECD principles of corporate governance whereby the dimensions of the “protecting shareholder rights and interests” and “treating shareholders equitably” were combined and the allocation of weights to each dimension of the evaluation were adjusted correspondingly. To further enhance the differentiation of the overall evaluation, the types of indicators and scoring methods were also adjusted. For example, type C indicators were cancelled and replaced with “type AA indicators” for higher weight in scoring, and “type A+ indicators” for scoring by level of practice. Furthermore, the “indicator for extra scoring” and “indicator for extra deduction of marks” were also introduced. This arrangement helps to highlight the enterprises with sound pursuit in corporate governance and include more elements of actual practice.
 
In the evaluation of 2018, eight indicators were added, 22 indicators were removed (of which 16 indicators were merged into other indicators), and 13 indicators were amended. Finally, types of 22 indicators were adjusted for alignment with the aforementioned new indicator types being introduced.
 
A number of indicators related to compliance were removed in response to relevant amendment of applicable laws, and indicators of similar meaning were combined or adjusted by indicator type for the sustained identifiability. Examples are the allocation of additional weight to six indicators, which include, “whether the company announces its financial reports within two months after the end of the fiscal year”, “the presentation of annual financial reports in English”, and “establishment of a whistle blower system”. In addition, nine indicators were adjusted to scoring by level of practice, such as “the disclosure of the emission of carbon dioxide and other greenhouse gases by the company over the last two years” will be graded for one point in its dimension. One extra mark will be added to the total scoring if “the content of disclosure has been accredited by external institutions”. The above indicators are the means of allocating more weight to the scoring as an encouragement to adopt relevant measures.
 
In addition, the evaluation included the addition of “at least one independent director shall attend the board meeting in person”, “the appointment of full-time personnel to take charge of matters related to corporate governance”, and the “disclosure of the performance evaluation of the directors in connection with the remuneration to the directors” so as to continue to enhance the function of the board of directors. New indicators like “the installation of an appropriate framework for the governance of corporate social responsibility", “the establishment of human rights protection policy”, and the “policy of reflecting operation results through the remuneration to the employees” were introduced for the reinforcement the goals of corporate social responsibility.
 
The TWSE emphasized that the purpose of the advocacy of Corporate Governance Evaluation is to lead companies to the goal of best practice in corporate governance through the essence of the indicators, and it also serves as a mechanism for healthy competition among the companies listed on the TWSE or TPEx, which in turn will help to augment the realization of corporate governance and corporate social responsibility and thus improve the global capital market and Taiwan competitiveness. The 2017 Corporate Governance Evaluation is now in progress and the result is expected to be announced by April 30, 2018.