Taiwan Stock Exchange (TWSE) has officially announced the 2019 (6th Round) Corporate Governance Evaluation. The system consists of four dimensions and 85 indicators and is in effect between January 1, 2019 and December 31, 2019. The 2019 evaluation results are expected by the end of April 2020.

 

The TWSE points out that the campaign to promote corporate governance by following the 2013 Corporate Governance Roadmap since 2014 has been showing excellent results. The New Corporate Governance Roadmap (2018-2020) (hereinafter “the New Roadmap”) released by the competent authority on April 24, 2018 names "enhancing the effectiveness of the corporate governance evaluation system" the first priority in "deepening corporate governance and corporate social responsibility culture". The 6th Evaluation follows the New Roadmap and makes adjustments along the themes of stronger qualitative indicators, refined scoring, and new questionnaire to gather feedback. The Evaluation also reflects important international trends in corporate governance and new regulatory amendments, interpretations, and policies in the country as well as suggestions from various industries. Four new indicators have been added and four old ones removed. Thirteen indicators are amended, and types of eight indicators are adjusted. The aim is to drive companies to augment corporate governance and enhance the differentiation of the overall evaluation.

 

The TWSE goes on to state that regarding strengthening qualitative indicators, "actual implementation" will be the focus of evaluation. In other words, points will not be given until established policies have been implemented or executed to meet certain requirements and publicly disclosed. The approach leads to a more effective qualitative scoring system. Changes in 2019 include: "establishment of an information security risk management framework, formulation of information security policies and detailed management approaches, and disclosure on company websites or in annual reports", "establishment of succession plans for board members and key managers and disclosure of related operations on company websites or in annual reports", and "human rights protection policies based on international human rights conventions, detailed management approaches, and disclosure of related operations on company websites or in annual reports".

 

The added "scoring by level of practices" indicators include questions such as "basic points to be given for appointment of a corporate governance officer responsible for corporate governance related activities and description of the officer's authority and responsibilities, key targets in the current year, and education and training hours; and additional points awarded if the officer is not concurrently serving another position in the company". Another example is "basic points to be given for disclosure of stakeholders identified, crucial issues being monitored, and means of communications and response; and additional points awarded if the board of directors is regularly updated on stakeholder communications". The goal is to encourage companies by awarding different scores for different degrees of adoption or implementation of corporate governance practices.

 

In addition, following the New Roadmap, the questionnaire will be sent this year to internal and external auditors to collect feedback on their perception of the boards and their members and observations of the degree of attention given to corporate governance. The questionnaire results will be checked against the indicators and used in consideration for extra points given and amendments of indicators.

 

The TWSE emphasized that the purpose of the advocacy of the 2019 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. The 2018 (5th round) Corporate Governance Evaluation is in progress. The results are anticipated by the end of April 2019. It is worth noting that the evaluation results are planned to add information on industry and market capitalization basis when they are released next year.