The Taiwan Stock Exchange (TWSE) announced “The Second Version of Corporate Governance Evaluation Indicators” today. Altogether, the indicators cover five dimensions with 98 indicators. The period that the evaluation covers is from January 1, 2015 to December 31, 2015. The TWSE expects to announce the list of companies ranking in the top 50% in April 2016.
The TWSE indicates that it initiated the modification of evaluation indicators earlier than scheduled and successfully completed this task before the end of 2014 to allow ample time for listed companies to review and respond to the content of the second version of evaluation indicators. Altogether, eleven new indicators have been added and five were removed. The total number of indicators increased from 92 to 98.
The TWSE further indicates that the second version of evaluation indicators added many topics that are major concerns among the general public. Examples include the food safety incidents that occurred in recent months and the public safety highlighted by the gas explosion. The result is that the government decided to force listed companies to give greater emphasis on corporate social responsibility. In addition to raising the weight of the dimension “fulfilling corporate social responsibility” in corporate governance evaluation from 15% to 18%, the TWSE also requires corporations to “compile a corporate social responsibility report based on international guidelines,” as a new item in the evaluation indicators and it is advised that companies should “voluntarily obtain third party verification” for their corporate social responsibility reports to make them more authoritative. By this measure, the TWSE hopes that it can encourage listed companies to give greater emphasis on their responsibilities to the environment and society.
In addition, to protect the interests of investors, the TWSE has added the requirement: “When the shareholders’ meeting of a company resolves to distribute cash dividends, the company shall completely distribute the cash dividend within 30 days of the record date.” Moreover, the company should also “disclose the review of execution for matters resolved at the annual shareholders’ meeting in the annual report” to ensure that resolutions at the shareholders’ meeting are properly executed. As for the interests of employees, such as the compensation and benefits of employees, which is a hot-button issue among the general public, the TWSE has added the indicator that “encourages the company to enter into collective agreements with employees” to encourage employers and employees to improve and protect the interests of employees.
What is worth noting is that the TWSE adds the requirement that “at least one director on the Board of a company should be female” for the purpose of improving gender equality and to stay current with international development trends. The goal is to diversify the composition of board members of a company.
The TWSE emphasizes that the purpose of “Corporate Governance Evaluation” is to highlight listed companies with good corporate governance and rewarding such companies through publicity and encouragement. By doing so, these companies can become the benchmarks of other companies. With such measures, the TWSE can not only improve the corporate governance level in the entire capital market of Taiwan and massively improve protection for investors, but also significantly help improve the international image of Taiwan and create a well-functioning investment environment. The first version of corporate governance evaluation is underway. The self-evaluation by listed companies is expected to be complete before January 31, 2015. By the end of April 2015, the list for companies that rank in the top twenty percent of the first version of corporate governance evaluation will be announced.