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TWSE releases guidelines and templates to enhance continuing emphasis on corporate governance and corporate social responsibility

Publish time:2020-02-14

Following the amendments of four corporate governance regulations, which were the "Taiwan Stock Exchange Corporation Rules Governing the Preparation and Filing of Corporate Social Responsibility Reports by TWSE Listed Companies", “Taiwan Stock Exchange Corporation Operation Directions for Compliance with the Establishment of Board of Directors by TWSE Listed Companies and the Board's Exercise of Powers", "Taiwan Stock Exchange Corporation Rules Governing Information Filing by Companies with TWSE Listed Securities and Offshore Fund Institutions with TWSE Listed Offshore Exchange-Traded Funds", and "XXX Co., Ltd. Rules of Procedure for Shareholders Meetings" released on January 2, 2020, the Taiwan Stock Exchange looked at the New Corporate Governance Roadmap ("New Roadmap") and the recent amendments of regulations made by the competent authority and TWSE, and considered local practices and international regulations. To make a continuing emphasis on corporate governance and corporate social responsibility, the TWSE announced the implementation of the "Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies", the "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies", and the "Sample Template for XXX Co., Ltd. Procedures for Ethical Management and Guidelines for Conduct" on February 13, 2020.

The TWSE states that in the interest of stronger corporate governance, it advises TWSE listed companies to, in addition to complying with the applicable regulations, look at the latest amendment of the "Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies" and adopt the appropriate measures, which include stock trading control that comes into effect upon insider knowledge of financial statements or related business results, establishment of a nomination committee, and implementation of an intellectual property management system.

Following the amendment of the "Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies" released on May 23, 2019, The TWSE revised the "Sample Template for XXX Co., Ltd. Procedures for Ethical Management and Guidelines for Conduct". Important changes include: installation of resources and personnel for an ethical management unit, obligation of the ethical management unit to report to the board of directors at least once a year, more responsibilities for the ethical management unit (regular analysis and assessment of the risk of unethical behaviors outside the scope of business, and preparation and safekeeping of ethical management policies and documented information from policy execution), requirement for directors and executive officers to present statements of compliance with the ethical management policies, inclusion of a requirement for employees to comply with the ethical management policies in the terms of employment, actions to be taken after reports have been investigated, and acceptance of anonymous reports.

Furthermore, to encourage the TWSE listed companies to pay attention to climate change issues, the TWSE looked at the "Task Force on Climate-related Financial Disclosures" by the Financial Stability Board, and released the amended "Taiwan Stock Exchange Corporation Rules Governing the Preparation and Filing of Corporate Social Responsibility Reports by TWSE Listed Companies" on January 2, 2020. The rules require TWSE listed companies to disclose governance practices for climate risk and opportunities plus actual and potential climate induced impact; and describe processes that identify, evaluate, and manage climate risk; benchmarks and targets used to evaluate and manage climate issues. These measures are intended to make Taiwanese businesses better equipped to respond to climate risks. Meanwhile, the competent authority announced the amendment of the “Regulations Governing Information to be Published in Annual Reports of Public Companies” on January 22, 2020. The TWSE listed companies will be required to disclose climate change related information in their annual reports. The TWSE also made changes to the “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies” by following the direction in the New Roadmap and the amended regulations above and taking into account important global trends. Key changes include:

I. TWSE/TPEx listed companies are required to observe the materiality principle in their assessments of risk in environmental, social, and corporate governance issues relevant to their business activities, and devise risk management policies and strategies accordingly.

II. TWSE/TPEx listed companies should evaluate the potential risk and opportunities in climate change with regard to the present and future of their business, and take appropriate action to counter climate change issues.

III. TWSE/TPEx listed companies should take inventory of their greenhouse gas emissions, water consumption, and total waste produced, and implement policies on energy efficiency and carbon reduction, greenhouse gas reduction, water reduction, or waste management.

IV. TWSE/TPEx listed companies should implement and follow reasonable employee benefits (including pay, leave, and other benefits), and ensure business performance or results are reflected adequately in employee remuneration.

V. TWSE/TPEx listed companies should implement supplier management policies to require suppliers observe certain regulations on environmental protection, occupational health and safety, or labor or human rights.