Corporate governance is the first step to corporate sustainability and a key benchmark for measuring sustainable development. Sound corporate governance is embodied by the Board of Directors and the management operating in the context of the best interests of the company and stakeholders, providing effective oversight and assistance to the company's management and operations to achieve business goals. Meanwhile, it also encourages the company to utilize resources and become more efficient, thereby strengthening competitiveness of the company and wellbeing of the population as a whole.
Corporate Governance Framework
TCFHC follows the FSC “Corporate Governance 3.0 - Sustainable Development Roadmap” and the TWSE and SFI “Corporate Governance Evaluation of TWSE/TPEx-Listed Companies” to enforce corporate governance practices in order to effectively advance corporate governance and business results, facilitate a healthy organization, and protect the rights of shareholders, employees, customers, and other stakeholders.
Structure of Board of Directors and Operations Mechanism
TCFHC has a well-defined corporate structure and complies with governance related regulations including “Articles of Incorporation”, “Corporate Governance Best Practice Principles”, “Ethical Corporate Management Best Practice Principles”, and “Sustainability Best Practice Principles”, based on which the Board of Directors is entrusted with the highest authority in corporate governance to be responsible for sustainable development decisions on economic, social, and environmental aspects.
Since 2021, the directors and independent directors are elected following the candidate nomination system by shareholders from the list of candidates for directors and independent directors and serve a term of 3 years.
In 2023, 17 Board of Directors meetings were held and the attendance rate of all 5th directors was 95%.
The Board of Directors have 15 directors, consisting of 1 executive director, 5 independent directors, and 9 non-executive directors. The Chairman of the Board and the President are not the same person, spouses, or close relatives within the second degree of kinship. The relationships between the directors are not spousal or familial relationships within the second degree of kinship, and independent directors serve a maximum of 3 consecutive terms. All these ensure the independence of the Company’s Board of Directors.
The members of the Company’s 5th Board of Directors possess rich experience and expertise in various fields, including business management, leadership and decision-making, knowledge of the industry, international perspectives, financial accounting and taxes, and law. Among them, 1 independent director have served for less than 3 years, while 2 independent directors have served for more than 3 years but less than 6 years, 2 independent directors have served for more than 6 years but less than 9 years, the average tenure of 5th Board members is 3.6 years. Currently, 3 directors in the Company are employees (including employees from affiliates). The number of directors concurrently serving as the Company’s manager does not exceed one-third of the total number of directors. The age distribution of the directors is diverse, with 4 directors below the age of 50, 3 directors aged between 50 and 60, and 8 directors aged 61 or above, as of March 18, 2024. In terms of gender, there are 12 male directors (80%) and 3 female directors (20%). Regarding industry experience, 71.43% of the directors have relevant Global Industry Classification Standard (GICS) financial work experience (Mei-Tsu Chen is an executive director and therefore not included in this calculation). Gender equality has been equally weighted by TCFHC with having at least 2 female members in the Board being set as the goal. At present, the number of female members in the Board of Directors in this term is 3, which has achieved the goal. The relevant implementations are listed as follows:
Performance Evaluation of Directors
“The Board of Directors Performance Evaluation Guidelines” are established to enhance the operating efficacy of the TCFHC’s Board of Directors. The Board of Directors and functional committees shall conduct internal performance evaluations each year according to the evaluation procedures and indicators outlined in this regulation. They shall also commission external professional independent institutions or teams of external experts and scholars to evaluate at least once every 3 years. The results of both internal and external performance evaluations shall be reported to the Board of Directors by the end of March of the following year. The result of such evaluations is taken as reference for appointing or nominating directors, whereas the result of each individual director’s evaluation is taken as reference for arranging each of their individual remuneration。
External consultants had completed external performance evaluation of the Board of Directors in 2023. The Company is rated 2 “Advance” and 1 “Benchmark” in 3 aspects, “Structure”, ”People”, and “Process and Information” of the Board. The scope of the Board of Directors’ internal evaluation for 2023 included the Board, individual members of the Board, and functional committees. Evaluation methods were internal self-assessment and director/member self-assessment. The evaluation results are all classified into “good”. The evaluation cycle, evaluation period, evaluation scope, evaluation method, and evaluation results of the performance of TCFHC’s Board of Directors are all announced on the Company's official website.
Continuing Education for Directors
In order to continue to strengthen professional capacity of the Board of Directors, TCFHC followed the “Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies” and arranged training for every director to reinforce all of the directors’ professional capabilities so as to empower corporate governance in the company.
In 2022, the directors completed a total of 213 hours of training encompassing corporate governance, FinTech, IT Security, anti-money laundering, risk management, and internal control and audit. In addition, to enable directors to effectively keep abreast of ESG issues and development trends, each director participated in one or more ESG-related courses. For details of courses that the TCFHC directors have participated, please visit the website of TWSE’s Market Observation Post System for inquiry.
Functional Committees
To leverage the roles and strengthen independence of the Board of Directors, the Company has established 3 functional committees under the Board of Directors which are Audit Committee, Remuneration Committee, and Ethical Management Committee. In addition, special committees have been established under the Chairman to enhance corporate governance and improve risk management and legal compliance systems.
Remuneration of Directors and Senior Management
The remuneration of the directors of the Company includes monthly remuneration, subsidies for health examinations (reimbursement based on actual expenses), and director remuneration. The Board of Directors is authorized to formulate the monthly remuneration for directors (excluding the Chairman) according to the recommendations of the Remuneration Committee. The Board not only considers their involvement in the Company’s operation and value of their contributions but also the Company's business performance and standard generally adhered by other industries of the same trade. In addition, regular internal and external performance evaluations of directors’ are conducted, and the evaluation results are reported to the Remuneration Committee as a reference for the Remuneration Committee to evaluate regularly and formulate the director remuneration. The director remuneration is based on the profit pre-tax before deducting employee remuneration and director remuneration in the current year, allocating a maximum of 1% of the amount recommended by the Remuneration Committee. The remuneration is submitted to the Board of Directors for review and reported at the shareholders’ meeting. The remuneration of the Chairman is 1.25 times the total remuneration received by the President.
Senior management (including the President) remuneration can be divided into fixed and variable remuneration, including basic salary, supervisor work overtime allowance, meal allowance, health examination subsidy (reimbursed based on actual expenses), bonuses, and employee remuneration. However, the President does not receive employee remuneration in accordance with the regulations.
Fixed Remuneration
The standard of the monthly remuneration for the President is determined by the Board of Directors according to the Company's Articles of Incorporation and is submitted in advance to the Remuneration Committee for suggestions according to the regulations. The senior management is paid according to the standard of the job grade on the “Employee Remuneration Table” . The standards and approval processes for the aforementioned “Employee Remuneration Table” and issuance of the supervisor work overtime allowances and meal allowances are also proposed by the Remuneration Committee and implemented after submitted to the Board of Directors for review and approval. The results are regularly reviewed and evaluated by the Remuneration Committee every year.
Variable Remuneration
The annual performance evaluation of the President are determined by factors such as financial indicators include pre-tax profit target achievement rate and growth rate, return on equity(ROE) achievement rate and growth rate, output rate achievement situation and growth rate, non-performing loans ratio, loan coverage ratio excluding government agency loans and expected loan coverage ratio. It also take financial indicators such as the achievement rate of the Company's profit target, return on equity (ROE), return on total assets (ROA) and non-financial indicators such as specific achievements in management and business reform of subsidiaries into comprehensive consideration. These indicators are taken into consideration to determine the allocation of the variable remuneration (including evaluation and performance bonuses) of the President. Additionally, the comparison of the Company's financial performance with other industries of the same trade is used as a reference for the upper limit of the allocation of bonus. The 0.6% variable salary is deferred for 6 years in the form of employee stock ownership trust. If the President faces civil liabilities before the allocation of the bonuses, the bonuses will be reduced or not awarded.
In recent years, in order to improve the Group’s ESG results, senior management personnel are incentivized to pay attention to sustainable developments for corporates. In addition to records of rewards and disciplines and attendance rates, a major performance section has been specially set up in the assessment form for senior management personnel. The annual execution results of material topics and major outstanding performances for ESG (including but not limited to corporate governance, business management, environmental protection, and CSR) are considered as key evaluation item in the overall assessment, ultimately determining the final assessment. Therefore, senior management personnel are required to include ESG development as the main initiative in their annual planning. Furthermore, the scope of the performance evaluation of subsidiaries will also include the execution results of material topics on ESG and the important operational policies. Relevant facts and supporting evidence may be provided to earn additional points. TCFHC Group links the performance evaluation of senior management personnel and subsidiaries to ESG, hoping to enhance sustainable development of the TCFHC Group and bring positive impacts to stakeholders through top-down initiatives.
Shareholding
Although the Group has not currently stipulated relevant regulations for the shareholding of senior management, it has currently included the company's financial achievement as an evaluation indicator for business performance bonuses. The Group also connects it to the employee’s performance evaluation and rewards, hoping the long-term interest of the management and the company will gradually become consistent. The shareholding of the CEO and other senior management has gradually increased over the years. Furthermore, since 2020, TCB has launched an employee stock ownership trust and raised the maximum withholding amount for employees to NT$20,000 per month by the end of 2021. This actively encourages senior management to purchase and hold the company's stock during their tenure. The multiple of CEO and other senior management's shareholding and remuneration in 2022 were 2.37 times and 1.53 times, respectively (2.26 times and 1.39 times, respectively, in 2021).
