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Corporate Governance

Implementation of Corporate Governance Practices

Assessment Item Status Non-compliance and Reasons
Yes No Description
1. Does the Company follow “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” to establish and disclose its corporate governance practices? V The Company has established “Guidelines on Corporate Governance” in order to enhance its performance in corporate governance, secure shareholders’ rights, improve the performance of the Board, respect stakeholder’s right and enhance information transparency. None
2. Ownership structure and shareholders’ rights
(1) Does the Company have internal operation procedures to handle shareholders’ suggestions, concerns, disputes and litigations? If yes, has these procedures been implemented accordingly? V (1) The Company has spokesperson, deputy spokesperson and departments such as investor relation, shareholder service and legal to handle shareholders’ suggestions or complaints. None
(2) Does the Company possess a list of major shareholders and ultimate owners of these major shareholders? V (2) Pursuant to Article 25 of the Securities and Exchange Act, the Company has monthly updated the changes in shareholdings of internal parties, including Directors, Supervisors, managers and shareholders with more than 10% shareholdings, at MOPS website designated by Securities and Futures Bureau.
(3) Does the Company build and execute a risk management system and firewall between itself and affiliates? V (3) In addition to various risk management mechanism already in place, there are Procedures to be followed for operational, business and financial transactions between the Company and its affiliates, for instance, the Procedures for Long-term Investment. They provide guidance for the subsidiaries to establish internal controls in writing, set authorization levels and formulate Procedures for Acquisition or Disposal of Assets, Endorsement and Guarantee, and Lending Funds to Other Parties based on the Company’s corresponding Procedures in order to enforce risk management mechanism on subsidiaries.
(4) Does the Company have internal rules to prevent insiders from using undisclosed information to trade securities? V (4) The Company has established “Procedures for Prevention of Insider Trading” prohibiting insiders from using undisclosed information to trade securities. The Company also holds sessions to inform all relevant personnel of the Procedures to avoid any violations.
3. Composition and duties of the Board of Directors
(1) Has the Company established a diversification policy for the composition of its Board of Directors and has it been implemented accordingly? V (1) Members of the Board are diversified, with different professional backgrounds and genders, to form a well-balanced structure.
Diversity in the Board:
Diverse core items
Directors
Gender Opera-tion Judge-ment Acco-unting and Finan-cial Anal-ysis Manag-ement Crisis Manag-ement Indus-trial Know-ledge Inter-national Perspe-ctive Leader-ship Deci-sion -Making
Chair-person Qiao Mei Develop-ment Corpora-tion
Represen-tative: Ta-Wen Sun
M V V V V V V V V
Director Qiao Mei Develop-ment Corpora-tion
Represen-tative: Jun-Yan Jiang
M V V V V V V V V
Director Ching-Yi Chang M V V V V V V V V
Director Fuding Invest-ment Co., Ltd.
Represen-tative: Re-Zhang Lin
M V V V V V V V V
Director Chun-Chi Lin M V V V V V V V V
Director Fu-Le Lin M V V V V V V V
Indepen-dent Director Chein-Ming Hsu M V V V V V V V V
Indepen-dent Director Wen-I Lo M V V V V V V V V
Indepen-dent Director Shi-Chern Yen M V V V V V
None
(2) Other than Compensation and Audit Committees which are required by law, does the Company plan to set up other functional Committees? V (2) In addition to the existing Compensation Committee, Audit Committee and Corporate Social Responsibility Committee, the Company plans to establish other functional committees to assist the Board in managing the Company.
(3) Has the Company established methods to evaluate the performance of its Board of Directors annually? V (3) The Compensation Committee regularly reviews the standards and structure of remunerations to Directors and the management team. Members would submit their recommendations to the Board for discussion.
(4)  Has the Company periodically evaluate the independence of its CPAs? V (4) The Board annually evaluates the independence of the CPAs and obtains the Declaration of Independence. Once it is confirmed that other than audit and tax fees, there is no financial interests nor business between the Company and the CPAs, and the family members of CPAs do not violate the requirements for independence, the Company would report to the Board. When discussing the independence and engagement of CPAs in the Board meeting, the resume (detailing the CPA’s past and current customers) and independence declaration (he/she did not violate Article 10 of the Bulletins of Professional Ethics Code for CPAs) of each CPA shall be submitted for evaluation.
Standards for CPA Independence:
Evaluation Item Evaluation Result Independence Status
1. Whether the auditor has a direct or materially indirect financial interest in the Company. N Y
2. Whether the auditor engages in financing or guarantee transactions with the Company or Directors of the Company. N Y
3. Whether the auditor has close commercial relationship or potential employment engagement with the Company. N Y
4. Whether the auditor or the audit team members serve as a director, manager or in a position of the Company that could significantly influence the audit work either currently or in the past two years. N Y
5. Whether the auditor provides the Company with non-audit services that could directly impact the audit work. N Y
6. Whether the auditor acts as a broker for shares or other securities issued by the Company. N Y
7. Whether the auditor acts as a defender of the Company or resolves conflicts with a third party on behalf of the Company. N Y
8. Whether the auditor has family relationship with the Company’s directors, managers or persons in a position that could significantly influence the audit work. N Y

The Board evaluated the independence of CPAs, Jheng-Chu Chen and Fang-Wen Li, from Ernst & Young on February 20, 2019. As they both met the Company’s standards for independence, they were qualified to be its CPAs.

4. Has the Company established an exclusively (or concurrently) dedicated corporate governance unit or personnel to handle matters pertaining to corporate governance (including but not limited to provide information required for business execution by directors and supervisors, handle matters relating to board meetings and shareholders’ meetings according to laws and regulations, handle corporate registration and amendment registration, produce minutes of board meetings and shareholders meetings, etc.) V The Company has concurrently dedicated corporate governance personnel from finance, shareholder service and legal divisions to handle matters pertaining to corporate governance, including providing information required for business execution by Directors, handling matters relating to Board meetings and Shareholders’ Meetings according to laws and regulations, handling corporate registration and amendment registration, producing minutes of Board meetings and shareholders meetings, etc. None
5. Has the Company established a communication channel with its stakeholders (including but not limited to shareholders, employees, customers and suppliers) and created a stakeholder section on the Company’s website to respond to their questions on corporate social responsibilities? V The Company has spokesperson and deputy spokesperson. Depending on the circumstances, investor relation, shareholder service and legal divisions would also communicate with stakeholders (including but not limited to shareholders, employees, customers and suppliers). In addition, the contact information of spokesperson and each department can be found on the Company’s website and a stakeholder section has been created to respond to stakeholders’ questions on corporate social responsibilities with care. None
6. Has the Company appointed a professional registrar to organize the Shareholders’ Meetings? V To service our shareholders, the Company has appointed the stock management service department of Yuanta Securities to manage issues related to shareholders and organize the Shareholders’ Meetings. None
7. Information disclosure
(1) Has the Company established a corporate website to disclose information regarding the Company’s financials, business and corporate governance status? V (1) The Company discloses financial and business information through the corporate website, http://www.taiflex.com.tw, which is maintained by designated persons. Information is available in both Chinese and English. Material information, financial status, organization and operation of internal audit, significant laws and regulations and major resolutions of the Boards are disclosed on the Company’s official website for foreign and domestic investors to access. None
(2) Does the Company have other information disclosure channels (e.g. maintaining an English-language website, designating people to handle information collection and disclosure, appointing spokesperson, webcasting investor conference)? V (2) The Company would hold investor conferences when deemed necessary and the video or audio recording of such event would be available in the shareholders section on the website. Relevant information would be filed on the MOPS website. The Company has dedicated personnel for collection of data and disclosure of material information. Spokesperson / deputy spokesperson are responsible for communication with external parties.
8. Does the Company have other important information to facilitate better understanding of the Company’s corporate governance practices (including but not limited to employees’ rights and welfare, investor relations, supplier relations, rights of stakeholders, continuing education of directors and supervisors, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and insurance for directors and supervisors provided by the company) ? V (1) Employees’ rights and welfare: A Welfare Committee is formed by employees of the Company to undertake various welfare projects and activities. Please refer to “5. Industrial Relations” (Page 91 to 96) for details. None
(2) Investor relations: The Company values investors’ rights. Relevant information is disclosed timely on the MOPS website pursuant to laws and regulations and on the Company’s official website simultaneously.
(3) Supplier relations: The Company maintains good relationship with suppliers. There has been no complaints regarding the quality and delivery schedule of purchases and there is no shortage or interruption of supplies.
(4) Stakeholder relations: The Company’s official website has set up a stakeholder section, which is served as a communication channel to protect the legal rights of both parties.
(5) Continuing education of Directors and Supervisors: Please refer to the table of “Continuing Education of Directors in 2018” for details.
(6) The implementation of risk management policies and risk evaluation measures: Please refer to “Risk Analysis and Assessment” (Page 109 to 114) for details.
(7) The implementation of customer policies: The Company follows ethical guidelines and maintains good relationship with customers. Quality policy includes innovation on research and development, continuous improvement, quick response, customer satisfaction, environmental protection and green environment. Technical personnel of the Company provides on-time delivery and after-sale services.
(8) Insurance for Directors and Supervisors provided by the Company: The Company provides liability insurance for Directors and Supervisors each year.
(9) The Company adopted electronic voting in Shareholders’ Meetings since 2016, ahead of the schedule announced by Financial Supervisory Commission (FSC).
9. The improvement status for the outcome of Corporate Governance Evaluation announced by Taiwan Stock Exchange Corporate Governance Center and the priority of pending issues. (Companies not included in the Evaluation are exempted.)
(1) The Company was ranked in the top 6% to 20 % in 2017 Corporate Governance Evaluation. It recognized the Company’s outstanding performance in various management aspects, such as corporate governance, corporate social responsibility, protection of shareholders’ rights, information transparency and timely disclosure of information.
(2) Improvements completed in 2018 for the 2017 Corporate Governance Evaluation: Independent directors’ opinions on material proposals in the Board meetings and actions taken by the Company in connection with those opinions are disclosed in detail in the annual report. The Company has established a diversification policy for the composition of Board members and disclosed the policy implementation status in the annual report and corporate website. The amount and nature of non-audit fees paid to CPAs and affiliates of the CPA’s accounting firms are disclosed in the annual report. The names, and numbers and percentages of shares held by major shareholders, including shareholders with holdings exceeding 5% or top ten shareholders, are disclosed in the annual report and corporate website.
(3) Pending issues with high priority

A. To strengthen the structure and operation of the Board
(a) The Company shall propose a succession plan for its Board members and senior management.
(b) The Company shall set up a position for corporate governance supervisor to handle matters pertaining to corporate governance. The supervisor’s job function, main focuses of the year and continuing education shall be disclosed in the annual report and corporate website.
(c) The Company will establish a framework for information security risk management and draw up information security policies and specific management schemes. All information will be disclosed in the annual report and corporate website.

B. To enhance information transparency
(a) To upload the English translation of annual financial reports (including the financial statements and notes) to the corporate and MOPS websites.

C. To fulfill corporate social responsibilities
(a) To formulate human rights protection policies and specific management schemes based on the International Bill of Human Rights and disclose relevant details in the annual report and corporate website.

(4) The Company performed self-assessment based on 2018 Corporate Governance Evaluation in January 2019. The outcome will be reviewed to determine the performance improvement plans.