TAIPEI (Taiwan News) — 2023 sees Taiwan’s Financial Supervisory Commission (FSC) promoting corporate governance measures to implement its “Corporate Governance 3.0 – Sustainable Development Blueprint” policy.
The FSC’s measures are part of the global environmental, social and governance (ESG) framework used to assess an organization's business practices and performance on various sustainability and ethical issues. It also provides a way to measure business risks and opportunities in those areas.
Companies listed on the Taiwan Stock Exchange (TWSE), the Taipei Exchange (TPEx), and the Emerging Stock Market must implement the following FSC corporate governance measures.
Establishment of a corporate governance officer: This officer must be in place by June 2023 and is required to ensure at the most basic level that board and shareholder meetings are conducted in accordance with the law. Minutes must be prepared, and directors and supervisors must be assisted to pursue further education.
The officer must appropriately arrange the change of directors and the usual catch-all of appropriately handling any other matters pursuant to the company’s articles of association.
Independent directors: Taiwan is awash with small companies. This creates situations in which the chairperson of the board and general manager are the same person.
Should this occur, then the number of independent directors must not be less than four and in some cases not less than five. The FSC also points out that these independent directors cannot be employees or managerial officers of the company.
Enhanced English disclosure of information: An almost surprising addition to the FSC’s requirements is greater disclosure of corporate information in English. Presumably, this is in line with the government’s aim of Taiwan being bilingual by 2030. This requirement applies to shareholders’ meeting manuals, annual reports, and annual financial reports.
Disclosure of financial information: Listed or OTC-traded companies with paid-in capital of NT$10 billion (US$326 million) must announce and report their financial information from the previous year within 75 days of the end of the year.
Similar requirements apply to listed companies with lower paid-in capital. The FSC is clearly demanding best practice from listed companies' reporting standards.
Disclosure of sustainability information: This requirement “ups the game” by expanding the sustainability report obligation to companies with paid-in capital between NT$2 billion to NT$5 billion. The obligation also applies to companies in the cement, plastics, steel, oil, electricity, and gas industries.
This clearly puts sustainability reporting requirements on industries that have a direct impact on Taiwan’s environment. What form these reports take will be interesting to note, especially when combined with the English language requirement noted above.
Electronic voting capabilities for emerging-market companies: A further tightening of the screws and a step towards greater investor involvement and protection. This should help to eliminate the old-fashioned closed-door shareholders meetings and ensure that agendas are clear, and the minutes appropriately recorded.
It is inevitable that there will be those that query the cost of the FSC’s new requirements. But in reality, these initiatives are nothing more than best practice, recognition of the importance of ESG and the gradual implementation of Sustainable Development Goals.
This is all in line with the Taiwan government’s 2050 net-zero pathway.
Taiwan enterprises must not only adopt these requirements but they must also be aware of their international obligations too. Taiwan is an important part of the global supply chain and ESG is a global issue.