【External Board Performance Evaluation Report】
The Company engaged Chin En Management Consulting Co., Ltd. to conduct an external evaluation of the performance of the board of directors and its functional committees for 2023. The firm and its evaluators have no business dealings with the Company and are independent. The evaluation covered the composition, guidance, authorization, supervision, communication, internal control and risk management, self-discipline and other aspects of the board and its functional committees, using questionnaires and on-site interviews. The overall evaluation results were reported to the board of directors on March 14, 2024. The overall assessment and recommendations are as follows:
(1) Overall assessment:
- The board members and the management team trust each other. Matters discussed by the board — the Company's future operations, business development and potential business opportunities — are fully disclosed, and management also consults the independent directors proactively in the ordinary course of business, with open and transparent information exchange.
- During the evaluation period, independent directors held more than one-third of the board seats, and no independent director had served more than three consecutive terms. More than half of the directors were not concurrently employees or managers, and no more than two directors were spouses or relatives within the second degree of kinship.
- The Audit Committee maintains open channels of communication with the head of internal audit and the certifying CPAs, and its stand-alone communications are disclosed on the Company's website, helping the Audit Committee fully exercise its guidance and supervisory functions.
- The chairman, more than half of the directors, and the convener of the Audit Committee all attended the 2023 annual shareholders' meeting in person, and the attendance list was disclosed in the meeting minutes.
- A review of Market Observation Post System records shows that every director completed at least six hours of continuing education during the evaluation period.
(2) Recommendations for improvement and the Company's responses:
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Recommendation |
Company response or planned measures |
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The in-person attendance rate of individual directors during the evaluation period was low; participation by video conference is suggested. |
The management team will coordinate meeting schedules and actively encourage directors and independent directors to participate by video conference when they cannot attend in person, with the goal of an overall actual board attendance rate of at least 85% for the year and at least two independent directors attending each board meeting in person, maintaining the directors' high level of engagement with the Company's operations. |
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To further strengthen board diversity in line with the FSC's Corporate Governance 3.0 roadmap, it is suggested that at the next board election the Company add independent directors of a different gender or with legal expertise or industry knowledge. |
To implement corporate governance and enhance the functioning of the board, the Company's Corporate Governance Best Practice Principles provide that the composition of the board should take diversity into account, and that an appropriate diversity policy should be formulated in light of the Company's own operations, business model and development needs, covering standards including but not limited to the following two dimensions: (1) Basic attributes and values: gender, age, nationality, culture, etc. (2) Professional knowledge and skills: professional background (such as law, accounting, industry, finance, marketing or technology), professional skills and industry experience, etc. The current directors each have industry experience and relevant skills (such as finance and accounting) as well as business judgment, management, leadership, decision-making and crisis-management capability. To implement the diversity policy, the Company planned to expand the board to nine seats at the full re-election in 2025, adding directors of a different gender and seeking candidates with industry experience or legal expertise, so as to achieve a diverse board through directors with varied genders and specializations such as law. |
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It is suggested that the Company study the possibility of making its dedicated (or concurrent) sustainability unit a functional committee, and draw up the corresponding charter or regulations. |
The Company will disclose corporate-sustainability information on its official website, including: (1) Progress in promoting sustainable development (2) The charter of the Sustainability Committee (3) Important resolutions of the Sustainability Committee and their implementation (4) Stakeholder-engagement methods (5) A sustainability-report section Initially, in line with its operating circumstances, the Company will actively prepare to establish a sustainability unit at the general-manager level, responsible for collecting the material issues stakeholders care about in corporate governance, operating performance, environmental sustainability, service quality and employee care, and responding appropriately through the official website; it will also report ESG results to the board annually, strengthening the board's engagement with the Company's ESG progress. |
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It is suggested that the Company link senior managers' compensation to ESG-related performance evaluation, to effectively motivate the management team to pursue long-term benefits and lay the foundation for sustainable development. |
The Company incorporates sustainable development into its core values and operating objectives, and sets clear sustainability performance targets, indicators and management strategies as guidance for the development and execution of future incentive plans. In addition, the Company will strengthen its management of sustainability-indicator data so that performance indicators can be accurately and regularly recorded, evaluated and analyzed, supporting indicator selection, performance calculation and tracking for sustainability-linked incentive plans. As the Company's ESG indicators were first set in 2023, they will be incorporated into managers' performance indicators once the measurement methodology and external assurance processes have matured. |
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It is suggested that the Company strengthen board members' training on the sustainability disclosure standards (IFRS S1 and S2), to raise awareness of and attention to sustainability-related disclosure. |
The Company will task the relevant staff with helping all board members strengthen their training on the sustainability disclosure standards (S1 and S2) in 2024, so that they understand the connections between sustainability-related financial disclosures and the financial statements — from governance and strategic planning to risk management, performance indicators and targets — and can respond early to the impact of the IFRS sustainability disclosure standards on the Company. |
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It is suggested that the Company establish orientation programs and related support for first-time directors, to help them understand their duties and become familiar with the Company's operations and environment, and that the procedures be standardized and documented for more effective implementation. |
The Company will familiarize first-time directors with its business and their duties through the following measures: (1) Orientation through discussions with senior managers and unit heads, covering the Company's history, organizational structure, business, operating strategy, medium- and long-term goals, market competition and market position, to help first-time directors understand the industry and the environmental factors affecting the Company's operations. (2) Providing new directors with the Director's Handbook, the regulatory guidance handbooks for directors, supervisors and independent directors, the insider-shareholding guidance handbook, the rules and points of attention for insider share transfers, the laws and regulations directors must comply with, and the Company's internal rules relevant to directors, to support their onboarding and legal compliance. (3) Helping first-time directors complete the minimum required and continuing training hours, and arranging on-site visits to the operating entity Zhejiang Tong Ming. |
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The Company is progressively implementing succession for board members and key management; it is suggested that the Company compile and document its succession framework for directors and management, and disclose its operation on the website or in the annual report. |
The Company will make improvements in line with the recommendation. |