The FSC to Propose Three-Year "Corporate Governance 3.0 - Sustainable Development Roadmap"
2020-08-14
To build up enterprises'' resilience amidst rapidly changing capital markets, speed up the implementation of corporate governance, and keep up with the ESG megatrend, the FSC is proposing the "Corporate Governance 3.0 - Sustainable Development Roadmap" (hereinafter referred to as CG 3.0), a three-year flagship program designed to promote enterprises'' commitment to sustainable corporate development. Today, the FSC has held a CG 3.0 hearing attended by corporate governance-related NGOs, delegates from listed companies, and experts. The purpose of the hearing was to collect a broad range of public opinions to build consensus on CG development in Taiwan. The FSC expects the launch of the CG 3.0 will effectively spur the development of corporate sustainability, improve interaction and communication with investors and stakeholders, and establish a healthy and competent ESG ecosystem to strengthen the international competitiveness of Taiwan''s capital markets.
Proposed CG 3.0 by the FSC centers on the following five action plans: "Strengthen duties and functions of boards to enhance the sustainable value of enterprises," "Enhance information transparency and promote sustainable operations," "Strengthen communication with stakeholders and create effective interaction channels," "Encourage stewardship and align with international norms," and "Deepen a corporate culture of sustainable governance and provide diversified products."
The details of the five action plans are as follows:
1. Strengthening duties and functions of boards:
Given that listed companies are facing an increasingly complex and diversified market environment, the FSC will take a series of measures to support properly functioning boards of directors, including the appointment of more independent directors, adoption of independent director term limits, introduction of risk management committees to the boards of listed companies, appointment of more corporate governance officers, provision of a more diversified range of training programs for directors, and the release of templates for the exercise of duties and powers by independent directors and audit committees.
2. Enhancing information transparency:
Based on the increasing attention that international investors and industrial chains are paying to ESG issues and disclosure of climate change related information proposed by the Task Force on Climate-related Financial Disclosures ("TCFD"), the CG 3.0 aims to augment enterprises'' emphasis on ESG performance and to provide ESG-related information that is useful for investment decision-making. The key measures include enhancing the disclosure of sustainability reports by referring to TCFD and Sustainability Accounting Standards Board ("SASB"), expanding the scope of companies subject to the mandatory requirement to produce sustainability reports and acquired third-party assurance, encouraging listed companies to disclose and file operating status information, and shortening the deadline for filing of annual financial reports to ensure more timely access to information and to improve its transparency.
3. Strengthening communication with stakeholders:
In order to strengthen the operation of shareholders'' meetings of listed companies, the FSC will study ways to strengthen the neutrality of companies that handle their own shareholder services and to enhance the transparency of e-voting results. Moreover, the need to protect shareholders'' rights, to mitigate the high concentration of annual shareholders'' meeting during the shareholders'' meeting season, and to strengthen disclosure of corporate governance information on the Market Observatory Post System ("MOPS") website and companies'' websites has also been taken into consideration in CG 3.0.
4. Encouraging stewardship of institutional investors:
Considering the gradual increase in the ratio of foreign investments in Taiwan''s listed companies, international proxy advisors are gaining increasing influence over Taiwan''s listed companies. To implement shareholder activism and strengthen corporate governance, the CG 3.0 would provide for research and planning to set up a stewardship code for proxy advisors to establish an engagement mechanism between listed companies and proxy advisors and expand the investment industrial chain. Moreover, the CG 3.0 will encourage institutional investors to disclose stewardship reports through policy incentives, and will establish a public stewardship evaluation mechanism to ensure healthy competition among institutional investors.
5. Deepening a corporate culture of sustainable governance:
Due to the impact of global climate change and Covid-19, many countries have begun to value sustainable corporate and economic development. Given that the market mechanism has been the crucial driving force to direct global investment toward sustainable development and guide companies to voluntarily attend to sustainability issues, this year''s CG 3.0 will establish a sustainability market, promote sustainability-related products, and continuously review corporate governance evaluation systems.
Proposed CG 3.0 by the FSC centers on the following five action plans: "Strengthen duties and functions of boards to enhance the sustainable value of enterprises," "Enhance information transparency and promote sustainable operations," "Strengthen communication with stakeholders and create effective interaction channels," "Encourage stewardship and align with international norms," and "Deepen a corporate culture of sustainable governance and provide diversified products."
The details of the five action plans are as follows:
1. Strengthening duties and functions of boards:
Given that listed companies are facing an increasingly complex and diversified market environment, the FSC will take a series of measures to support properly functioning boards of directors, including the appointment of more independent directors, adoption of independent director term limits, introduction of risk management committees to the boards of listed companies, appointment of more corporate governance officers, provision of a more diversified range of training programs for directors, and the release of templates for the exercise of duties and powers by independent directors and audit committees.
2. Enhancing information transparency:
Based on the increasing attention that international investors and industrial chains are paying to ESG issues and disclosure of climate change related information proposed by the Task Force on Climate-related Financial Disclosures ("TCFD"), the CG 3.0 aims to augment enterprises'' emphasis on ESG performance and to provide ESG-related information that is useful for investment decision-making. The key measures include enhancing the disclosure of sustainability reports by referring to TCFD and Sustainability Accounting Standards Board ("SASB"), expanding the scope of companies subject to the mandatory requirement to produce sustainability reports and acquired third-party assurance, encouraging listed companies to disclose and file operating status information, and shortening the deadline for filing of annual financial reports to ensure more timely access to information and to improve its transparency.
3. Strengthening communication with stakeholders:
In order to strengthen the operation of shareholders'' meetings of listed companies, the FSC will study ways to strengthen the neutrality of companies that handle their own shareholder services and to enhance the transparency of e-voting results. Moreover, the need to protect shareholders'' rights, to mitigate the high concentration of annual shareholders'' meeting during the shareholders'' meeting season, and to strengthen disclosure of corporate governance information on the Market Observatory Post System ("MOPS") website and companies'' websites has also been taken into consideration in CG 3.0.
4. Encouraging stewardship of institutional investors:
Considering the gradual increase in the ratio of foreign investments in Taiwan''s listed companies, international proxy advisors are gaining increasing influence over Taiwan''s listed companies. To implement shareholder activism and strengthen corporate governance, the CG 3.0 would provide for research and planning to set up a stewardship code for proxy advisors to establish an engagement mechanism between listed companies and proxy advisors and expand the investment industrial chain. Moreover, the CG 3.0 will encourage institutional investors to disclose stewardship reports through policy incentives, and will establish a public stewardship evaluation mechanism to ensure healthy competition among institutional investors.
5. Deepening a corporate culture of sustainable governance:
Due to the impact of global climate change and Covid-19, many countries have begun to value sustainable corporate and economic development. Given that the market mechanism has been the crucial driving force to direct global investment toward sustainable development and guide companies to voluntarily attend to sustainability issues, this year''s CG 3.0 will establish a sustainability market, promote sustainability-related products, and continuously review corporate governance evaluation systems.
The FSC will officially launch the CG 3.0 in the near future, and in designing the CG 3.0 will make reference to the public opinions that were put forward during today''s hearing.
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2020-08-14