FSC launches Corporate Governance 3.0 - Sustainable Development Roadmap
2020-08-25
To deepen Taiwan corporate governance, promote sustainable corporate development, establish a competent ESG ecosystem, and strengthen the international competitiveness of Taiwan's capital markets, the FSC has officially launched the “Corporate Governance 3.0 - Sustainable Development Roadmap” (hereinafter referred to as CG 3.0). To help the public understand the direction for CG 3.0 and to facilitate consensus among all interested parties, the FSC held an information session on August 14, 2020 attended by different departments and corporate governance experts. Suggestions received during and after the session included exploring the feasibility of nomination committees, having enterprise risk management mechanisms overseen by a functional committee under the board such as an audit or risk management committee, adjusting the board of directors training programs for more flexibility, having the three consecutive term maximum limit apply to all independent directors, or otherwise, setting a deadline for TWSE/TPEx-listed companies to publish unaudited annual financial statements, and moving forward the filing deadline for annual financial statements. The FSC has considered the suggestions and modified the roadmap accordingly.
This year’s CG 3.0 issued 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 39 specific promotion measures that constitute the five action plans are as follows:
I. Strengthening duties and functions of boards: Applicants for initial TWSE/TPEx listing with a paid-in capital of NT$10 billion or more and TWSE/TPEx-listed financial institutions and insurance companies will, starting in 2024, be required to have independent directors make up no less than one third of the directors (applicable at the end of term for existing directors), and have 50% or more of the independent directors serve no more than three consecutive terms (applicable at the end of term for existing directors). TWSE/TPEx-listed companies will be encouraged to implement enterprise risk management mechanisms. TWSE/TPEx-listed companies with a paid-in capital under NT$2 billion will, starting in 2023, also be required to appoint a chief corporate governance officer. A variety of training plans for directors will be provided. Templates for independent directors and audit committees exercising their powers will be constructed for reference. TWSE/TPEx-listed companies will be encouraged to implement nomination committees and related measures.
II. Enhancing information transparency: Given the fact that investors worldwide and industrial supply chains are paying more attention to ESG issues, the FSC will strengthen the disclosure rules for sustainability reporting based on international guidelines (e.g. Task Force on Climate-Related Financial Disclosures (TCFD), Sustainability Accounting Standards Board (SASB)) in order to urge companies to pay attention to ESG related issues and provide ESG information useful to investors in the decision making process. Furthermore, TWSE/TPEx-listed companies with a paid-in capital of NT$2 billion or more will, starting in 2023, be required to prepare and file sustainability reports, and expand the application scope of third-party assurance for sustainability reporting. For more timely financial disclosure, the FSC will require TWSE- and TPEx-listed companies with a paid-in capital of NT$10 billion or more to publish their unaudited financial information and annual financial reports within 75 days after the end of a fiscal year in 2022 and 2023, respectively; TWSE/TPEx-listed companies with a paid-in capital of NT$2 billion or more will be required to file unaudited financial information in 2023, and the same rule will apply to the rest of TWSE/TPEx-listed companies in 2024 to increase disclosure transparency.
III. Strengthening communication with stakeholders: To strengthen the conduct of shareholders’ meetings, the FSC will improve the fairness of companies that handle own shareholder services and enhance the transparency of e-voting results. In addition, the daily maximum limit for shareholder meetings held by TWSE- and TPEx-listed companies will be lowered to 90 and 80 in 2021 and 2022, respectively, to protect the shareholders' right to attend shareholder meetings.
IV. Encouraging stewardship of institutional investors: Considering the increasing participation of foreign investors in Taiwan's securities markets, the international proxy advisors’ increasing influence over public companies in Taiwan has been foreseen by the FSC. Therefore, by referring to relevant foreign standards and practices, the stewardship code for service providers and the engagement mechanism between international proxy advisors and public companies will be implemented to further expand the industrial chain of stewardship in Taiwan. In addition, a total of 151 institutional investors have signed "Stewardship Principles for Institutional Investors" (published in 2016) as of this year. The FSC will continue to encourage these companies to improve stewardship information disclosure. Furthermore, a public evaluation mechanism for stewardship will be installed to reinforce shareholder activism and improve corporate governance practices in Taiwan's securities market as a whole.
V. Deepening a corporate culture of sustainable governance: The impacts of global climate change and COVID-19 on the world have prompted many countries to pay more attention to environmental and social sustainability. Given that the market mechanism has been the crucial driving force to direct global investment towards sustainable development and guide companies to voluntarily attend to sustainability issues, this year's CG 3.0 will arrange to establish a sustainability market, promoting sustainability-related products such as sustainability bonds, social responsibility bonds, and green bonds. Meanwhile, the FSC will keep encouraging self-enhancement of corporate governance through continuous optimization of corporate governance evaluation indicators and establishment of corporate governance ranking for small- and medium cap companies.
The FSC will be working with the Taiwan Stock Exchange, Taipei Exchange, TDCC, Taiwan Futures Exchange, and other associated agencies to implement the measures set out in CG 3.0 and adjust the content on a rolling basis over the next three years to achieve the CG 3.0’s visions of effective corporate governance, improved sustainable development, a sound ESG system, and more globally competitive capital markets.
This year’s CG 3.0 issued 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 39 specific promotion measures that constitute the five action plans are as follows:
I. Strengthening duties and functions of boards: Applicants for initial TWSE/TPEx listing with a paid-in capital of NT$10 billion or more and TWSE/TPEx-listed financial institutions and insurance companies will, starting in 2024, be required to have independent directors make up no less than one third of the directors (applicable at the end of term for existing directors), and have 50% or more of the independent directors serve no more than three consecutive terms (applicable at the end of term for existing directors). TWSE/TPEx-listed companies will be encouraged to implement enterprise risk management mechanisms. TWSE/TPEx-listed companies with a paid-in capital under NT$2 billion will, starting in 2023, also be required to appoint a chief corporate governance officer. A variety of training plans for directors will be provided. Templates for independent directors and audit committees exercising their powers will be constructed for reference. TWSE/TPEx-listed companies will be encouraged to implement nomination committees and related measures.
II. Enhancing information transparency: Given the fact that investors worldwide and industrial supply chains are paying more attention to ESG issues, the FSC will strengthen the disclosure rules for sustainability reporting based on international guidelines (e.g. Task Force on Climate-Related Financial Disclosures (TCFD), Sustainability Accounting Standards Board (SASB)) in order to urge companies to pay attention to ESG related issues and provide ESG information useful to investors in the decision making process. Furthermore, TWSE/TPEx-listed companies with a paid-in capital of NT$2 billion or more will, starting in 2023, be required to prepare and file sustainability reports, and expand the application scope of third-party assurance for sustainability reporting. For more timely financial disclosure, the FSC will require TWSE- and TPEx-listed companies with a paid-in capital of NT$10 billion or more to publish their unaudited financial information and annual financial reports within 75 days after the end of a fiscal year in 2022 and 2023, respectively; TWSE/TPEx-listed companies with a paid-in capital of NT$2 billion or more will be required to file unaudited financial information in 2023, and the same rule will apply to the rest of TWSE/TPEx-listed companies in 2024 to increase disclosure transparency.
III. Strengthening communication with stakeholders: To strengthen the conduct of shareholders’ meetings, the FSC will improve the fairness of companies that handle own shareholder services and enhance the transparency of e-voting results. In addition, the daily maximum limit for shareholder meetings held by TWSE- and TPEx-listed companies will be lowered to 90 and 80 in 2021 and 2022, respectively, to protect the shareholders' right to attend shareholder meetings.
IV. Encouraging stewardship of institutional investors: Considering the increasing participation of foreign investors in Taiwan's securities markets, the international proxy advisors’ increasing influence over public companies in Taiwan has been foreseen by the FSC. Therefore, by referring to relevant foreign standards and practices, the stewardship code for service providers and the engagement mechanism between international proxy advisors and public companies will be implemented to further expand the industrial chain of stewardship in Taiwan. In addition, a total of 151 institutional investors have signed "Stewardship Principles for Institutional Investors" (published in 2016) as of this year. The FSC will continue to encourage these companies to improve stewardship information disclosure. Furthermore, a public evaluation mechanism for stewardship will be installed to reinforce shareholder activism and improve corporate governance practices in Taiwan's securities market as a whole.
V. Deepening a corporate culture of sustainable governance: The impacts of global climate change and COVID-19 on the world have prompted many countries to pay more attention to environmental and social sustainability. Given that the market mechanism has been the crucial driving force to direct global investment towards sustainable development and guide companies to voluntarily attend to sustainability issues, this year's CG 3.0 will arrange to establish a sustainability market, promoting sustainability-related products such as sustainability bonds, social responsibility bonds, and green bonds. Meanwhile, the FSC will keep encouraging self-enhancement of corporate governance through continuous optimization of corporate governance evaluation indicators and establishment of corporate governance ranking for small- and medium cap companies.
The FSC will be working with the Taiwan Stock Exchange, Taipei Exchange, TDCC, Taiwan Futures Exchange, and other associated agencies to implement the measures set out in CG 3.0 and adjust the content on a rolling basis over the next three years to achieve the CG 3.0’s visions of effective corporate governance, improved sustainable development, a sound ESG system, and more globally competitive capital markets.
Contact: Wen-Cheng Lin, Head of Corporate Finance Division, Securities and Futures Bureau
Telephone: (02)2774-7311
Please direct all correspondence and inquiries to FSCmail
Telephone: (02)2774-7311
Please direct all correspondence and inquiries to FSCmail
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2020-12-17