Company Law is the regulatory foundation of corporate governance. The roles of shareholders’ meeting, board of directors and supervisors regulated in Company Law are comparable to the separation of executive, legislative and judicial powers in a political system that aim to achieve the objective of corporate governance through check and balance.

(2) Securities and Exchange Act

The administration and supervision of the offering, issuance, and trading of securities issued by a public company are governed by the Securities and Exchange Act. Only matters not specified in the Securities and Exchange Act fall under the Company Law and other regulations. Article 36 of the Securities and Exchange Act and Article 7 of the Enforcement Rules for Securities and Exchange Act that deal with the corporate governance system emphasize the disclosure of financial information and its effect on shareholders’ interests. The financial information of a company to a large extent reveals the state and outcome of corporate management. Aside from Securities and Exchange Act, the securities authorities, by the power vested under the Act, can issue ordinances regarding the administration of public companies, which are also important directives for corporate governance.

(3) Listing regulations

The listing criteria set forth by Taiwan Stock Exchange and GreTai Securities Market, together with the Company Law, Securities and Exchange Act, and other ordinances for public companies can help and guide listed companies in the establishment, implementation and practice of corporate governance system.

Board members should act in good faith, with due diligence and care, and in the best interest of the company to evaluate the operational strategies, risk management, annual budget, and business performance of the company, and oversee major capital expenditures, merger, disposal of investments and other major business activities of the company. At the same time, board members should ensure the adequacy of company’s accounting system and the accuracy of financial statements and prevent the act of board members from harming the company or having conflict of interest with shareholders. The board of directors should also appoint and monitor key executives with care, judge the affairs of the company with objectivity, and select suitable internal audit chief to ensure the effectiveness of internal control and preclude the occurrence of fraud.

(2) Bringing into effect the function of supervisors

Supervisors should exercise timely their right to supervise, and keep the operation of supervisory board smooth with fairness, transparency and clear delineation of responsibility. Aside from monitoring the financial affairs of the company, the supervisory board, if deemed necessary, may appoint accountant and attorney to examine those affairs on its behalf. To prevent the situation where the supervisor and the director of a company are both representative of the same juristic person, or a supervisor is materially unable to exercise independently his authority that might harm the interest of shareholders, the supervisory board should urge the company to take remedial action according to its commitments to Taiwan Stock Exchange or GreTai Securities Market at the time of listing application. Supervisors should carefully examine the internal audit report and follow up on the internal control and internal audit practices of the company. If situations harmful to the company are suspected, a supervisor should inform the competent authority and Taiwan Stock Exchange or GreTai Securities Market in a timely manner to help prevent or curb the occurrence of fraud.

(3) Recognizing the rights of shareholders and stakeholders

A company should treat major and minor shareholders equally and encourage them to attend shareholders’ meeting and actively participate in the election of directors and supervisors or amendment to articles of incorporation. A company should also give its shareholders reasonable and full opportunity to ask questions or propose resolutions. Similarly, shareholders are entitled to access corporate information on a timely and regular basis and share corporate profits. Corporate governance should in particular recognize the rights of stakeholders and actively cooperate with them in creating wealth, jobs, and the sustainability of financial health. If the stakeholder infuses funds into the company, the company must perform its obligations as a debtor to keep itself from financial distress.

(4) Making corporate information transparent

Article 2 of the Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies specifies enhancing information transparency as one of the corporate governance principles. A company should establish a spokesperson system and make proper use of the public disclosure system to let shareholders and stakeholders understand fully the financial conditions of the company and company’s corporate governance practice.

(5) Establishing and practicing internal control and audit system

To help sustain a sound operation and help the board and management fulfill their responsibilities, a company should establish a comprehensive internal control system and implement it faithfully and effectively. Company supervisors should examine and follow up the execution of internal control and internal audit according to rules. In addition, the company should conduct self-assessment of its operations. The board of directors and the management should also review each year the results of self-inspection conducted by respective functions and internal audit report, and submit an internal control statement to the competent authority as required.

(6) Selecting good and responsible accountant and legal counsel