The Company’s corporate governance structure is composed of three committees: an Audit Committee, a Nomination and Remuneration Committee and an ESG Steering Committee.
The ESG Steering Committee, composed of chairman and 5 independent board directors, is bound by the “ESG Steering Committee Charter.” The committee is responsible for reviewing the annual plans of the subordinate functional groups, supervising and tracking the implementation results, and revising the ESG Steering Committee Charter.
Directors Liabilities
The company’s Articles of Incorporation do not include any provisions that limit, exempt, or reduce the legal liabilities of directors. Directors must bear full legal responsibility for any misconduct. Directors are legally obligated to fulfill their duties of loyalty and the duty of care of a good administrator; if they violate these duties, they shall be personally liable for damages to the company and may also bear joint liability with the company. If a director’s breach of duty causes damage to the company, the company may pursue compensation claims according to the law to protect the interests of the company and its shareholders. To prevent directors from being deterred by excessive personal risk in carrying out their duties, Article 193-1 of the Company Act requires the company to insure with directors’ liability insurance to disperse the potential loss risks arising from litigation related to their duties. Such insurance serves as a means of loss compensation and does not constitute an exemption from liability; directors must still bear personal responsibility under the law.
CEO Succession Plan: Key Executive Succession Planning
The Company has implemented a succession plan for senior executives, including the President (CEO) and vice presidents. This plan is aligned with the Company’s core values and long-term strategies. We regularly assess the capabilities and performance of each executive, and provide customized training programs, job assignments or job rotation accordingly. The progress of the succession plan is reviewed by the Nomination and Remuneration Committee.
Metric for President(CEO) compensation
President’s performance and remuneration is reviewed by the Nomination and Remuneration Committee, and approved by the board meeting. Performance-based compensation of President’s annual salary is determined by a comprehensive evaluation of measurable metrics. The metrics include financial performances such as ROA、ROE、ROIC、total shareholder return, and the non-measurable external perception metrics such as net-zero target, net promoter score (NPS), DJSI evaluation results and a set of sustainability objectives which are integrated into business operations. In order to strengthen the link between sustainable development goals and CEO compensation, the linkage ratio between variable compensation and ESG performance & other metrics is 30%. The ratio will be elevated to 100% in 2025, reflecting our commitment to long-term value alignment and the integration of sustainability into corporate leadership and performance.
Deferral of Bonus for Short-term CEO Compensation
In Taiwan, due to differences in regulations and cultures, professional managers in Taiwan need to declare their shareholding status, and do not actively purchase Company shares to avoid concerns with conflicts of interest. It is part of Taiwan’s unique culture. Thus, CEO and high-level executives rarely hold company shares and no short-term bonus deferred in the form of shares or stock options.
However, we have a long term incentive plan based on shares, which allows CEO, executives, and employees to acquire company shares. We implemented employee share ownership trust (ESOT) program to support the Company’s strategy by incentivizing the delivery of growth, increase in profitability, superior shareholder returns and sustained financial performance. CEO joined ESOT program by contributing certain amount of salary (self-contribution), and company will also contribute equal amount money to trust fund. The trust fund is used to purchase company stock. ESOT is use to ensure that interests of CEO are aligned with long-term shareholders and to provide an incentive for CEO to continue employment relationship with the company. Since 2022, we upgraded our ESOT scheme, allowing CEO, senior executives and employees to increase their contribution amount with no limit.
Our CEO actively participated in the additional contribution of ESOT, which demonstrates CEO's strong identification with the company. By investing in the company through the ESOT, CEO signals to other investors and stakeholders that the company's success is a top priority. CEO's active participation also reinforces his commitment to the company's long-term success and fosters a sense of trust and loyalty among employees and other stakeholders.
Performance Period for Variable CEO Compensation
The performance period for variable CEO compensation is one year and eight months (1.67years).
Time Vesting for Variable CEO Compensation
The time vesting period for variable CEO compensation is one year and eight months (1.67years).
President(CEO) compensation- Long-Term Performance Alignment
Clawback provision
We hereby explain current clawback practices on compensation of Taiwan Mobile CEO. Compensation paid to CEO comprises a fixed monthly salary and variable compensation. Variable compensation is comprised of performance-based bonuses and employee profit sharing. Variable compensation accounts for approximately 50% of the remuneration and is determined based on CEO’s contribution to the Company’s financial performance and achievements of strategic milestones, including ESG KPIs. The Company reviews the compensation mechanism periodically, taking future operating risks, environmental conservation and sustainable development into consideration.
HR is tasked with preparing and submitting an annual report on CEO’s performance and compensation considerations to the Nomination and Remuneration Committee. Based on the report, the committee will then make the final decision on CEO’s performance-based bonuses and employee profit sharing. If one or more adjustment events, including restatement of financial statements, expected or incurred losses caused by operational misconduct by CEO or through CEO’s direction, have taken place during the year, previously distributed variable compensation would be reclaimed (clawback). In addition, the Company can recover all or a portion of unvested deferred variable compensation based on risks reports issued by its risk management department.