Code of Corporate Governance for Chunghwa Telecom Co., Ltd.

Transcription

1 Code of Corporate Governance for Chunghwa Telecom Co., Ltd. Chapter 1 General Principles Article 1 Chunghwa Telecom Co., Ltd. (herein referred to as the Company ) has hereby determined the Code of Corporate Governance for Chunghwa Telecom Co., Ltd. in accordance with the "Corporate Governance Best-Practice Principles for TSE/GTSM Listed Companies" drafted by the Taiwan Stock Exchange Corporation (herein referred to as TSEC ) and GreTai Securities Market in order to establish a sound corporate governance system. Article 2 In addition to abiding by laws and the articles of incorporation, the corporate governance system established by the Company shall uphold the following principles: 1. Protect shareholders' rights and interests 2. Strengthen the functions of the Board of Directors 3. Fulfill the function of supervisors 4. Respect for stakeholders' rights and interests 5. Enhance information transparency Article 3 The Company shall, pursuant to the Regulations Governing Establishment of Internal Control Systems by Public Companies, establish an effective internal control system in consideration of the overall operating activities of the Company and its subsidiaries, and shall regularly review said system in order to ensure the continued effectiveness of its design and implementation in light of changes in the Company's internal and external environment. The determination or revision of the internal control system shall be submitted to the Board for approval; any opposed or qualified opinions stated by independent directors shall be explicitly recorded in the Board meeting minutes. Apart from effectively implementing self-audits of the internal control system, the Company's Board and the management shall review self-audit results of each department and the audit reports of audit organization at least once each year; the supervisors shall pay close attention to and supervise this review work. 1

2 The Company's management shall place importance on the internal audit department and its personnel, grant it full authority, and urge it to conduct audits effectively, evaluate the deficiencies in the internal control system and assess the Company's operating efficiency to ensure the system can be carried out effectively on a continuous basis and can assist the Board of Directors and the management to execute their responsibilities, and thereby make the corporate governance system practicable. Chapter 2 Protection of Shareholders' rights and interests Section One Encouraging Shareholders to Participate in Corporate Governance Article 4 The Company shall take protection of shareholders' rights and interests as its foremost goal when implementing the corporate governance system, and shall treat all shareholders equally. The Company shall establish a corporate governance system that can ensure shareholders right to be aware of the Company's material information. Article 5 The Company shall convene shareholders meetings in accordance with the Company Act and relevant laws and regulations, and shall establish comprehensive meeting rules of order; any matters that must be determined by resolution of the shareholders meeting shall be implemented in accordance with the meeting rules of order. The content of resolutions of the shareholders meeting shall comply with laws, regulations, and articles of incorporation of the Company. If the Chairman cannot attend a shareholders meeting for some other reason, the Vice Chairman shall attend in lieu of the Chairman; if the Company has no Vice Chairman or the Vice Chairman is also absent, the Chairman shall designate one director to attend in his stead. The directors shall nominate and elect one of their members to act as chairman if the Chairman has not designated a deputy. Article 6 The Company's Board shall properly arrange shareholders meeting discussion topics and procedures. Each issue shall be allotted to reasonable time for discussion in the shareholders meeting, and shareholders shall be given appropriate opportunities for speaking out. 2

3 A majority of the directors shall personally attend shareholders meetings convened by the Board. Article 7 The Company shall encourage shareholders to participate in corporate governance, and shall hold shareholders meetings in a legal, effective, and secure manner. The Company shall employ all types of methods and channels as well as make full use of technological methods of information disclosure to increase the percentage of shareholders attending the shareholders meeting, and shall ensure that shareholders may fulfill their shareholders' rights at the shareholders meeting in accordance with relevant laws. Article 8 The Company shall record minutes of the shareholders meeting in accordance with the Company Act and other relevant laws and regulations. Elections of Directors and Supervisors shall be explicitly specified to be the resolution by voting with the weighted numbers of voting rights that elected directors and supervisors received. The shareholders meeting minutes shall be kept indefinitely and appropriately as long as the Company is in existence, and should be sufficiently disclosed on the Company's website. Article 9 The chairman of shareholders meeting shall be fully aware of and comply with the Company s Ordinance of Shareholders Meeting, ensuring the proper progress of the proceedings of the agenda, and may not arbitrarily declaring adjournment of the meeting. In order to protect the rights and interests of the majority of shareholders, if the chairman declares the adjournment of a meeting in violation of the meeting rules of order, the other members of the Board should quickly assist attending shareholders, in accordance with statutory procedures, to elect one person as chairman on the basis of the majority of shareholders' voting rights, and continue the meeting. Article 10 The Company shall place high importance on shareholders' right of being informed and thoroughly comply with relevant regulations concerning information disclosure to regularly and promptly provide shareholders the 3

4 information concerning the Company's finances, operations, insiders shareholdings and corporate governance by using of the Market Observation Post System or the Company's website. Article 11 Shareholders shall have the right to share the Company's earnings. In order to safeguard shareholders' investment rights and interests, the shareholders meeting may, in accordance with Article 184 of the Company Act, audit statements and books produced by the Board and supervisors' audit reports, and resolve to distribute earnings or decide deficit off-setting plans. The shareholders meeting may appoint an inspector to perform the foregoing audit tasks. Shareholders may, in accordance with Article 245 of the Company Act, apply with the court to appoint an inspector to audit the Company's accounts of operation and property holdings. The Board, supervisors, and managers shall comply fully with the audit tasks performed by the inspector in the two foregoing paragraphs, and may not attempt to obstruct, refuse, or evade the inspector's work. Article 12 To protect shareholders' rights and interests, the Company shall handle major financial actions, including acquisition or disposal of assets, lending capital to and making endorsements or providing guarantees for any other entities, in accordance with relevant laws and regulations, and shall draft and submit relevant handling procedures to the shareholders meeting for approval. Article 13 To protect shareholders' rights and interests, the Company should have dedicated personnel to properly handle shareholders' recommendations, questions, and disputes. If a resolution of the shareholders meeting or a board meeting violates laws and regulations or the articles of incorporation, or if the directors, supervisors, or managers violate laws and regulations or the articles of incorporation in the course of their duties, and results in harming shareholders' rights and interests, the Company shall appropriately handle any lawsuits initiated by shareholders in accordance with law. Section Two Corporate Governance Relationship Between the Company and Affiliated Enterprises 4

5 Article 14 The allocation of management authorities and responsibilities over personnel, assets and financial affairs of the Company and its affiliated enterprises shall be clearly identified; risk evaluation shall be conducted exactly and appropriate firewalls shall be established. Article 15 Unless otherwise provided by the laws and regulations, the Company's managers may not concurrently serve as managers at affiliated enterprises. A director, who engages on behalf of himself or third party within the scope of the Company's operations, shall explain the major content of such actions to the shareholders meeting and obtain the latter's consent. Article 16 The Company shall establish sound management systems for finance, operations, and accounting in accordance with relevant laws and regulations. It shall further properly perform overall risk evaluation with its affiliated enterprises on main correspondent banks, customers, and vendors, and shall implement necessary control mechanisms in order to lessen credit risk. Article 17 Based on the principles of fairness and reasonableness, when the Company has a business transaction with an affiliated enterprise, the Company shall determine written standards for the conduct of mutual financial and business operations. Price and payment terms shall be definitively stipulate when contracts are signed, and non-arm s length transactions shall be prohibited. Transactions or contractual matters between the Company and related parties and shareholders shall also be conducted according to the principles set froth in the foregoing paragraph, and tunneling of benefit shall be strictly prohibited. Article 18 A juristic shareholder having controlling power over the Company shall comply with the following provisions: 1. It shall bear a duty of good faith to other shareholders and shall not directly or indirectly cause the Company to be engaged in transactions 5

6 at other than arm s length or involved in a management conduct for illegal profit. 2. Its representative shall follow the Company's regulations with respect to the exercise of rights and participation in resolution, so that at shareholders meeting, the representative shall exercise his/her voting right for the best interest of all shareholders and in good faith and exercise the fiduciary duty of care of a directors and supervisors. 3. It shall comply with relevant laws, regulations, and the Articles of Incorporation of the Company in nominating of the Company's directors and supervisors and shall not act beyond the authority granted by the shareholders meeting or the board meeting. 4. It shall not improperly intervene in corporate policy making or obstruct corporate management activities. 5. It shall not restrict or impede the Company's production operations by methods of unfair competition such as monopolizing corporate procurement or foreclosing sales channels. Article 19 The Company shall ensure the command at any time of information on the identity of major shareholders, who own the higher percentage of shares and have an actual control over the Company, and its ultimate control persons. To enable other shareholders to exercise supervision function, the Company shall regularly disclose important information about its shareholders holding more than ten percent of the outstanding shares relating to the pledge, increase or decrease of share ownership, or other important matters that may possibly trigger a change in the ownership of their shares. Chapter 3 Enhancing the Functions of the Board of Directors Section One Structure of the Board of Directors Article 20 Regarding the structure of the Board of Directors of the Company, the number of directors, which shall be more than five, shall be properly determined by reviewing the scale of corporate management and operation and the shareholding of the major shareholders and taking into consideration of the practical needs for operation. The Board member shall possess the necessary knowledge, skill, and 6

7 experience for performing their duties. In order to achieve the ideal goals of corporate governance, the Board of Directors shall possess the following abilities: 1. ability to make operational judgment 2. ability to perform accounting and financial analysis 3. ability to conduct management administration 4. ability to conduct crisis management 5. possession Industrial knowledge 6. possession perspective of International market 7. ability to lead 8. ability to make decisions Article 21 The Company shall incorporate a fair, just, and open procedure for the election of directors, and adopt the cumulative voting mechanism in order to fully reflect shareholders views, unless a different mechanism has otherwise been implemented in the Articles of Incorporation. A majority of the Company's directors may not be the spouse of or relative two-degree of consanguinity with each other. The Company shall elect a director to fill the vacancy at the first subsequent shareholders meeting after a director has been released for a particular reason and the Board is left with less than five members. If, however, the number of vacancies exceeds one-third of the number of directors designated in the Articles of Incorporation, the Company shall, within 60 days after the vacancies arise, convene a special shareholders meeting to elect for filling the vacancies. The aggregate shareholding percentage of all of the directors of the Company shall comply with the laws and regulations. Restrictions on the share transfer of each director and the creation, release, or changes of any pledges over the shares held by each director shall be subject to the relevant laws and regulations, and the relevant information shall be fully disclosed. Article 22 Before the Company convenes a shareholders meeting to re-elect the directors, the qualifications, education, working experience, background and the existence of any other matters set forth in Article 30 of the Company Act with respect to the candidates recommended by shareholders or directors should be reviewed in advance and the result thereof be provided to shareholders for their reference, so that qualified directors will be elected. Article 23 7

8 The responsibilities and duties of the Chairman, CEO, and president shall be clearly distinct. It would be inappropriate for the Chairman to also act as the president. If the chairman also acts as the president or they are spouses or relatives within one degree of consanguinity, the number of independent directors should be increased. Section Two The Independent Director System Article 24 In accordance with the Articles of Incorporation, the Company shall have three independent directors. The Company's independent directors shall be elected via a nomination system; elections shall be held as prescribed in Article 12-1 of the Articles of Incorporation. Independent directors and non-independent directors may not switch their status during their terms of appointment. The subsequent shareholders meeting shall have election to fill the vacancy if an independent director is released for a particular reason and the number of independent directors is less than the number designated in the first paragraph or in the Articles of Incorporation. If the independent directors are all released, the Company shall, within 60 days after the vacancies arise, convene a special shareholders meeting to elect for filling the vacancies. Article 25 Except when approved by the competent authority, the following matters shall be submitted to the Board for approval; any opposed or qualified opinions stated by independent directors shall be explicitly stated in the Board meeting minutes: 1. Determination or revision of the internal control system in accordance with Article 14-1 of the Securities and Exchange Law. 2. Determination or revision in accordance with Article 36-1 of the Securities and Exchange Law of procedures for handling major financial and operational actions such as acquisition or disposal of assets, implementation of derivatives trading, lending of funds, and endorsements or providing of guarantees to third parties. 3. Matters in which directors or supervisors have a personal interest 8

9 4. Transactions involving material assets or derivatives 5. Material fund lending, and endorsements or guarantees for others 6. Offering, issuing, or private offering of equity-type securities. 7. Appointment/dismissal and compensation of the certifying certified public accountant. 8. Appointment and dismissal of officers of finance, accounting, and internal audit departments. 9. Other material matters designated by the authority Article 26 The Company shall stipulate expressly the scope of duties of the independent directors and empower them with manpower and material support related to the exercise of their powers. Neither the Company nor other members of the Board shall restrict or obstruct the independent directors' performance of their duties. The Company shall stipulate expressly the independent directors' compensation in Articles of Incorporation or pursuant to a resolution of the shareholders meeting. Different but reasonable compensation from that of other directors may be set forth for the independent directors. Section Three Functional Committees Article 27 For the purpose of developing monitoring functions and strengthening management mechanisms, the Board of Directors of the Company may, taking into account the basis of the size of the Board and number of independent directors, set up functional committees and have them stipulated in the Articles of Incorporation. Functional committees shall be responsible to the Board and submit proposals to the Board of Directors for approval. Functional committees shall adopt organizational regulations governing the exercise of their power and duty to be approved by the Board of Directors. Article 28 The Board shall establish an Audit Committee comprising the three 9

10 independent directors; one of the audit committee's members shall serve as chairman, and at least one member shall possess professional expertise in accounting or finance. The Company's Audit Committee shall perform its main duties as prescribed in the organizational regulations of audit committee. Article 29 The Company shall select a professional, responsible, and independent certifying CPA to perform regular review of the financial conditions and internal control measures of the Company. With regard to the irregularity or deficiency timely discovered and disclosed by the CPA during the review, and the concrete measures for improvement or prevention suggested by the CPA, the Company shall faithfully implement improvement actions. The Company shall evaluate the independence of the CPA engaged by the Company regularly and no less frequently than once annually. In the event that the Company engages the same CPA without replacement for five years consecutively, or if the CPA is subject to disciplinary actions or other circumstances prejudicial to the independence of the CPA, the Company shall review the necessity of replacing the CPA, and shall submit the conclusion of such review to the Board. Article 30 The Company should engage a competent and professional legal counsel to provide adequate legal consulting services to the Company, or to assist the directors, the supervisors and the management improve their knowledge of the law, for the purpose of preventing any infraction by the Company or its staff of laws or regulations, and ensuring the corporate governance matters will proceed pursuant to the relevant legal framework and prescribed procedures. In the event that the directors, supervisors, or the management are involved in litigation as result of performing his or her duties as provided by the law or arising from shareholders disputes, depending on the circumstances, the Company shall retain a legal counsel to provide assistance. The Audit Committee may, on behalf of the Company, engage a legal Counsel, CPA, or other professional to perform necessary auditing tasks or provide consulting services in connection with the committee's exercise of its powers; the Company shall bear responsibility for payment of the expenses so incurred. Section Four Rules for the Proceedings of Board Meetings and the Decision-making Procedures 10

11 Article 31 The Company shall convene the Board meeting once every two months, and may convene the Board at any time when urgent circumstances have arisen. When convening the Board, the Company shall state the main contents of the meeting, notify all directors to attend at the designated time, and invite supervisors to attend in a non-voting capacity. The Company shall also provide sufficient meeting materials when notifying the directors. If the provided materials are insufficient, the directors have the right to request supplementary information, or may delay deliberation following a Board resolution. The Company shall draft the regulations governing procedures for Board meetings and report the same to the shareholders meeting. Regulations governing major deliberation items, operating procedures, items to be explicitly stated in the minutes, announcements, and other binding matters shall comply with the Regulations Governing Procedure for Board of Directors Meetings of Public Companies. Article 32 A director shall exercise a high degree of self-discipline and shall voluntarily abstain from voting, for himself or herself or as proxy for another director, on a proposal submitted to the Board of Directors that risks the involvement of the director s own interest to the detriment of the interest of the Company. The directors shall also practice self-discipline as to their internal relationship and must not support each other in an inappropriate manner. The matters that a director shall voluntarily abstain from voting shall be clearly set forth in the rules for the proceedings of the board meetings. Article 33 The independent directors shall attend meetings in person, and may not appoint a non-independent director to attend in their stead, when the Board discusses matters that must be submitted to the Board pursuant to Article 14-3 of the Securities and Exchange Law. Independent directors' opposed or qualified opinions shall be explicitly recorded in the Board meeting minutes. If an independent director cannot attend a Board meetingin person to express an opposed or qualified opinion, unless he or she has a legitimate excuse, the independent director shall submit a written opinion in advance; said opinion shall be explicitly recorded in the Board meeting minutes. In the foregoing paragraph, the Company shall announce publicly and report on the information reporting website designated by the competent authority within two days after the Board meeting. 11

12 When the content of proposals to be discussed warrants, the Board may notify managerial personnel in relevant departments who don t have the title as directors to attend the Board meeting in a non-voting capacity in order to report on the Company's current business situation and respond to inquires raised by the directors. When necessary, the Board may also invite the CPA, legal counsel, or other professional to attend the meeting in a non-voting capacity to assist the directors in understanding the conditions of the Company for the purpose of adopting an appropriate resolution. Article 34 In accordance with relevant regulations, staff personnel of the Company attending Board meetings shall collect and correctly record the meeting minutes in detail, and the summary, method of resolution, and voting results of all the proposals submitted to the Board meeting. The Board meeting minutes shall be signed by the chairman and secretary of the Board meeting. The director attendance records should be kept completely. Board meeting minutes shall be treated as important corporate records and be placed in safekeeping permanently as long as the company is in existence. The minutes may be produced, distributed, and kept via electronic methods. The Company shall make audio or video recordings of Board meetings, and shall keep such recordings for at least five years. Recordings may be kept via electronic methods. If a lawsuit concerning a relevant Board resolution occurs before the end of the preservation period mentioned in the foregoing paragraph, relevant archival audio or video recordings shall be kept indefinitely, and the regulations of the foregoing paragraph shall not apply. When a Board meeting is held by means of videoconferencing, audio and video recordings of the meeting shall be part of the minutes, and shall be kept indefinitely. Where a resolution of the Board violates laws, regulations, articles of incorporation, or resolutions adopted in the shareholders meeting, and thus causes an injury to the Company, dissenting directors whose dissent can be proven by minutes or written statements will not be liable for damages. Article 35 The Company shall submit the following matters to the Board for discussion: 1. The Company's operating plan 12

13 2. Annual and semiannual financial statements 3.Determination or revision of the internal control system in accordance with Article 14-1 of the Securities and Exchange Law 4. Determination or revision in accordance with Article 36-1 of the Securities and Exchange Law of procedures for handling major financial actions such as acquisition or disposal of assets, implementation of derivatives trading, lending of funds, and endorsements or providing of guarantees to third parties 5. Offering, issuing, or private offering of equity-type securities 6. Appointment and dismissal of officers of finance, accounting, and internal audit departments 7. Matters that must be decided by a resolution of the shareholders meeting or submitted to the Board in accordance with Article 14-3 of the Securities and Exchange Law or the articles of incorporation of the Company, or other material matters designated by the authority. Apart from matters in the foregoing paragraph that shall be submitted to the Board for discussion, the Chairman & CEO or president shall exercise the powers of the Board in accordance with the table of scope of duties of the Board and the management when the Board is adjourned. However, matters involving the Company's material interests must still be decided by resolution of the Board. Article 36 The Company shall ask the appropriate corporate department or personnel to handle matters and implement actions pursuant to the Board of Directors resolutions in a way consistent with the program schedule and objectives. It shall also follow up on these matters and faithfully review their implementation. The Board of Directors shall ensure full control of implementation and progress of these matters and make a report in subsequent meeting so as to ensure that the Board s management decisions are faithfully implemented. Section Five Fiduciary Duty, Duty of Care and Responsibility of Directors Article 37 Board members shall faithfully conduct corporate affairs and discharge the duty of care as a good administrator. In conducting the affairs of the Company, they shall exercise their power with a hightened level of self-discipline and prudential attitude. Unless matters are reserved for shareholders meeting by law or in the articles of incorporation of the Company, they shall ensure that all matters will faithfully adhere to the Board's resolutions. 13

14 Where resolutions of the Board involve major policy directions and the corporate management, the Board shall make careful consideration and may not affect the implementation and effectiveness of corporate governance. Independent directors shall perform their duties in accordance with relevant laws, regulations, and the Company' articles of corporate governance so as to protect the rights and interests of the Company and shareholders. Article 38 If a resolution of the Board of Directors violates laws, regulations or the Company s articles of incorporation, at the request of shareholders holding shares continuously for a year or an independent director, or at the notice of a supervisor to discontinue the implementation of the resolution, members of the Board shall promptly take appropriate measures or discontinue the implementation of such resolution as soon as possible. Upon discovering any threat of the Company suffering material injury, members of the Board shall immediately report to the independent directors or supervisors in accordance with the foregoing paragraph. Article 39 The Company may take out liability insurance for directors with respect to their liabilities resulting exercising their duties during their terms of occupancy so as to reduce and spread the risk of material harm to the Company and shareholders arising from any illegal conduct. Article 40 Members of the Board should participate in training courses, offered by an organization designated in the Advanced Study Promotion Guidelines for the Directors and Supervisors of TSE/GTSM Listed Companies, of finance, business, commerce, accounting or law which cover subjects relating to corporate governance upon becoming directors and throughout their terms of occupancy. They should also ensure that the Company employees at all levels will enhance their professionalism and knowledge of the law. Chapter 4 Empowering the Supervisors Section One Duties of Supervisors Article 41 14

15 The Company shall stipulate a fair, impartial, and open procedure for the election of supervisors, and shall adopt the cumulative voting mechanism to fully reflect the opinions of shareholders, unless a different mechanism has otherwise been implemented in the articles of incorporation. The aggregate shareholding percentage of all of the supervisors of the Company shall comply with laws and regulations. Restrictions on the share transfer of each supervisor and the creation, release, or other changes of any pledges over the shares held by each supervisor shall comply with the relevant laws and regulations, and the relevant information shall be fully disclosed. Article 42 Before the Company convenes a shareholders meeting to re-elect the supervisors, the qualifications, education, working experience, background and the existence of any other matters set forth in Article 30 of the Company Act apply with respect to the candidates recommended by the shareholders or directors should be reviewed in advance and the results thereof be provided to shareholders for their reference, so that qualified supervisors will be elected. Section Two Duties and Obligations of Supervisors Article 43 At least one of the Company's supervisors may not be the spouse of or share kinship of the second-degree or closer with another supervisor or director. The election of supervisors shall be held in accordance with the Company's "Regulations of Election of Directors and Supervisors." Supervisors should have a domicile within the territory of R.O.C. in order to timely perform the supervisory functions. Article 44 A supervisor shall be familiar with the relevant laws and regulations, understand the rights, obligations, and duties of the directors of the Company and the functions, duties, and operation of each department, and frequently attend meetings of the Board of Directors to supervise the operations and to state his/her opinions when appropriate so as to control or discover any abnormal situation early on. 15

16 Article 45 A supervisor shall supervise the implementation of operations of the Company, and the performance of duties by directors and managers, and care the enforcement of the internal control system as to reduce the financial and operational risks of the Company. Where a director, for himself/herself or on behalf of others, enters into a sale/purchase or loan transaction, or conduct any legal act with the Company, a supervisor shall act as the representative of the Company. Article 46 A supervisor shall investigate the operational and financial conditions of the Company from time to time, and the relevant departments in the Company shall provide the books or documents that will be needed for supervisor s review. When reviewing the finance or operations of the Company, a supervisor may retain attorneys or accountants on behalf of the Company to perform the review; however, the Company shall inform the relevant persons of their confidentiality obligations. The Board or Directors or managers shall submit reports in accordance with the request of the supervisors and shall not for any reason attempt to obstruct, circumvent, or refuse the inspection of the supervisor. When a supervisor performs his/her duties, the Company shall provide necessary assistance as needed by the supervisor, and the reasonable expenses that the supervisor needs shall be borne by the Company. Article 47 For supervisors to timely discover any possible irregular conduct in the Company, the Company shall establish a channel for supervisors to communicate with relevant persons. Upon discovering any irregular conduct, a supervisor shall take appropriate measures timely to curb the expansion of the irregular conduct, and file a report to the relevant regulatory authorities if necessary. When any of the independent directors, President, officers of finance, accounting, R&D, and internal audit departments, or CPAs resigns or is removed from his/her position, the supervisors shall further investigate the reason thereof. 16

17 In the event that a supervisor neglects his/her duties and therefore causes harm to the Company, the supervisor shall be liable for compensation to the Company. Article 48 When exercising her/her supervisory power, each supervisor of the Company, after taking into consideration the overall interest of the Company and shareholders, convene a meeting to exchange opinions among all the supervisors when he or she feels necessary, but may not by such way obstruct each supervisor in exercising his/her duties. Article 49 The Company may take out liability insurance for supervisors with respect to their liabilities resulting from exercising their duties during their terms of occupancy so as to reduce and spread the risk of material harm to the Company and shareholders arising from any illegal conduct. Article 50 Supervisors should participate in training courses, offered by an organization designated in the Advanced Study Promotion Guidelines for the Directors and Supervisors of TSE/GTSM Listed Companies, of finance, business, commerce, accounting or law which cover subjects relating to corporate governance upon becoming supervisors and throughout their terms of occupancy. Chapter 5 Respecting Stakeholders Rights Article 51 The Company shall maintain open communication channels with correspondent banks and other creditors, employees, consumers, vendors, the community, and all other parties connected with the Company's interests, and shall respect and maintain those parties' due lawful rights and interests. The Company shall take appropriate action in the principle of good faith when the lawful rights and interests of stakeholders are infringed. Article 52 The Company shall provide full information to correspondent banks and other creditors in order to facilitate their judgments concerning the Company's operating and financial status and decision-making process. The Company 17

18 shall respond proactively when the lawful rights and interests of these parties are infringed, and shall give creditors appropriate routes for redress with a forthright and responsible attitude. Article 53 The Company has established communication channels with employees, and encourages employees to appropriately express their opinions concerning the Company's operating and financial status and major decisions affecting employees' interests. Article 54 The Company shall show concern for consumers' rights and interests while it maintains normal operations and seeks to maximize stockholders' interests. The Company will actively participates in various types of activities through marketing packaging to enhance the Company's public-spirited image and fulfill its social responsibilities. Chapter 6 Enhancement of Information Transparency Section One Strengthening Information Disclosure Article 55 The Company shall certainly discharge its duties of information disclosure in accordance with relevant laws and regulations, including regulations of Taiwan Stock Exchange. To ensure the prompt, appropriate disclosure of information that may affect the decisionsof shareholders and stakeholders, the Company shall designate specific personnel to be in charge of information collection and disclosure, and shall establish a spokesperson system. Article 56 To enhance the accuracy and efficiency of information disclosure, the Company shall assign persons who have a comprehensive understanding of the Company's finances and operations, or who are able to coordinate the provision of relevant data from individual displays, and who are able to single-handedly speak on behalf of the Company to the public, to serve as the Company's spokespersons and deputy spokespersons. The Company shall assign more than one deputy spokespersons, and each one shall be able to speak single-handedly on behalf of the spokesperson when the spokesperson is unable to perform the speaking duties. However, to avoid confusion, the Company shall confirm the order in which deputy spokespersons perform their duties. 18

19 In order to effectively implement its spokesperson system, the Company shall explicitly prescribe unified speaking procedures, and shall request management and employees to maintain the confidentiality of financial and business secrets and not arbitrarily disseminate information without authorization. Any changes in the status of spokespersons or deputy spokespersons shall be promptly disclosed. Article 57 The Company should establish a website in order to take advantage of the speed and convenience of the Internet. The Company shall post the information regarding finance, operation and corporate governance on said website to facilitate the reference for shareholders and stakeholders. The Company should also provide an English version of such on the website. The website in the foregoing paragraph shall be maintained byspecific personnel. To avoid misleading information, posted data shall be accurate, in detail and updated timely. Article 58 The Company shall hold institutional investor conferences in accordance with Taiwan Stock Exchange regulations, and should keep audio or video recordings of said conferences. Financial and operation information disclosed at investor conferences shall be filed on the designated Internet information posting system of the Taiwan Stock Exchange in accordance with Taiwan Stock Exchange regulations, and shall be provided for queries via the Company's website or other appropriate channels. Section Two Disclosure of Corporate Governance Information Article 59 The Company shall disclose the information regarding corporate governance in the fiscal year in accordance with relevant laws and regulations, including Taiwan Stock Exchange regulations. The Company should, according to the actual performance of the corporate governance, disclose the specific plans and measures to improve its corporate governance via appropriate mechanisms. 19

20 Chapter 7 Supplementary Provisions Article 60 The Company shall at all times monitor the domestic and international development of corporate governance and thereby review and revise its corporate governance system so as to enhance the performance of corporate governance. 20