Corporate Governance

Board of Directors

Issue Date:2024/05/15

Board Structure and Composition

As set forth in the Articles of Incorporation, the Company’s Board of Directors consists of seven to fifteen directors, each serving a three-year term. At least one-fifth of the directors must be experts in relevant fields, and starting from the 5th Board of Directors, we are required to elect a minimum of three independent directors.

The Company's Board of Directors for the 10th term is composed of thirteen directors, of which eight are juristic persons, including two executive directors, one labor director, and five non-executive directors, and five independent directors. They were elected to reflect the Company's consideration for the interests of all stakeholders and balance the independence of the Board of Directors, as well as to ensure the stability and development of the Company's operations.

The number of independent directors of the Company has exceeded the statutory requirement, which mandates a minimum of three directors and no less than one-fifth of the total number of directors. Currently, independent directors make up 38% of the Company's Board. In addition, all the external directors of the Company meet at least 4 of 9 criteria according to the DJSI independent directors’ statement.

Please refer to the document introducing the directors.

Please refer to the document on the independence of the directors.

The term of 3 years beginning on May 27th, 2022 to May 26th, 2025.


Functions of the Board of Directors

The Board of Directors is the highest governance body of the Company, responsible for its management, supervision, and decision-making. The Board's responsibilities include but not limited to: increase or reduction of capital of the Company; regulations with regard to the organization of the Company; establishment, amendment, and abolishment of the branch offices within or outside the territory of the Republic of China; examination of annual business budgets and final closing report; distribution of profits or off-set of deficit; the amount and term of domestic and foreign loan; the amount of Investment; issuance of corporate bonds; policies regarding personnel matters, material purchase, accounting, and internal control; amendment and modifications of regulations of organization of the Board of Directors and the functional committee; amendment and modification of regulations with regard to the scope of duties of independent directors; appointment and removal of the management; appointment and removal of the chiefs of finance, accounting and internal audit; policies regarding recommendation of chairman and president to subsidiaries; other duties and powers granted by the law or by shareholders' meeting.

The Implementation of Diversity by Board Members

To strengthen corporate governance and promote sound development, the Board of Directors of the Company has approved the enactment of the 'Code of Corporate Governance.' As per article 20 of the Code, the composition of the Board members shall be considered in a diversified manner, and the appropriate policy on diversity should be based on the Company's business operations, operating dynamics and development needs. The Company has set a concrete objective to include at least one female director on its Board of Directors, and the number of female directors has increased from 7% to 23% since the last election held in May 2022.

Please refer to the document for details on the Company's Implementation of Board Diversity.

Board Effectiveness

Board Meetings Attendance
According to the Corporate Governance Evaluation Indicator of Taiwan Stock Exchange (TWSE), the actual attendance rate of all directors at board meetings in the evaluated year must be at least 85%. To comply with this requirement, and to emphasize the importance of achieving a board of directors' average attendance rate of 85% or above, the Company has included the same indicator in its Regulations Governing the Performance Evaluation of the Board of Directors. To achieve the target attendance rate of 85%, board meetings may be attended in person or via video conference, as stated in Article 205 of the Company Act. Additionally, the attendance rate of each director at board meetings shall be considered one of the key factors for evaluating and nominating board members for re-election. In 2023, the Company held a total of nine meetings, and the average attendance rate of all directors was over 98.4%. Please refer to the document on Board Meeting Attendance.

Board Mandates
The Company complies with Article 4 of Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies that none of directors serve as an independent director of more than three other public companies.

Please refer to the document on Board Mandates.

Board Performance Review

The Company has approved its Regulations Governing the Performance Evaluation of the Board of Directors at the 2nd meeting of the 9th term Board of Directors on August 13th, 2019.

The Company conducts an external evaluation by an independent professional institution or a panel of external experts and scholars, at least once every three years. In 2022, the Company commissioned the Taiwan Institute of Ethical Business (“the Institution”) to conduct the external evaluation , and an internal self-evaluation, which covers the Board as a whole, individual directors, and functional committees, was conducted in 2023.

Please refer to the document on the complete 2023 evaluation report for more information about the Company's Board Performance.

Board Nomination and Election Process

The Company has established the Directors Election Regulations, which stipulate that the director election process shall follow the candidate nomination system under Article 192-1 of the Company Act. Independent and non-independent directors are elected concurrently, but their votes are calculated separately.

As per Article 195 of the Company Act and Article 13 of the Company's Articles of Incorporation, directors serve a three-year term and are eligible for re-election. According to the Company’s Code of Corporate Governance, the composition of the Board members shall be considered in a diversified manner. To be eligible for election, directors must possess the necessary knowledge, skills, and experience to perform their duties. Additionally, all independent directors must meet professional qualification requirements, have relevant work experience, maintain their independence, and not have any direct or indirect interest relationship with the Company, in compliance with the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies.

The Board of Directors and shareholders holding over 1% of the total issued shares are authorized to nominate candidates for directors through formal written communication. At the Annual General Meeting, shareholders shall elect directors from among the nominees listed in the roster of candidates.

The Company's Board will have one chairman who is elected by and from among the directors. The chairman will serve as the internal chair of the Board of Directors and represent the Company externally.

 

Board Average Tenure

The Company follows the provisions of the domestic Company Act, which stipulates that the term of office for directors is three years. In addition, to ensure that independent directors can objectively perform their duties and maintain their independence, the Taiwan Stock Exchange Corporate Governance Evaluation has set an index stating that more than half of the independent directors should not serve continuously for more than three terms. Based on these regulations, the composition of the Company's tenth Board of Directors, which was elected in May 2022, includes five newly appointed directors and eight re-appointed directors.

Having a combination of both new and incumbent directors on the Board of Directors ensures that experienced and knowledgeable directors are available to guide new directors and provide valuable insight into the Company’s operations and future. This is based on their understanding of the Company’s history, policies, and objectives, and helps ensure continuity in decision-making, thus sustaining the Company's operations. Additionally, new directors bring fresh perspectives and ideas that promote innovation and adaptation to the changing market and industry, contributing to the overall success and sustainability of the Company. A diverse mix of directors can also lead to more balanced and informed decision-making. By including new directors, the Board can also plan for succession and maintain a smooth transition, promoting stability and continuity in the Company's leadership.

In May 2023, due to the re-appointment of a new chairman and the reassignment of a Juristic Person Director in July of the same year, the average tenure of directors of the Company was 3.8 years until December 2023. Please refer to the table below for the Percentage Distribution of Director Tenures.

  Percentage of Directors
Directors with Tenure between 6-9 Years 23.1%
Directors with Tenure between 3-6 Years 23.1%
Directors with Tenure Less than 3 Years 53.8%


Chief Corporate Governance Officer

The Company approved the establishment of the position of Chief Corporate Governance Officer at the 17th meeting of the 8th Board of Directors on March 19th, 2019. At the 7th meeting of the 10th Board of Directors on August 9, 2023, the position was exclusively appointed to the Assistant Vice President, Ms. An-An Hsia. For details,please see the Chief Corporate Governance Officer and its implementation.



CEO & Director Compensation Policy

Connection between Director Compensation and Sustainability Performance

All the Directors of Chunghwa Telecomm were nominated by the Board of Directors and shareholders with shares of statutory percentage before election in the shareholders’ meetings. To tie the Directors’ performance with the corporate vision for sustainability and the short, mid-, and long-term strategic targets, assess the required core competencies, strengthen accountability, link performances with compensation, retain and attract key talents to the Board of Directors, the Compensation Committee flexibly incorporates the sustainable management strategic targets in the indicators for Directors’ compensation disbursement to tie it with the variable compensation in accordance with regulations like the Articles of Incorporation so as to materially drive the performance and achieve a win-win scenario.

* Compensation of Directors: Please refer to p.36-39 of the Annual Report 2022.

CEO Compensation Indicators

The CEO compensation is positively correlated with the corporate management performance, which is divided into fixed compensation and variable compensation. The compensation indicators include financial and comprehensive management indicators listed in the following table:

Financial Indicators ROE and ROA
Financial Related Indicators Turnover, EPS, total assets of the corporation and owners’ equity
Comprehensive management indicators The mid- and long-term management policies, risk management, and other ESG implementation results of Chunghwa Telecom

Clawback Mechanism

The bonuses and compensation for the senior management of Chunghwa Telecom are in principle disbursed in cash. To ensure the sustainability and ethical operation of the enterprise, in the event of a material risk incident that brings impact to the corporate goodwill or major failure in internal control, Article 12 of the Standards Governing the Administrative Rewards and Discipline of Chunghwa Telecom Personnel stipulates that in the event of any malpractice carried out by any employee, CEO included, the reward(s) approved for such employee is to be revoked upon disciplinary actions as the collected prize amount shall be clawed back in accordance with pertaining regulations.

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