Corporate Governance

Ethical Management

Issue Date：2022/06/09

Responsible Business Conduct

To ensure that all employees conduct business activities with the highest ethical standards, we have stipulated Ethical Corporate Management Best Practice Principles, Code of Conduct, and Procedures for Ethical Operation and Guidelines for Conducts to detail the required ethics and responsibilities for employees in business practices and extensively promote and strengthen the corporate culture of ethics and integrity.

The purpose of stipulating the Code of Conduct of Chunghwa Telecom is to prevent occurrence of misconduct and encourage stakeholders to act in line with integrity and ethics, not for personal gains, and abide by the laws and regulations. Also, the stakeholders conducting business with Chunghwa Telecom are encouraged to abide by ethical standards equivalent to that of the CHT employees.

Employees

100% signing and receiving promotion and trainings on the Code of Conduct by all employees
Regular independent third-party audits by SGS-Taiwan under commission regarding implementation of the Code of Conduct each year (with a 100% coverage of our branch offices)
Regular review by the internal audit units in line with the annual auditing plan for the compliance and implementation of ethical management practices

Suppliers

Check and demand stipulation of Code of Conduct and Code of Business Ethics, encouragement and promotion of its employees’ compliance with relevant regulations, and maintenance of information transparency publicly in the vetting stage
Regular audits by SGS-Taiwan to contractors and suppliers in terms of compliance with relevant laws and regulations to capture their implementation statuses

To strengthen the ethical management, allocate resources and personnel, the Organization and Talent Development Department is responsible for assisting the Board of Directors and the management in the stipulation, supervision, and execution of the ethical management policies and guidelines for conduct, which is to report to the Board of Directors regularly (at least once a year). Also, the Chief Administrative Officer (CAO) is responsible for the supervision and oversight of issues concerning business ethics and corruption.

There were 67 complaints received in 2021, of which 66 were closed and 1 being verified and addressed as of April 2022. There were 8 incidents of violation of the Code of Conduct in 2021, and all of which were investigated, deliberated, and addressed in line with the operating procedures and handling principles. In addition, all employees were notified for an enhanced promotion to strengthen their awareness of compliance with the Code of Conduct.

CoC Violation & the Prevention and Corrective Actions

Regarding incidents of Code of Conduct (CoC) violation, we enhance the promotion and communication of the CoC principles in line with the categories of violation incidents via appropriate training occasions and interviews. Meanwhile, reoccurrence of relevant incidents is prevented through interviews, correction of operating procedures, and improvement of internal review/audit mechanisms.

Categories of Violations in 2021

Violation Category	Count
Privacy	0
Bribery	0
Discrimination	0
Integrity & Ethics	6
Corporate Asset Protection	2
Total	8

Award/DisciplineCategory	Conduct for Award/Discipline	Subsequent Prevention, Reminders, and Improvements
Regulation Violation	Use of corporate car for private purpose	Regulations for no use of corporate car for private purpose is reiterated; all unit supervisors are required to better promote and communicate such to employees.
Regulation Violation	Inappropriate language or behavior	The requirement that employees are to comply with laws and regulations at workplace or other venue for performance of duty and watch out for their language and behaviors is reiterated in order to foster a workplace of compliance and harmony.
Regulation Violation	Absence without permission	Regulation Violation Absence without permission The regulations of “no use of corporate car for private purpose” and “attendance during core work hours” are reiterated; supervisors of all levels are required to better manage, supervise, and review performances to maintain team discipline and corporate image.
Regulation Violation	Failure to comply with standard operating procedure	Regulation Violation Failure to comply with standard operating procedure The management and review of the invoice procedure has been improved. The invoice procedure is conducted by the respective construction inspector in line with the SOP, before verification by another randomly assigned supervisor. Also, the education and trainings for inspectors have been enhanced. Absenteeism Violation of attendance regulations The employee has been interviewed and informed of the regulations governing leave and award/discipline; the unit supervisor has been required to improve the attendance management of the employee.
Regulation Violation	Use of corporate car for private purpose	All unit supervisors are required to enforce accountability and a better management and to reiterate that no use of corporate car for private purpose and no drunk driving to remind employees to abide by the regulations of the Company.
Regulation Violation	Failure to handle business in line with regulations	Regulation Violation Failure to handle business in line with regulations The regulations for recruitment process have been reiterated to prevent any misconduct; different individuals are appointed as written reviewers and oral interviewers to separate the result of written review from that of oral interview.
Regulation Violation	Failure to comply with standard operating procedure	The management and review of the invoice procedure has been improved. The invoice procedure is conducted by the respective construction inspector in line with the SOP, before verification by another randomly assigned supervisor. Also, the education and trainings for inspectors have been enhanced.

System & Procedures

Chunghwa Telecom has established a quality corporate governance system. With reference to “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” stipulated by Taiwan Stock Exchange (TWSE) and Taipei Exchange (TPEx), it formulated “Code of Corporate Governance of Chunghwa Telecom Ltd. Co.,” for guidance and compliance.

To become the most valuable and most trust-worthy ICT company, professionals from different areas are invited as the Independent Directors. On one hand, they further improve the corporate governance with their expertise; on the other, they play the role of supervising the Company on behalf of the broader investors in terms of risk management and decent business operation.

Chunghwa Telecom sticks to political neutrality and avoids utilization of internal funds, workforce, facilities, or other resources of the Company out of political agenda.

Reporting Channels & Protection

We have established a variety of communication and reporting channels to ensure the needs and recommendations of internal and external stakeholders heard and responded by the corresponding units of the Company. In the event of any violation or potential breach of laws or regulations, complaints and reports can be made via relevant channels.

The whistleblower’s identity will be rigorously kept in confidence. The whistleblower will not be subject to disciplinary action such as dismissal, demotion or transfer, or salary reduction. An official protection system for anonymous whistleblowers with legal protection is in place.

Employees http://chtblog.cht.com.tw/mbr/index.jsp
Suppliers https://scm.cht.com.tw/outboard/
Customers http://www.emome.net/
Investors http://www.cht.com.tw/ir/mae-smeeting.html

Internal Audit

The purpose of internal audit is to assist the Board of Directors and managers to check and review the internal control system and evaluate the operation efficiency. The CHT internal audit team answers to the Board of Directors, which conducts internal audits in line with the regulations and system. At the end of each year, based on the results of risk assessment, the audit plan of the coming year is formulated. Upon approval by the Board of Directors after submission thereof, the audit plan is submitted via online information system for the competent authority’s reference. The internal audit and internal control mechanisms of Chunghwa Telecom have been audited and stated in the financial report by CPA.

2021 Information of Interest Conflicts

Item	Description
Cross-board memberships	Lifting the non-compete restrictions for the Independent Director Lo-Yo Yen regarding the cross-board membership thereof as the Independent Director of Qisda Corporation, Session 12, 9th Board of Directors: the party recused himself in line with the regulations. Lifting the non-compete restrictions for the Independent Director Yu-Fen Lin regarding the cross-board membership thereof as the Independent Director of SINBON Electronics Co., Ltd., Session 14, 9th Board of Directors: the party recused herself in line with the regulations. Lifting the non-compete restrictions for the Independent Director Sin-Horng Chen regarding the cross-board membership thereof as the Independent Director of Chinesegamer International Corporation, Session 15, 9th Board of Directors: the party recused himself in line with the regulations.
Cross-shareholding with suppliers and other stakeholders	Cross-shareholding with suppliers and other stakeholders The “Procedures for Acquisition or Disposal of Assets of Chunghwa Telecom Co., Ltd.” has been stipulated in line with the FSC’s “Regulations Governing the Acquisition and Disposal of Assets by Public Companies”; related parties are identified in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and the list of such is disclosed online. Pursuant to the “Procedures for Acquisition or Disposal of Assets of Chunghwa Telecom Co., Ltd.,” the Company may not enter into a transaction contract or make a payment until materials pertaining to a transaction of an amount of NT$300 million or more with related party are submitted and approved by the Audit Committee, followed by adoption by the Board of Directors and report on the website designated by the FSC within the time period specified in Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material Information of Companies with Listed Securities.
Existence of controlling shareholders	Existence of controlling shareholders The controlling shareholder of Chunghwa Telecom is the Ministry of Transportation and Communications, with whom there is no conflict of interest that leads to damage to investors’ rights.
Related parties, their relationships, transactions, and outstanding balances	The disclosure requirement is met by the notes on the related parties in the financial statements in the Annual Report for the Shareholders’ Meeting.