Organization of corporate governance

Corporate governance is at the highest management level of business operation. It is responsible for a company’s future development and strategies. We uphold the concept of sustainable management and aim to create the maximum benefits and values for our customers, shareholders, employees, and society. With “integrity, quality, service, innovation, and sustainability” as our highest guiding principle, we implement the principles of financial disclosures and information transparency, ensuring appropriate and efficient business operation and management and committing ourselves to protecting shareholders’ rights and interests.

Operation of the Board of Directors

The Board of Directors is the company’s highest governing body, with a total of nine directors (eight males and one female) on the board. In accordance with Article 192-1 of the “Company Act” and Article 15 of Chapter 4 of the “Articles of Association of Kedge Construction,” the board of directors adopts a candidate nomination system. The nomination of the directors goes through a rigorous selection process, which not only considers professional ability, but also attaches great importance to their reputation in moral behavior and leadership. The independence of candidates for independent directors must also comply with the provisions of the “Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies.” According to relevant laws and regulations, shareholders who hold more than 1% of the company’s total issued shares can submit a list of candidates to the company, so that shareholders can also participate in the nomination process for director candidates. All candidates for directors will be voted on at the general meeting of shareholders. At present, the nine directors (including three independent directors) have more than five years of work experience in business, law, finance, accounting or company business, and perform the governance tasks of the company’s operation and management according to the actual situation, and report to the board of directors.

In order to promote honest and ethical behavior of directors and improve corporate governance, the company has established a code of ethics for directors, which all directors must abide by to prevent and alleviate conflicts of interest; independent directors maintain their independence within the scope of business execution, and every year in the annual report, the independence of independent directors should be disclosed to ensure compliance with Article 3 of the “Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies.”

The Board of Directors has set up the Audit Committee, the Remuneration Committee and the Sustainable Development Committee to assist the Board of Directors in performing its supervisory duties and improve corporate governance performance.

In 2022, the Board of Directors held 6 meetings, with an average attendance rate of 90.74%.

Members of the Board of Directors

The company has specified in the “Corporate Governance Best Practice Principles” and the Procedures for Election of Directors that the diversity principle, business operation, business model, and development shall be considered for the composition of members, without restrictions on gender, age, and education. In practice, each board member has expertise and practical experience in various fields of business administration, construction management, and accounting in alignment with the diversity policy.

Implementation of the diversity policy in 2022: The directors’ remuneration is negotiated based on the degree of directors’ participation in the company’s operations and the value of their contributions, covering the company’s economic, social, and environmental goals. If there is a profit in the current year, less than 2% can be allocated as remuneration for directors and supervisors. The actual distribution ratio and amount are prepared by the Board of Directors and submitted to the shareholders’ meeting for resolution.

Functional committee members

Audit Committee

Kedge established the “Audit Committee” in March 2020. Composed of three independent directors, the committee assists the Board of Directors in fulfilling its supervision of the company’s quality and integrity in accounting, auditing, financial reporting processes and financial control. The term of office is the same as that of the Board of Directors.

Remuneration Committee

Kedge established the “Remuneration Committee” in December 2011. Composed of two independent directors and an external expert, the committee assists the Board of Directors in formulating policies, systems, standards and structures for performance evaluation and remuneration of directors and managers. Related performance evaluation, salary, bonus, employee remuneration system and payment method of remuneration for directors and supervisors are all regularly evaluated and reviewed by the remuneration committee, and recommendations will be submitted to the Board of Directors for discussion.

Sustainable Development Committee

Kedge established the “Sustainable Development Committee” in 2022, which consists of four directors (including two independent directors) and is the highest level of internal sustainable development organization of Kedge. The committee coordinates the formulation of the strategy and goals related to the company’s corporate social responsibility and sustainable development. It regularly reviews performance and goal achievement.

Effectiveness of the Board of Directors

Directors’ advanced training

Kedge Construction arranges for directors to participate in advanced courses each year on directors’ professional skills and knowledge as well as issues related to sustainable development, so as to strengthen the professional ability of directors and the company in response to operational impacts. In 2022, there were accumulatively 62 hours of the advanced course participation.

Remuneration policies for Directors and Senior Management

The remuneration of directors of Kedge Construction is consistent with the relevant remuneration regulations for directors and employees who concurrently serve as directors, including remuneration, retirement pension, distributed remuneration and business execution expenses. The Remuneration Committee shall refer to the industry standard and the individual performance of directors as the basis for adjusting personal remuneration. In addition to the fixed salary, the performance bonus is calculated according to the achievement of various performance indicators. The remuneration of directors in 2022, the step-by-step schedule of remuneration for directors, and the distribution standards can be referenced from pages [16-17] of Kedge’s 2022 Annual Report. Apart from the above, there is no remuneration mechanism for directors and executive managers.

Kedge Construction’s remuneration system for senior management is proposed by the Remuneration Committee to the Board of Directors for approval. In addition to fixed salaries and retirement pensions, performance bonuses are calculated according to the achievement of various performance indicators. The retirement system for senior management is the same as that for other employees. The salary of the senior management in 2022 and the grade interval table can be informed from pages [18-20] of Kedge’s 2022 Annual Report.

Resignation and Retirement Policy of Directors and Senior Management

The resignation notice period of Kedge’s directors and senior management is determined in accordance with the Labor Standards Act and the company’s relevant resignation measures. The number of days for notice in advance and calculation methods are the same as in the regulations for other employees, and no other payments or actual benefits in kind will be issued to resigned directors and senior management. For details, please refer to page [21] of Kedge’s 2022 Annual Report.

Link between the ESG performance and the remuneration of directors and senior management

In order to link the performance of the senior management with the company’s sustainable vision and short-, medium-, and long-term goals, evaluate the core competencies of the senior management, strengthen the responsibility of the senior management, and implement the linkage between performance and salary, Kedge incorporates ESG strategic goals into one of the evaluation items involving the variable remuneration of directors, so as to enable the senior management to actively implement the corporate sustainability goals and make the goals of the senior management consistent with the company’s ESG sustainable development strategy.

Performance Evaluation of the Board of Directors

Article 3 of the company’s “Regulations on the Performance Evaluation of the Board of Directors” stipulates that the internal performance evaluation of the Board of Directors shall be carried out at least once a year; the external evaluation by an external professional independent organization or a team of external experts and scholars shall be carried out at least once every three years.

Results of Internal control

Self-assessment of performance appraisal of the Board of Directors: After collecting relevant meeting materials of the Board of Directors in 2022, the assessment was filled in according to the five major aspects of the “Self-evaluation of the Board of Directors Performance Questionnaire,” and given points in accordance with the evaluation standards which correspond to the actual operation situation. The average score was 4.42 points (out of 5.0 points as full points), the converted total score was 88.4 points (out of 100.0 points as full points), and the self-assessment results were rated as “excellent (above the average)” and “beyond the standard.”

Self-assessment results of directors: The company has a total of 9 directors (including independent directors), and 9 copies of the “Self-assessment Questionnaire for Directors” were issued at the end of January in 2023, and all of them were returned. After summary statistics, the average score of each director’s self-assessment questionnaire was 4.75 points (out of 5 points as full points).

Results of external evaluation

In February 2023, Kedge appointed the Taiwan Association of Board Governance to conduct an external evaluation of the performance of the Board of Directors during 2019-2022. The summary of the evaluation conclusion is excerpted as follows: “The company continues to pay attention to the promotion of ESG issues, and most of the governance and operation of the Board of Directors are in line with the standards proposed by Taiwan Stock Exchange and Taipei Exchange for corporate governance practices and the evaluations of the Board. These advantages should continue to be maintained and implemented.”

Management of the conflicts of interest

The procedure rules of the Board of Directors of Kedge Construction and the organizational regulations of the functional committees all have provisions on the avoidance of interests. If a director’s proposal involves the interests of himself, his spouse, blood relatives within second-degree relatives, or a company in which the director has control and affiliation, he shall explain his interest at the current board meeting. If there is concern about impairing the interests of the company, he shall not participate in the discussion and vote. He shall be withdrawn during discussion and voting, and shall not exercise other directors’ voting rights on behalf of other directors; the names of relevant directors, descriptions of important contents and circumstances of withdrawal shall be recorded in the meeting minutes. Directors and managers are also required to complete the annual related party transaction statement and report the results to the Audit Committee.

  • For related party transactions, directors, controlling shareholders or other interested parties’ cross-shareholding status in 2022, please refer to: Kedge Construction’s 2022 Annual Report pp. [198-206].

In addition, Kedge has also formulated a code of integrity for employees at different levels, a code of ethical conduct for directors and managers, and a code of professional ethics for employees. As of the end of 2022, there have been no major conflicts of interest in Kedge Construction.