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.

Board Operations

In 2023, the Board of Directors convened eight times, with an average attendance rate of 93.06%. The Kedge Construction Board of Directors, as the company’s highest governance body, consists of nine directors (all male). According to Article 192-1 of the “Company Act” and Article 15 of Chapter 4 of the “Kedge Construction Articles of Association,” the nomination of Kedge directors follows a candidate nomination system. The nomination of board members is highly rigorous, considering not only their expertise but also their reputation in ethics and leadership. The independence of independent director candidates must also comply with the “Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies.” 

According to relevant laws and regulations, shareholders holding more than 1% of the total issued shares of the company can submit a list of candidates to the company, allowing shareholders to participate in the nomination process for board candidates. All director candidates are elected by voting at the shareholders’ meeting. Currently, the nine directors (including three independent directors) each have more than five years of work experience in fields ranging from business, law, finance, and accounting to areas necessary for company operations. They are assigned tasks according to the situation and report to the board of directors.

To promote honesty and ethical behavior among directors and enhance corporate governance, the company has established a code of ethical conduct for directors: all directors must prevent and mitigate conflicts of interest, and independent directors maintain their independence within their scope of business. The annual report discloses the compliance of independent directors with the independence requirements 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 established an Audit Committee, a Remuneration Committee, and a Sustainable Development Committee to assist in oversight and improve corporate governance performance.

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 2023:

1. Our company has implemented a diversified policy as stipulated in Article 20 of the “Corporate Governance Best Practice Principles” to develop appropriate diversification guidelines based on the company’s operations, business model, and development needs. This aims to enhance corporate governance and promote the healthy development of the board’s composition and structure, including but not limited to the following two major criteria:

(1) Basic Conditions and Values: Gender, age, nationality, and culture.

(2) Professional Knowledge and Skills: Professional backgrounds (e.g., law, accounting, industry, finance, marketing, or technology), professional skills, and industry experience.

2. The members of our company’s board of directors should generally possess the necessary knowledge, skills, and qualities required to perform their duties. To achieve the ideal goals of corporate governance, the board as a whole should possess the following expertise: operational judgment, management, industry knowledge, financial and accounting analysis, and leadership decision-making. This will enable the company to respond to changes in the international market, understand their potential impact on the company’s operations, and provide necessary crisis management guidance.

3. Our current board of directors is composed of nine members. The specific management objectives and achievement status of the board’s diversification policy are as follows:

4. Diversity Management Objectives: According to Article 20 of our company’s “Corporate Governance Best Practice Principles,” the composition of board members should consider diversity. Our current board of directors is composed of nine members, including six directors and three independent directors, all of whom have extensive experience and expertise in civil engineering, finance, business, law, and management. Additionally, our company emphasizes gender equality in the composition of the board. Currently, we aim to have at least one female director (for the next board re-election, this management objective will guide the nomination process). Moving forward, we will continue to strive to achieve a goal of having more than 25% female directors. 

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 Members and Operations

Kedge Construction Corp. established the Remuneration Committee in December 2011, consisting of two independent directors and one external expert. This committee assists the Board of Directors in setting policies, systems, standards, and structures for evaluating the performance and remuneration of directors and managers. Issues related to performance assessment, salaries, bonuses, employee compensation systems, and the distribution methods for director and supervisor remuneration are regularly evaluated and reviewed by the committee before submitting recommendations to the board 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 Director

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 2023, there were accumulatively 87 hours of the advanced course participation.

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 17-18 and 22-23 of Kedge’s 2023 Annual Report. Beyond the aforementioned, there is no remuneration clawback mechanism for directors and senior management.

The remuneration system for senior management at Kedge Construction is proposed by the Remuneration Committee to the board of directors for approval. Besides fixed salaries and retirement pensions, performance bonuses are calculated based on the achievement of various performance indicators. The retirement system for senior management is the same as for other employees. For details on the 2023 senior management remuneration and scale, please refer to pages 19-21 of Kedge Construction’s 2023 Annual Report.

Resignation and Retirement Policy of Directors and Senior Management

The notice period for the resignation of directors and senior management at Kedge Construction is determined in accordance with the Labor Standards Act and the company’s relevant resignation and retirement policies. The notice period and calculation methods are the same as for other employees, and no additional payments or in-kind benefits are provided to resigning directors and senior management.

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.

Board Performance Self-assessment

Based on the collection of relevant meeting data of the company’s Board of Directors in 2023, the “Board Performance Self-assessment Questionnaire” was filled out based on the five major aspects. Scores were assigned according to evaluation standards reflecting actual operational performance, resulting in an average score of 4.51 out of 5.0, translating to a total score of 90.2 out of 100. The self-assessment results were rated as “Excellent” and “Exceeds Standards.” 

Our company has a total of nine directors (including independent directors). In December 2023, nine “Board Member Self-Evaluation Questionnaires” were distributed, with a 100% return rate. After summarizing and compiling the results, the average score from the self-evaluation questionnaires was 4.79 out of 5. The self-evaluation result is rated as “Excellent.”

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 2023, please refer to: Kedge Construction’s 2023 Annual Report from page 204 to page 21.

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 2023, there have been no major conflicts of interest in Kedge Construction.