In the December/January 2011 issue, we reported that an amendment to the Securities and Exchange Law was adopted to request listing companies establishing compensation committees. And, under the authorisation of the Law, qualifications of the members and the competence of the compensation committee will be promulgated by the Financial Supervisory Commission (FSC), the financial regulator in Taiwan. Now, after due consultations, the FSC has set up a set of rules for the establishment and competence of compensation committees for listing companies (Rules).
Under the Rules, a compensation committee should consist of at least three members to be appointed by the board. If there are independent directors on the board, the compensation committee should comprise at least one independent director, and the independent director should be elected as convener and chairman of the committee. Otherwise, a member of the committee should be elected to serve such functions. Members of the committee should have professional experiences and possess certain degree of independence.
The committee should be convened at least twice a year to establish/review the policies and systems of performance evaluation and compensation for directors, supervisors and officers, and establish/review their compensation as well as make recommendations to the board. Any written dissenting opinions to the decisions of the committee should be recorded in the minutes and published within two days on the public disclosure website designated by the FSC.
While discussing the recommendations of the committee, any disapproval or amendment by the board should be adopted by a majority vote attended by at least two thirds of board members. Further, if the board adopts a more favorable compensation than that recommended by the committee, such difference and the reasons behind should be recorded in the minutes and published within two days on the public disclosure website designated by the FSC.
Please note that under Taiwan Companies Law, the compensation for directors (and supervisors as well) should be resolved by the shareholders meeting if not specifically provided for in the company’s articles of incorporation. Therefore, the compensation decided by the board should be submitted to the shareholders meeting for final approval.
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