The Board has the overall responsibility for the Company’s performance and its main duties include regularly reviewing the Company’s strategy, capital expenditure plans, internal restructuring and human resources policy. It also appoints, dismisses and supervises the Company’s senior management team, chief auditor and chief accountant. Certain responsibilities are delegated to four Committees, which assist the Board in carrying out its duties. Elected on May 24, 2017 for a term of three years, the current Board consists of the Chairman, nine Directors and three Independent Directors. Fifteen meetings of the Board were held during 2016.
Corporate Governance & Nomination Committee
The Corporate Governance & Nomination Committee has primary responsibility for nominating Directors, including Independent Directors, for election at the shareholders’ meetings; reviewing the Company’s compliance with corporate governance regulations, guidelines and principles, and recommending changes, as appropriate, for approval by the Board. The Committee consists of five to seven members, and currently consists of Chairman, three Independent Directors and another Director. Chairman is responsible for convening committee meetings.
The Audit Committee assists the Board in fulfilling its responsibilities for overseeing the Company’s financial reporting processes , the audit of the Company ’s financial statements, the Company ’s compliance with legal and regulatory requirements, the qualifications and independence of the Company’s Chief Auditor, the performance of THSRC’s internal control function, any conflicts of interest from affiliated parties and the risk management function. The Committee consists of three Independent Directors.
The Remuneration Committee assists the Board in fulfilling its responsibilities for setting the compensation policies, systems and standards, and evaluating the performance and the compensation of THSRC’s Board of Directors and executives. The Committee consists of three to five members and its meetings shall be convened by an Independent Director.
The Special Committee assists the Board in fulfilling its responsibilities in advising and overseeing the Company’s practices relating to significant legal and contract disputes or corporate actions, and overseeing the procurement processes and practices for major projects and construction awards. The Committee consists of five to seven members and an Independent Director is responsible for convening committee meetings.
Approved and ratified by shareholders, THSRC’s Guidelines for Corporate Governance is based upon OECD Principles of Corporate Governance, S&P Corporate Governance Scores and Evaluations, NYSE Listed Company Manual Sec303A, Infosys Corporate Governance Report, corporate governance guidelines for international and/or domestic companies, corporate governance-related laws and regulations in Taiwan, and rules published by the Taiwan Stock Exchange. The main objectives for THSRC are to establish the best corporate governance system, to protect shareholders’ rights and interests, to strengthen the structure of the Board of directors and to fulfill social obligations. In addition to Guidelines for Corporate Governance, THSRC has drawn up a number of governance documents and committee charters, including Rules for Proceedings of Board Meetings, Charter of the Corporate Governance & Nomination Committee, Charter of the Audit Committee, Charter of the Remuneration Committee, Information Disclosure Rules and Code of Conduct & Ethics, among others. These documents provide the basis for decision-making and guide THSRC’s corporate governance actions. The documents that describe THSRC’s corporate governance framework are prepared in Chinese language and available on the About Us section of company website at http://www. thsrc.com.tw.
In compliance with Guidelines for Corporate Governance, which was approved at the shareholders’ meeting on November 1, 2004, THSRC had taken liability insurance to indemnify its directors, supervisors and executive managers against liability while acting for THSRC, and the coverage was US$10 million per year until 2010. Upon the renewal of the liability insurance on November 1, 2010, the annual coverage was raised to US$20 million. On November 1, 2014, the annual coverage was adjusted to NT$600 million. In the subsequent year, upon the renewal of the insurance contract, the annual coverage was increased to NT$900 million.
Based on the findings of a self-assessment, Taiwan High Speed Rail Corporation (THSRC) states the following with regard to its internal control system during the period from January 1, 2016 to December 31, 2016:
- THSRC is fully aware that establishing, operating and maintaining an internal control system are the responsibilities of its Board of Directors and management. THSRC has established such a system aimed at providing reasonable assurance regarding the achievement of objectives in the following categories: (1) effectiveness and efficiency of operations (including profitability, performance, and safeguarding of assets), (2) reliability, timeliness, and transparency of reporting in compliance with the relevant specifications, and (3) compliance with applicable laws and regulations.
- An internal control system has its inherent limitations. No matter how carefully designed, an effective internal control system can only provide reasonable assurance of accomplishing the three objectives mentioned above. Moreover, the effectiveness of an internal control system may be subject to changes in environment or circumstances. Nevertheless the internal control system of THSRC contains self-monitoring mechanisms, and THSRC takes corrective actions whenever a deficiency is identified or an enhancement is necessary.
- THSRC evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control Systems by Public Companies (hereinafter referred to as the “Regulations”) of the Republic of China. The Regulations identify five components of internal control based on the process of management control: (1) control environment, (2) risk assessment, (3) control activities, (4) information and communication, and (5) monitoring. Each component further contains several elements. Please refer to the Regulations for details.
- THSRC has evaluated the design and operating effectiveness of its internal control system according to the aforementioned criteria.
- Based on the results of the evaluation mentioned in the preceding paragraph, THSRC believes that during the period from January 1, 2016 to December 31, 2016, the design and operation of its internal control system have reasonably achieved the objectives mentioned in item 1 above, including monitoring of operational effectiveness and efficiency, and reliability, timeliness, and transparency of reporting in compliance with the relevant specifications, and compliance with applicable laws and regulations.
- This Statement is an integral part of THSRC’s Annual Report for the period from January 1, 2016 to December 31, 2016, and Prospectus, and is a public document. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171 and 174 of the Securities and Exchange Law.
- This Statement has been passed by the Board of Directors at the meeting held on Mar 21, 2017, with the contents of this Statement affirmed by all the 14 members present in the meeting.