Governance
Structure
Composition of the Board of Directors
The highest governing body of Formosa Laboratories is the Board of Directors, which is responsible for decision-making, supervision, and management of the Company's impact on the economy, environment, and human rights. The current Board of Directors of Formosa Laboratories was fully re-elected in June 2022, with a total of 8 directors appointed, including 3 Independent Directors. Their term will be from June 23, 2022, to June 22, 2025.
The Company has established the "Corporate Governance Practices Guidelines" and the "Director Nomination Procedures," which specify that the composition of the Board of Directors should consider diversity and emphasize the diverse industry experience, professional background, and abilities of board members. The Company also continues to actively include voices from different genders, ages, and disadvantaged groups. In the current 10th Board of Directors, there are 7 members (with independent director Chang, Ting-Jung resigning in November 2022), 4 of whom (57%) have a background in medicine or chemistry, and 3 of whom (43%) have expertise in finance, finance, or corporate management. In addition, there are 2 female directors, accounting for approximately 29% of all board seats. The number of directors who also serve as company executives does not exceed one-third of the total number of board seats. The composition of the Board of Directors not only meets the basic requirements, values, professional knowledge, and skills but also achieves diversity in accordance with the policy, while also considering gender equality.
The Company also continues to arrange diverse training courses for directors to enhance their supervisory and management abilities, thereby strengthening the functions of the Board of Directors. Therefore, each director of the Company is able to provide professional opinions from their respective fields and perspectives, which greatly benefits the Company's operational performance and governance decisions. The Board of Directors of Formosa Laboratories meet at least once every quarter. In 2022, a total of 6 board meetings were held, with an average attendance rate of 96% for both former and current directors. The board meetings in 2022 mainly focused on regular reporting, routine tracking, compliance with laws and regulations, and the operational needs of the Company. There were no significant events in 2022 that required communication with the Board of Directors.
Board of Directors of Formosa Laboratories
- The Board of Directors was re-elected on June 23, 2022, and held two and four board meetings before and after that date, respectively.
- Chang, Ting-Jung resigned as an independent director and a member of the audit committee on November 12, 2022.
Nomination and Selection of the Board of Directors
Formosa Laboratories passed a resolution at the board meeting in March 2022 to fully re-elect 8 directors (including 3 Independent Directors) at the shareholders' meeting in 2022. The nomination of Dr. Cheng, Chen-Yu and 7 other directors (including 3 Independent Directors) was reviewed and approved, and their diversity, independence, educational and professional backgrounds, industry experience, and relevant skills related to organizational impact all comply with the "Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies", Article 192 of the "Company Act,"the"Articles of Incorporation"and the"Procedures for Election of Directors". The candidate nomination system is adopted, and Chen, Yi-Fen, Lu, Ta- Jung, and Chang, Ting-Jung are included in the Company's list of independent director candidates for 2022, which was announced on the Public Information Observation Station and submitted for election at the shareholders' meeting in June 2022.
Formosa Laboratories elected 8 directors (including 3 Independent Directors) at the shareholders' meeting in June 2022 and held a board meeting. All the elected directors unanimously recommended Dr. Cheng, Chen-Yu to serve as the Chairman of Formosa Laboratories. Dr. Cheng, Chen-Yu holds a Ph.D. in Medicinal Chemistry from the University of California, San Francisco. He has previously served as a professor in the Department of Pharmacy at National Taiwan University, a researcher at DuPont Chemical Company, and a postdoctoral researcher in the Department of Chemistry at MIT. During his tenure as Chairman and President of Formosa Laboratories, Dr.Cheng, Chen-Yu has accumulated professional capabilities and extensive experience in operational judgment, management, leadership decision-making, and crisis handling. He has provided professional and comprehensive guidance on the Company's operational management and investment decisionmaking, significantly benefiting the operational management of Formosa Laboratories. Therefore, he will continue to serve as Chairman.
To implement the diversification of the Board of Directors and formulate appropriate diversification policies for its own operations, operational models, and development needs, the following two aspects are considered: first, basic conditions and values such as gender, age, nationality, and culture; second, professional backgrounds, knowledge, skills, and experience in law, accounting, industry, finance, marketing, or technology. In addition, to achieve the ideal goal of corporate governance, the Board of Directors of the Company as a whole should possess eight abilities, including operational judgment, accounting and financial analysis, management, crisis handling, industry knowledge, international market perspective, leadership, and decision-making. The Formosa Laboratories Board of Directors should meet basic requirements and values, possess professional knowledge and skills, demonstrate diversity, and strive for gender equality. Formosa Laboratories also continues to arrange diverse training courses for board members to continuously enrich their knowledge for decision-making. For more information on the core competency indicators of the Board of Directors and its committees, please refer to the Company's annual report (2022 Annual Report).
Avoidance of Conflict of Interest
The Board of Directors of the Company is appointed through a candidate nomination system. Board of Directors follows the "Regulations Governing Procedure for Board of Directors Meetings of Public Companies"and establishes the "Rules of Procedure for Board of Directors Meetings," which regulates the principle of avoiding conflicts of interest for directors. Currently, if any of the following situations apply to the directors of the Company or their representatives in board meetings, they should explain the important content of their conflicts of interest at the meeting, including the following four points: first, if they have a conflict of interest with themselves or their representatives; second, if the directors themselves believe they should avoid; third, if the Board has resolved that they should avoid; fourth, if the directors' spouses, second-degree blood relatives, or companies with a controlling or subordinate relationship with the directors have a conflict of interest in the matters discussed at the meeting, it is considered that the directors have a personal interest in the matter. In order to avoid and mitigate conflicts between the directors' fiduciary duties and their interests, the Company has established a comprehensive principle of avoiding conflicts of interest and requires board members to fulfill their managerial ethical obligations and faithfully perform their duties with a high degree of self-discipline and prudence. At the same time, it regulates that directors who have conflicts of interest with themselves or their representatives in meeting matters, and whose participation in discussions and voting may harm the Company's interests, shall not be allowed to join the discussion and voting, and should avoid participating in the discussion and voting, and shall not act as proxies for other directors to exercise their voting rights.
Further Training of the Board of Directors
To keep up with global business management trends, enhance corporate governance, and improve risk management capabilities, Formosa Laboratories has established mechanisms and channels for director training and learning. This allows directors to easily access relevant information in order to maintain their core values, professional advantages, and capabilities. Formosa Laboratories arranges training courses for directors annually, covering various aspects such as economics, environment, and society, to enhance the governance knowledge and trend insights required by board members. In order to ensure that Independent Directors can stay informed about company-related information, the Company periodically sends out announcements of relevant laws and regulations to the competent authorities. Furthermore, based on the needs and feedback of each director,the Company continuously strengthens information dissemination and training planning to ensure that they possess sufficient professionalism to fulfill their leadership and supervisory functions. In 2022, the total training hours for the Board of Directors amounted to 60 hours, with an average of 7.5 hours per person.
Formosa Laboratories 2022 Board of Directors Training Courses
| Course | Course organizer | Course Hours | |
|---|---|---|---|
| Environment | Exploring Corporate ESG Strategies and Greenhouse Gas Inventory Practices | Taiwan Investor Relations Institute | 6 |
| Opportunities and Challenges of Net Zero Emissions - A Discussion on Greenhouse Gas Inventory, Carbon Footprint, and Carbon Neutrality | Independent Director Association Taiwan | 3 | |
| Economy/ Governance | An Era of Stringent Data Protection Regulation--The Latest Tendencies from Taiwan, EU and China | Taiwan Corporate Governance Association | 6 |
| Examining the Information Security Governance Strategy of Listed Companies from the Perspective of ESG Sustainable Development | Taiwan Corporate Governance Association | 3 | |
| Deep diving the cybersecurity tactics of listed companies from the perspective of ESG development | Independent Director Association Taiwan | 3 | |
| Innovation of Circular Economy for Creating True Value | Taiwan Corporate Governance Association | 3 | |
| Reveal the Secretive Mask of Insider Trading | Taiwan Corporate Governance Association | 3 | |
| Virtual World: The Metaverse and the Future of Cryptocurrency with Blockchains | Taiwan Corporate Governance Association | 3 | |
| Review the Risk and Operational Practices of Asset Valuation as the Board of Directors | Independent Director Association Taiwan | 6 | |
| How do directors and supervisors supervise companies to do well in risk management and internal control | Taiwan Corporate Governance Association | 3 | |
| Legal Responsibilities of Directors and Supervisors and Corresponding Risks and Prevention | Taiwan Investor Relations Institute | 6 | |
| The role of Independent Directors in corporate management and corporate governance. | Taiwan Corporate Governance Association | 3 | |
| Protection of Trade Secrets and Practices for Fraud Detection | Taiwan Corporate Governance Association | 3 | |
| Analysis of Practical Cases of Related Party Transactions and Unconventional Transactions | Independent Director Association Taiwan | 9 |
Individual Continuing Education Status of Formosa Laboratories' Directors in 2022
（Unit: hours））
| Board Members | Environment | Economy/Governance | Total Training Hours |
|---|---|---|---|
| Chairman Cheng, Chen-Yu | 3 | 3 | 6 |
| Director Fang, Pei-Wei | 3 | 3 | 6 |
| Director Lee, Chien-Hung | 0 | 6 | 6 |
| Director Hu, Yi-Kan | 3 | 3 | 6 |
| Director Shie, Hung-Min | 0 | 6 | 6 |
| Independent Director Chen, Yi-Fen | 0 | 12 | 12 |
| Independent Director Lu, Ta-Jung | 0 | 6 | 6 |
| Independent Director Chang, Ting-Jung | 0 | 12 | 12 |
Note: Chang, Ting-Jung resigned as an independent director and a member of the audit committee on November 12, 2022.
Performance Evaluation of the Board of Directors
To implement corporate governance and enhance the functionality of the Board of Directors, Formosa Laboratories has established the "Board of Directors Performance Assessment Measures" to strengthen the efficiency of the board. The Board of Directors, the Functional Committee (including the Audit Committee and the Remuneration Committee) conducts self-assessment annually, including the self-assessment of the performance of individual board members (by means of questionnaires). Among the Board of Directors' performance assessment indicators, there are five major aspects, including the "level of participation in the Company's operations", "enhancement of the quality of the Board of Directors' decision-making", "Board of Directors' composition and structure", "selection of directors and their continuous improvement" and "internal control". Following the assessment results, the Audit and Remuneration Committees will review and propose criteria for granting appropriate remuneration, including the exact amount. The self-assessment of the Board of Directors and functional committee, as well as the self-assessment of individual directors in 2022, showed that the Board of Directors effectively guided and supervised the Company's strategies, significant business matters, and risk management. They were able to establish appropriate internal control systems, and overall operations were satisfactory, meeting the requirements of corporate governance. The evaluation results are expected to be submitted to the Board of Directors in the first quarter of 2023.
In addition to implementing internal self-assessment, Formosa Laboratories revised the "Board Performance Assessment Measures" in November 2022, stipulating that an assessment should be conducted at least once every three years by an external professional independent organization or a team of external expert scholars. The Company is currently further evaluating the corresponding and feasible improvement plans.
Remuneration Policy for Directors and Managers
The salary and remuneration policies, systems, standards, and structures for directors and managers at or above the level of associate director at Formosa Laboratories are determined and reviewed by the Remuneration Committee. The committee includes Independent Directors who provide external perspectives and opinions, and at least two meetings are held annually to review and ensure the competitiveness and reasonableness of salary and compensation.
According to the "Remuneration Regulations for Directors, Members of Each Functional Committee, and Managers" established by Formosa Laboratories, the Company provides fixed remuneration to Independent Directors on a monthly basis, regardless of the operating profit or loss. Independent Directors do not participate in the annual profit distribution and are not provided with additional compensation such as duty allowances, severance pay, bonuses, retirement pensions, special fees, etc., in order to maintain their independence. The annual remuneration for non-Independent Directors includes director's remuneration, salary, and bonuses (the latter two only apply to those who also serve as employees). The remuneration for senior managers includes salary, bonuses, and retirement pensions, which are disclosed regularly in the Company's annual report (2022 Annual Report).
Apart from the aforementioned provisions, there are no other significant special benefits for senior executives in the Company. The retirement benefits system is also the same as that of other employees and is implemented in accordance with legal regulations.