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Corporate Governance

Ethical Corporate Management Status

Update: 2024/12/27

Implementation of Ethical Corporate Management and Deviations from "Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies" and Reasons

1. Establishment of Ethical Corporate Management Policies and Programs

Abstract Illustration：
  • The Corporation adheres to the five core values of Discipline, Integrity, Efficiency, Innovation, and Sensibility, and has established ethical policies and a corporate culture of ethical management based on our operational principles of Honesty, Transparency, and Responsibility. We have also established our Code of Ethical Conduct; Ethical Corporate Management Best Practice Principles; Regulation of Whistle-Blowing System for Unlawful, Unethical Conduct and Dishonesty Behavior; Regulations for Management of the Prevention of Insider Trading; Reward and Discipline Regulation and Grievance Regulation for our employees to abide by.
  • The Corporation established the "Ethical Corporate Management Best Practice Principles" following approval at the Extraordinary General Meeting held on March 18, 2020 to stipulate that directors and managers shall exercise due care of good administrators when carrying out business duties, rigorously execute their duties, and implement the commitments of ethical management policies. These Principles will be adjusted as necessary in accordance with the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies”.
  • Additionally, the Corporation's "Procedures for Ethical Corporate Management and Guidelines for Conduct" were established following approval at the 36th meeting of the 8th Board on March 18, 2020, and contain specific stipulations regarding compliance with ethical management policy items by Corporation personnel. These Procedures will also be adjusted as necessary in accordance with the Cooptation's ethical management policy.

Abstract Illustration：
  • The Corporation has established assessment mechanisms against risks from unethical conduct through our "Ethical Corporate Management Best Practice Principles" and "Procedures for Ethical Corporate Management and Guidelines for Conduct". The dedicated unit will plan for the internal organization and respective responsibilities according to the needs of individual cases, and monitor operational activities with higher risks of unethical conduct within the business scope. Articles 6 to 12 of our " Procedures for Ethical Corporate Management and Guidelines for Conduct" stipulate the preventive measures for unethical behaviors stated in Article 2 Paragraph 7 of the " Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies ". Our Sustainable Development and Nomination Committee oversees the Corporation's formulation and implementation of ethical management policies and reports to the Board of Directors on a regular basis.

Abstract Illustration：
  • The Corporation has established "Procedures for Ethical Corporate Management and Guidelines for Conduct" which contains detailed plans to prevent unethical behavior, including operational procedures, codes of conduct, disciplinary actions for violations, and appeals systems, and we periodically review and revise whether preventive measures are operating effectively.
  • The Corporation has established "Procurement Regulation" containing articles relating to business confidentiality and conflicts of interests for procurement staff, and employees who exhibit dishonest behaviors are subject to disciplinary actions under the "Rules Governing Rewards and Disciplinary Action" depending on severity of the cases.

2. Fulfillment of Operations Integrity Policy

Abstract Illustration：
  • The Corporation has established an assessment system for suppliers and business partners in our "Procurement Regulation", including no refund record, not being listed as dishonored vendors by our Corporation and government agencies. Our transaction contracts clearly stipulate the prohibition of unfair benefits, and stipulate that the manufacturer shall not require, make promises, accept or give bribes, commissions, proportions, agency fees, brokerage, kickbacks, gifts, entertainment or other improper benefits to our personnel or persons related to the contract procurement case; otherwise, the Corporation may terminate the contract at any time if a violation occurred.

Abstract Illustration：
  • In order to fulfill our supervisory obligations of ethical management, the Corporation has established a Sustainable Development and Nomination Committee under the Board of Directors for reviewing the effectiveness of our implementation of the sustainable development, including ethical management operation and execution. Additionally, the Corporation has also established a Sustainable Development Promotion Committee, which is supervised by the Board of Directors and Chairman, and consists of the President and senior managers. It holds quarterly and half-yearly meetings to discuss sustainable development promotion matters, and regularly reports to the Sustainable Development and Nomination Committee and the Board of Directors. Starting from June 15, 2023, the said Promotion Committee has been divided into six functional teams. Among them, the Ethical Management Team is led by our Legal Office as the leader, and composed of members from our Corporate Planning Division, Finance Division and Human Resources and Administration Division.
  • The specific performance and promotion measures of ethical management for year 2023 and the first half of 2024 were reported at the 14th meeting of the 10th Board on June 12, 2024. The main annual promotion plans and implementation status of the Ethical Management Team were reported as follows:
  • (A) Promotion Plans:
    1. Review of systems and establishment of preventive measures for ethical management in accordance with laws and regulations.
    2. Promoted and ensured implementation of the "Ethical Corporate Management Best Practice Principles" and the "Procedures for Ethical Corporate Management and Guidelines for Conduct" according to the duties of each unit.
    3. Conduct periodic reviews of legal compliance in internal audits, accounting procedures, and internal controls. Additionally, all units conduct monthly surveys of regulatory changes and have established relevant management systems.
    4. Strengthen the awareness of anti-corruption within the Corporation, promote relevant education and training, and deepen the ethical management philosophy of all employees.
  • (B) Implementation Status:
    1. Legal compliance:
      (1) Establishment of mechanism to manage legislative or regulatory changes and conduct monthly updates, and completed the review of the Corporation's "Compilation of Laws and Regulations Relevant to High-Speed ​​Railway Operations".
      (2) Conduct quarterly legal compliance representative meetings (including brief on important regulations.)
      (3) Report the implementation status of the Corporation's legal compliance system to the Board of Directors regularly in every October.
    2. Review internal by-laws:
      (1) Revised the “Intellectual Property Management Standards” and introduced the Taiwan Intellectual Property Management System (TIPS) verification specifications into these standards in March 2023, and refined the relevant content again to meet the verification requirements of TIPS.
      (2) Revised the “Management Measures for the Identification of Applicable Laws”. Considering that the regular review of the “Compilation of Laws and Regulations Relevant to High-Speed Railway Operations” and the provisional tracking measures for the draft amendments to applicable laws are becoming more mature, from January 2024 it is planned to be included in the regulations for continuous tracking and management, in order to optimize the provisions of this regulation.
    3. Training and communication:
      (1) Conducted training course for directors on “The Metaverse and the Future Development of Cryptocurrency Blockchain” and “Artificial Intelligence's Risks and Precautions for Enterprises” in April 2023 and 2024 respectively. Furthermore, written report on relevant anti-corruption information or new laws and regulations released by the government agencies were provided to the Board of Directors.
      (2) Conduct digital courses on ethics and integrity and insider trading prevention for all employees every year.
      (3) Provide written educational materials on insider trading prevention to insiders and quasi-insiders on a quarterly basis.
    4. Information disclosure:
      (1) In accordance with the regulations of the securities regulatory authority, major information and general announcements are announced on the public information observatory in a timely manner. A total of 37 major announcements were released in 2023, and a total of 14 major announcements were released in 2024 as of the end of May.
      (2) Information on ethical corporate management, legal compliance and related education and training has been disclosed on the Corporation's website and updated in a timely manner. Relevant information is regularly updated in the Corporation's annual report and Sustainability Report. Detailed information can be found under the “Corporation Governance and Organizational Structure” sub-section of the Corporate Governance section, and the “Ethical Governance” page under the "Sustainable Development" sub-section in the "ESG" section of our corporate website.
    5. Reporting and auditing: A total of 2 project group meetings were held from 2023 to the end of April 2024; and a total of 53 audit reports were issued.

Abstract Illustration：
  • Our “Ethical Corporate Management Best Practice Principles”, “Code of Ethical Conduct” and “Code of Conduct” all stipulate prohibitive obligations related to conflicts of interest. In addition to reporting to department heads, the Corporation has also established "Grievance Regulation" and "Regulation of Whistle-Blowing System for Unlawful, Unethical Conduct and Dishonesty Behavior" to provide timely and appropriate channels for making statements and reports to prevent conflicts of interest.
  • Separately, shareholders, investors and other external stakeholders or manufacturers who discover violations of the Corporation's “Ethical Corporate Management Best Practice Principles” or other non-compliance with laws and regulations can also provide information through our “Regulation of Whistle-Blowing System for Unlawful, Unethical Conduct and Dishonesty Behavior” to the Corporation's dedicated unit.

Abstract Illustration：
  • The Corporation has established an effective accounting system in accordance with the law. We implement internal control mechanisms on an annual basis. Each office carries out self-inspections that are reviewed by the Audit Office to ensure the continued effectiveness of the internal control system.
  • The Corporation's "Ethical Corporate Management Best Practice Principles" stipulate that internal audit units should formulate audit plans based on risk assessments of unethical conduct which can be used to review compliance with measures for preventing unethical conduct, and which may be audited by CPAs. Assistance may be obtained from professionals when necessary.

Abstract Illustration：
  • The Corporation host periodic training and promotion activities for Board directors, managers, employees, and fiduciaries to help them understand the Corporation's determination in implementing ethical management, related policies, prevention solutions, and consequences of ethical violations. For details on the implementation of education and training related to ethical corporate management, please refer to the “Ethical Governance” page under "Sustainable Management" in the "ESG" section of our website.

3. Operation of the Integrity Channel

Abstract Illustration：
  • The Corporation has established our "Grievance Regulation," and "Regulation of Whistle-Blowing System for Unlawful, Unethical Conduct and Dishonesty Behavior." Related matters are handled by respective dedicated units and separate service hotlines have been set up to handle feedback in accordance with established processes.

Abstract Illustration：
  • The Corporation's "Regulation of Whistle-Blowing System for Unlawful have clear stipulations on the appeals process and reviewing units, and commit to confidentiality for appeal makers and related evidence. Additionally, a special task force may be set up to investigate according to the nature of the case, and report the investigation results and handling suggestions.

Abstract Illustration：
  • The Corporation's "Regulation of Whistle-Blowing System for Unlawful, Unethical Conduct and Dishonesty Behavior" clearly stipulates that the identity of the whistleblower shall be strictly protected, and the whistleblower shall be prevented from being improperly treated due to making a report, such as threats, intimidation or other unfair treatment to the whistleblower. In such a case, the Corporation will immediately take appropriate preventive measures, and those involved in violations will be dealt with according to the "Reward and Discipline Regulation ". If criminal liability is involved, the Corporation will report it to the police for handling according to law.

4. Enhancing Information Disclosure Does the company discloses its ethical corporate management policies and the results of its implementation on the company's website and MOPS?

Abstract Illustration：
  • The Corporation's "Ethical Corporate Management Best Practice Principles", “Procedures for Ethical Corporate Management and Guidelines for Conduct” and promotion results related to ethical corporate management are publicly available for review on our internal and external websites. When revisions are made to our “Procedures for Ethical Corporate Management and Guidelines for Conduct”, these are announced to all staff members and information on our website is simultaneously updated. The Corporation has established a dedicated unit responsible for promptly disclosing major announcement. If there is major announcement related to the Corporation's ethical management policy, it will be disclosed in accordance with our "Regulations of Disclosure Information” and the “Regulation for Posting Information on the 'Market Observation Post System'” , in order to fulfill the Corporation's responsibilities and obligations for information disclosure.

5. If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation?

Abstract Illustration：
  • We have formulated the "Ethical Corporate Management Best Practice Principles" with reference to the "Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies". Up to now, the annual operation has no significantly difference from the content of the said reference.

6. Other important information to facilitate a better understanding of the company's ethical corporate management policies (e.g., review and amend its policies).

Abstract Illustration：
  • To implement the basics of ethical corporate management policies, the Corporation operates under the Corporation Act, Securities and Exchange Act, Businesses Entity Accounting Act, related regulations for TWSE/TPEx-Listed Companies, and other laws and decrees concerning business transactions. The promotion unit of the Corporation's "Ethical Management Team" was changed from our Corporate Planning Division to our Legal Office on June 15, 2024. The responsible units for both the "Ethical Corporate Management Best Practice Principles" and “Procedures for Ethical Corporate Management and Guidelines for Conduct” was also changed to our Legal Office from December 11, 2024.