Organizational Structure of Corporate Governance
Qisda complies with Company Law, the Securities and Exchange Act, and other relevant laws and regulations of the Republic of China to formulate and implement the company’s corporate governance structure. Qisda corporate governance model is composed of three units: the board of directors, the audit committee, and the salary compensation committee. The audit committee and the salary compensation committee are made up of independent members of the board of directors, while all members of the board of directors (including independent directors) are selected based on shareholder votes.
In principal, the responsibilities of the board of directors are carried out in accordance with relevant laws, company regulations or shareholder resolutions. The board of directors is also responsible for supervision of company management and overall business operational status. The audit committee’s responsibilities include accurate financial reporting, selection, dismissal and performance management of independent accountants, effective implementation of internal controls in accordance with relevant laws and regulations, and management/control of existing or potential risks. The salary compensation committee is responsible for reviewing and approving the salary and performance returns of the directors and executives within the company, as well as evaluating the policy, system, standards, and structure of the corporate compensation plan. Figure 5.1 shows the organizational structure of Qisda corporate governance.
Figure 5.1. The Organizational Structure of Qisda Corporate Governance.
Protecting shareholders’ rights and interests is one of the primary tasks of Qisda corporate governance. In addition to having a highly experienced and professional management team, the board of directors also possesses the necessary executive knowledge, skills and accomplishments to effectively supervise the corporate operation. It also strives to maximize the benefits for the shareholders. Members of the board of directors are listed in Table 5.1. The board of directors consists of 9 members (including 3 independent directors). The chairman is elected by the board. Board members all have 5 or more years of experience in business administration, legal, finance, accounting or other professional experience required by the company.
Table 5.1. Board of Directors
Corporate Governance Status
Qisda’s board of directors considers company and shareholder interests as top priorities in performing operational evaluations and passing significant resolutions. The audit committee fulfills an overseeing role through prudent and meticulous supervision over the operations of the company and the board of directors. In addition, Qisda’s Corporate Sustainability Development (CSD) activities are promoted through the CSD committee under the supervision of its chairman, Mr. Hui Hsiung.
In accordance with the regulations in Article 208, Item 3 of the Company Act, the chairman of the board of directors, Mr. K. Y. Lee, shall not concurrently serve in any position at Qisda. On September 1, 2007, after Qisda separated its branded business unit, Mr. Hui Hsiung assumed the role of CEO and President. Board of directors shall not participate in any discussion or vote on any matter in which he or she has potential conflict of interest or such participation is likely to prejudice the interest of the company. When such a situation presents itself, according to Company Act, Article 206, Item 2, and Article 178, the director should be excused from the meeting until the discussion and voting is over on the matter involved. When deemed necessary, the Chairman shall appoint someone else to act on the director’s behalf.
According to current Qisda regulations and procedures, the compensation for directors must not surpass 1% of distributable annual earnings, which demonstrates the relationship between operational performance and the compensation of the board of directors. However, the board of directors’ devotion and commitment to performing various responsibilities and duties will not decrease due to company’s losses or profits. Therefore, considering the company’s industry risk, the responsibilities of the chairman, directors and independent directors, the scope of its operations and so on, under the principle of uniformity of treatment as to fair compensation for those performing tasks that bear heavy responsibilities, the company shall issue director compensation on a regular basis governed by company regulations and upon the approval of the salary and compensation committee and board of directors.
The board of directors shall submit the annual financial statement, business report, profit surplus distribution and all related documentation and proposals to shareholders’ meeting for approval. Such a measure allows shareholders to verify the operational results of the board of directors and to determine the performance of the top management entity of the corporate. It is also expected that the information regarding the compensation of the directors and high-level executives shall be reasonably disclosed in the company’s annual report, providing all stakeholders with needed information to understand the relationship between top executives’ compensation and corporate performance.
I. Board of Directors Operation
According to the Securities and Exchange Act Article 26, Paragraph 3, Subparagraph 8 regulations, Qisda created the “Rules of Procedure for Board of Directors Meetings”. The major agenda, operational procedures, matters required to be stated in the minutes of the meeting, public announcements and other compliance requirements of the board shall be proceeded in accordance with the Rules of Procedure. The board meeting shall be convened at least once each quarter. The board of directors strives to maximize the benefits of the shareholders, and each director is expected to fulfill his or her supervisory role faithfully with the highest degree of self-discipline and integrity.
II. Audit Committee Operation
In 2008, Qisda installed independent directors and an audit committee in accordance with the Securities and Exchange Act and shareholder resolutions. Through the “Audit Committee Chapter” as enacted by the board of directors, Qisda maintains sound strategic and executive organizations to continuously increase operational efficiency by implementing practical and exact measures in corporate governance. The audit committee must convene at least once each quarter, requesting the attendance of accountants, internal auditors, risk management, legal and finance department representatives. The audit committee then receives reports and makes inquiries into the audit status concerning the latest financial report, internal audit results, significant litigation, and financial operation status. This implementation is aimed to assure that the audit committee can assist investors to ensure the credibility with regard to corporate governance and transparent information, and further safeguard the rights and interests of the shareholders.
III. Salary and Compensation Committee Operation
Qisda established the salary and compensation committee in August 2011. The board of directors enacted “Salary and Compensation Committee Chapter” to strengthen the corporate governance and foster the company’s compensation system for its directors and executives.
Qisda’s 2011 core consolidated revenues reached NT$84.9 billion, while the Taiwan parent company recorded revenues of NT$69.7 billion; an after-tax loss of NT$3.4 billion, and a loss of NT$1.74 per share was recorded.
The year 2011 proved to be a tumultuous period with various intricate challenges: the sluggish recovery from global recession, Europe’s debt crisis, the Japanese earthquake and tsunami, the increased cost of materials, as well as other adverse factors, all contributed to the hardships in business operations. Although the external environment remained unfavorable, Qisda managed to turn profit in core business through development of new products and customer base, improved cost and efficiency. However, due to Qisda’s investee companies’ loss, the company recorded a drop in revenue and negative earnings in 2011.
Refer to Figure 5.2 and Table 5.2, 5.3 for Qisda’s business revenue by product line and its operational performances for the past five years. For more detailed presentations on the company’s operational performances and financial information, please refer to its 2011 annual report available at Qisda corporate website: Qisda.com/Investor Relations/Annual Report.
Previous instances of capital increases or investments in equipment, R&D, etc were done in accordance with laws and subject to applicable text-exemption and/or preferential/reduced tax rates. For detailed information, please refer to the appendix of the 2011 Qisda Financial Statement with regards to “income tax” disclosure.
Table 5.2. Qisda Taiwan Parent Company Economic Value Distribution
Figure 5.2. Qisda 2011 Business Revenue by Product Line
Table 5.3. Qisda Operational Performances for the Past 5 years