Compensation Committee to Become a Requirement in Publicly Traded Companies

According toTaiwan’s Financial Supervisory Commission (FSC), starting September 2011 all listed companies (including companies traded over the counter) will be required to establish a compensation committee to evaluate the performance of directors, supervisors and managers, and review their compensation structure including salary, stock options and other forms of remuneration. The committee will have at least 3 members, whom are to be appointed by the board of directors and the term of their office will match that of the board of directors appointing them. If a corporation has one or more independent directors, one of the independent directors shall be elected the chairperson of the committee; conversely, if there is no independent director in the company, the committee members will elect their chairperson from amongst them. The compensation committee will convene at least twice a year and will make recommendations to the board of directors; unless a resolution is passed at the board meeting where more than two thirds (2/3) of the directors were present and voted in favor, the board cannot alter or refuse to accept the recommendations made by the compensation committee. As a grace period, within 3 years of the implementation of this new regulation, a compensation committee may be filled by directors of the company but such seats shall be less than one third (1/3) of the committee membership. Pursuant to Taiwan law, each of financial holding companies (including stock broker firms held by financial holding companies), banks, bills finance companies, insurance companies, publicly traded stock broker firms as well as non-financial companies whose capital exceeds 50 billion NT dollars is required to have at least 2 independent directors, and the number of the independent directors must be no less than 1/5 of the board of directors.