HTC 2009 Annual Report Download - page 31

6160
CORPORATE GOVERNANCE
>HTC has also been endeavoring in recent years to enhance the timeliness and
transparency of its information disclosure. In addition to making timely posts of
important information on financial and business matters on the Market
Observation Post System, HTC also provides early announcement (on 6th every
month) of its monthly revenues, and at the beginning of the month following
the end of each quarter, it announces its preliminary revenue figures, while also
convening online investor conferences on a regular, quarterly basis to allow
investors timely access to information on company operations and performance
in each quarter. In December 2008 the HTC Investor Relations Website was
revised. A special corporate governance page was added along with disclosures
of financial information, in order to make disclosures of information through
the website more complete and allow investors to obtain important information
on our corporate finances and operations in a more timely manner and better
understand the state of corporate governance matters. HTC had maintained its
"A" rating in the Securities and Futures Institute's information evaluations in
three successive rating periods, and during the sixth evaluation, it obtained
"A+" rating for the first time. During the fifth and sixth evaluation, it was also
rated high in transparency among exchange or OTC listed companies for its
voluntarily disclosures of information.
Note 1: For juristic person directors and supervisors, the names of the juristic person's shareholders
and its representatives shall be disclosed.
Note 2: When a director or supervisor leaves his post prior to the closing date of the fiscal year, the
date shall be noted in the "notes" column and their attendance rate (as a percentage) calcu-
lated based on the ratio of the number of directors meetings during their term to the actual
number of meetings at which they attended or observed.
If an election for directors or supervisors is held prior to the closing date of the fiscal year,
the old and new directors and supervisors shall be listed, and a designation placed in the
"notes" column beside each indicating the date of the election and whether each is new, old,
or serving successive terms. Their attendance rates (as a percentages) shall be calculated
based on the ratio of the number of directors meetings during their term to the actual number
of meetings at which they attended or observed.
Other matters to be included:
1. Identity and Responsibilities of Supervisors :
HTC currently has two independent directors and is not yet able to establish an
audit committee. Currently, therefore, the only choice has been to establish super-
visors and use supervisor's meetings to carry out most functions in place of an
audit committee.
>Supervisor communication with employees or shareholders (e.g., Channels and
methods of communication)
Supervisors can make use of channels such as supervisors meetings, board of
directors meetings, shareholders meetings, and internal audit reports to commu-
nicate with management-level officers and with shareholders.
>Supervisor communication with chief internal auditors and CPAs (e.g., financial
and operational matters on which they communicate, their methods, and results)
HTC supervisors can communicate through their regular quarterly supervisor
meetings with HTC's financial, legal, and internal auditing officers, who report to
the supervisors on such issues as risk management, assessment of risk of major
litigious actions, and internal auditing reports, so that the supervisors are famil-
iar with the company's assessment and management of risk.
Based on HTC's principle of sound, conservative accounting, its supervisors and
CPAs regularly undertake joint reviews of major account titles in its quarterly
financial statements, examining basic assumptions underlying the allocation of
allowances and reserves under those titles and assessing the reasonableness
and accuracy of book value estimates in order to ensure that the statements fairly
and reasonably present allowances and reserves. Adjustments to accounting
estimates during the 2009 fiscal year included setting the reserve rate of
allowance for doubtful accounts at 3.53 percent of accounts receivable, a slight
increase from the previous fiscal year. In allowances for reduction of inventory to
market, because HTC applied the newly amended valuation methods of
Statement of Financial Accounting Standards No. 10, the reserve rate of
allowances for loss on decline in inventory value or loss on items retired was 40
percent of total inventory, an increase of 22 percent over the previous fiscal year.
Product warranty reserves were recalculated on the basis of past experience as
well as a special assessment performed for HTC by accounting firm Deloitte &
Touche, and the product warranty reserve rate for 2009 was set at 4 percent of
net sales. Reasonable assessments have been performed and reserves allocated
for risk currently associated with HTC intellectual property in order to reduce the
degree of any material effect on HTC finances, business, and operations.
During each quarter, supervisors also have regular individual meetings with
CPAs. Supervisors must first review and be satisfied with CPA independence
and the professional fees for attestation of annual financial reports, which mat-
ters are then submitted to the board of directors for resolution.
In 2009, management levels responsible for corporate governance at HTC con-
tinued to give it their full attention and support. Internal controls continued to
be risk-oriented, and improvements in efficiency in each division showed a
marked upward trend. In the supervision of subsidiaries, continued emphasis
was placed on evaluation by corporate headquarters and the development of
global policies. In the area of internal control self-assessments, HTC has con-
tinued to use a combination of survey questionnaires and evaluations, while
also maintaining the use of statements on internal controls by individual divi-
sions to emphasize that the outcomes of their internal control self-assessments
must be viewed with seriousness, which has in turn also provided a more con-
crete and transparent basis for the issuance of statements on corporate internal
controls by the board of directors.
2. If supervisors in attendance at a board of directors meeting state opinions, the
meeting date, session number, agenda, and result of resolutions must be noted,
along with the company's handling of the supervisors' opinions.
Prior to each quarterly meeting of the board of directors, HTC convenes a regular
supervisors meeting at which important matters relating to finances, legal issues,
and internal audits are reported to the supervisors, and the supervisors in turn
produce a quarterly supervisors' report for submission to the board of directors.
Important related-party transactions are first submitted to the supervisors meet-
ings, which must first review the transactions and issue an unqualified opinion
that is then submitted for deliberation and resolution by the board of directors.
There has been no instance of a supervisor expressing a dissenting opinion
regarding a board of directors' resolution during the most recent fiscal year.
Note : When a supervisor leaves his post prior to the closing date of the fiscal year, the date shall
be noted in the "notes" column and their attendance rate (as a percentage) calculated based
on the ratio of the number of directors meetings during their term to the actual number of
meetings at which they attended or observed.
If an election for supervisors is held prior to the closing date of the fiscal year, the old and
new supervisors shall be listed, and a designation placed in the "notes" column beside each
indicating the date of the election and whether each is new, old, or serving successive terms.
Their attendance rates (as a percentages) shall be calculated based on the ratio of the num-
ber of directors meetings during their term to the actual number of meetings at which they
attended or observed.
2. Supervisor participation in board of directors meetings
The Board of Directors conducted Seven Meetings in 2009. The Supervisors' attendance status is as follows :
Title Name Addendance in Person(B) Attendance Rate in Person(%) [B/A](Note) Notes
Supervisor Wei-Chih Investment Co., Ltd.
Representative: Shao-Lun Lee 7 0
Supervisor Po-Cheng Ko 7 0
Supervisor Caleb Ou-Yang 0 0
3. The State of The Company's Implementation of Corporate Governance, Any Departure of Such Implementation from The
Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies, and The Reason for Any Such Departure
Item
1. Shareholding structure & Shareholders' Rights
(1) Method of handling shareholder sugges-
tions or complaints
(2) The Company's possession of a list of
major shareholders and a list of ultimate
owners of these major shareholders
(3) Risk management mechanism and "firewall"
between the Company and its affiliates
2. Composition and Responsibilities of the
Board of Directors
(1) Independent Directors
(2) Regular evaluation of external auditors'
independence
3. Communication channel with stakeholders
4. Information Disclosure
(1) Establishment of a corporate website to dis-
close information regarding the Company's
financials, business and corporate gover-
nance status
(2) Other information disclosure channels (e.g.,
maintaining an English-language website,
appointing responsible people to handle
information collection and disclosure,
appointing spokespersons, webcasting
investors conference)
5. Operations of the Company's Nomination
Committee, Compensation Committee, or
other funtional committees of the Board
of Directors
Implementation Status
>To guarantee shareholders' rights and interests, HTC has established spokespersons to properly handle any sugges-
tions, doubts, or disputes involving shareholders.
>When HTC provides shareholder registers in accordance with book closures carried out at the company by the share-
holder services agent, the registers indicate the major shareholders controlling the company and the persons with
ultimate control over the major shareholders. HTC, in accordance with regulations, also provides information regular-
ly on pledges and the increase and decrease in shareholdlings of shareholders with a more than 10% stake in the
company.
>The division of responsibilities and duties between HTC and its affiliated enterprises with respect to management of
personnel, resources, and finances are clear, while risk assessments are rigorously performed and appropriate fire-
walls have been set up. HTC conducts business relations with affiliated enterprises on the principles of fairness and
reasonableness, while observing the Transaction Operating Procedure for HTC Corporation's Designated Company,
Enterprise Group and Related Person and other related regulations such as those governing internal controls. In mat-
ters governed by contract, the terms and conditions for pricing and payment methods have been clearly prescribed,
and both non-arms-length transactions and financial tunneling are prohibited. As duly requested, the shareholders
meeting and the board of directors have adopted resolutions eliminating non-competition restrictions with respect to
directors and managerial officers.
>At the end-of-term elections for directors and supervisors at the 2007 ordinary shareholders meeting, the HTC volun-
tarily selected two independent directors in accordance with the provisions of the Securities and Exchange Act; the
number of independent directors exceeds one-fifth of the total number of directors.
>In 2008 HTC switched to regularly scheduled annual reviews and assessments of the independence of CPAs per-
formed by the supervisors, and prior to submitting a proposal to the board of directors for deliberation on a change in
CPAs, it submits the academic and professional qualifications of the CPA to the supervisors meeting and arranges for
the CPA to be interviewed by the supervisors in order to review and assess their independence. HTC will draw up
plans in the future to have the supervisors perform regular assessments of the independence of the CPA.
>HTC provides detailed contact information, including telephone numbers and email address, in the "contact us"
space on its corporate website. We have put personnel in place to exclusively deal with messages to the spokesper-
son mailboxes and investor email mailboxes so that various subject parties (including interested parties) will have
channels for communication with HTC as circumstances require.
> HTC has also set up both Chinese and English websites. Investor information pages include information on financial and
business issues and corporate governance, while product information pages provide information relating to our products
and businesses.
>HTC has set up English and Chinese investor relations websites, and dedicated personnel have been appointed who
are responsible for collecting information and making timely updates to website content. HTC Chief Financial Officer
Hui-Ming Cheng has been appointed spokesperson, and a spokesperson email address has been established with an
employee exclusively responsible for its handling, in order to implement the spokespersons system. An investors
conference is convened online each quarter, with sound recording and presenation of the proceedings posted on the
company website after the conference.
> After the term-end elections for directors and supervisors at its ordinary shareholders meeting of 2007, HTC's board of
directors chose Compensation Committee members in accordance with provisions of the Compensation Committee Articles
of Incorporation drafted by the board of directors, i.e., that the Compensation Committee shall be composed of three direc-
tors with the chairman of the board as ex officio chairman and the remaining two appointed by the board of directors, and
that at least one shall be an independent director. At the board of directors meeting of 22 June 2007, director HT Cho and
independent director Chen-Kuo Lin were appointed to the Compensation Committee, while Chairman Cher Wang was made
its chairman. The principal duties of the Compensation Committee include assisting the board of directors in supervising
the company's compensation system and making appropriate recommendations to the board.
Reson for Non-
implementation
None
None
None
None
None