HTC 2010 Annual Report Download - page 29

56 2 0 1 0 H T C A N N U A L R E P O R T 57
Corporate Governance
(3) The State of the Company's Implementation of Corporate Governance, departures
of such implementation from The Corporate Governance Best-Practice Principles
for TSEC/GTSM Listed Companies, and reasons for departures.
Item Implementation Status Reason for Non- implementation
1. Shareholding structure & Shareholders' Rights
(1) Method of handling shareholder
suggestions or complaints
(2) The Company's understanding of major
shareholders and the ultimate owners of
these major shareholders
(3) Risk management mechanism and
"firewalls" between the Company and
its aliates
To protect shareholders' interests, HTC has appointed spokesperson and acting spokesperson to properly
handle any questions, suggestions, or disputes involving shareholders.
The Company has a good understanding of its major shareholders through shareholder registers provided
by stock agents at book closures. HTC also provides information regularly on pledges and the increase and
decrease in shareholdings of shareholders with a more than 10% stake in the company.
The division of responsibilities between HTC and its aliates with respect to management of personnel,
resources, and finances is clear. Risk assessments are rigorously performed and appropriate firewalls
have been established. HTC conducts business with aliates based on the principles of fairness and
reasonableness and fully observe the "Operating Procedures for Transactions with Specific Companies,
Enterprise Groups and Related Parties" and other related regulations. Terms and conditions, pricing, and
payment methods are clearly prescribed in contracts to avoid non-arms-length transactions and financial
tunneling. When it is necessary to eliminate non-competition restrictions on Directors and managerial
ocers, requests are duly submitted to the Shareholders' Meeting and Board for approval.
None
None
None
2. Composition and Responsibilities of the
Board of Directors
(1) Independent Directors At the end-of-term elections for Directors and Supervisors at the 2010 ordinary Shareholders'
Meeting, HTC elected 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.
None
(2) Regular evaluation of external auditors'
independence
In 2008, HTC started to have its Supervisors review the independence of CPAs on an annual basis. Prior
to submitting a proposal to change CPA to the Board, the CPA will be interviewed and his credentials
reviewed by the Supervisors to assess his independence.
None
3. Communication with stakeholders HTC provides detailed contact information, including telephone numbers and email addresses, in the
"contact us" section of its corporate website. We also have personnel in place to exclusively deal with
messages to the spokesperson and investor mailboxes so that various interested parties will have channels
to communicate with HTC.
None
4. Information Disclosure
(1) Establishment of a corporate website
to disclose information regarding the
Company's financials, business and
corporate governance
(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)
HTC has both Chinese and English websites. Investor information pages provide information on financial
and business issues and corporate governance, while product information pages provide information
relating to our products and services.
HTC has English and Chinese investor relations websites. Dedicated personnel have been assigned to
collect and update information to websites. Chief Financial Ocer Winston Yung has been appointed
spokesperson and a spokesperson email address has been established. An investors conference is
convened online each quarter. Recording and presentation are posted on the Company website after the
conference.
None
None
5. Operation of the Company's Nomination
Committee, Compensation Committee, or
other functional committees of the Board
of Directors
At the end-of-term elections of Directors and Supervisors at its ordinary Shareholders' Meeting of 2010,
HTC's Board elected the second session of the Compensation Committee in accordance with provisions
of the Compensation Committee Articles of Incorporation. That is, the Compensation Committee shall be
composed of three Directors with the Chairman of the Board as ex ocio Chairman, the remaining two
members appointed by the Board, and at least one member shall be an Independent Director. At the Board
meeting of 21 June 2010, 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 in supervising the Company's compensation system
and making appropriate recommendations.
None
6. In 2008, HTC adopted the "Guidelines for Corporate Governance". Its provisions are based on the Corporate Governance Best-Practice Principles for TSEC/
GTSM Listed Companies issued on 10 November 2010, and were drafted with reference to the corporate governance practices of companies in Taiwan and
abroad with outstanding records in that area. Its purpose is to ensure that the Board has the authority to independently supervise corporate operations and to
make all decisions necessary to fulfill its responsibilities to shareholders and society.
7. Other important information helpful to understanding HTC's corporate governance practices:
(1) Employee rights and interests and employee care
HTC's employee code of conduct provides rules and guidelines for employees to follow when involved in company operations. All employees of the
Company and its branches and subsidiaries, regardless of their position, level, or location, need to abide by this code of conduct. Any unlawful conduct,
either at the Company or otherwise is prohibited.
In the General Principles, the Company commits to provide a safe and healthy work environment, fair opportunities, and provide principles for handling
Company assets and information.
In Relations with Customers and Suppliers, HTC commits to maintaining long-term relationships on a fair and reasonable basis in order to create win-win
partner relationships.
In the Conflicts of Interest section, HTC provides principles of conduct to guide employees in situations of conflict.
1. HTC is committed to providing employees with a working environment free of discrimination or harassment (including sexual harassment). Any form
of speech or conduct intended to incite hatred, conduct which could lead to accidental injury, or discrimination, will be immediately reported to the
responsible department for investigation and punishment.
2. Due caution is to be exercised in dealing with employee personal information, which shall be handled so as to give due regard to both the needs of the
organization and the employee's right to privacy. Disclosing employee personal information of any kind is inappropriate in any situation except where so
required by government laws or regulations.
3. HTC's hiring policies comply with the relevant laws and regulations
and provide fair opportunities to both applicants and employees.
Hiring decisions are based on HTC's operational needs, nature of the
work, and applicants' abilities. Fair opportunities are provided to both
applicants and employees. There will be absolutely no discrimination
on the basis of nonwork-related factors, such as race, skin color,
social position, language, belief, religion, political aliation, family
origin, gender, sexual orientation, marital status, appearance, facial
features, mental or physical disabilities, previous union aliation, or
any other factor protected by government order. Relations between
the company and any employee shall be based on the principles of
respect and good faith, without considerations of private interest.
These principles are applied (but not limited) to recruitment, hiring,
training, promotion, pay scales, benefits, transfers, and community
activities.
(2) Investor relations
HTC carries out its responsibility in the area of investor relations by
endeavoring to enhance the transparency and timeliness of information
disclosure. In addition to immediate announcement of material
information, monthly revenues are announced early, and preliminary
earnings are announced at the beginning of the month after the end of
each quarter. Investor/press conferences are held in Chinese and English,
with an average of more than 100 institutional investors from Taiwan
and abroad participating. Information is also uploaded to the Company
website simultaneously.
In addition to the regularly scheduled information disclosures above,
HTC also actively participates in investment seminars held by local and
overseas securities firms and investor/press conferences; it also arranges
meetings with domestic and foreign investors in order to further explain
financial figures and operational results that have already been publicly
released. Also, more than ten international securities houses routinely
publish analyst reports on HTC, providing investors with independent,
professional investment analyses.
HTC's investor relations activities in 2010, were as follows: Throughout
the year, HTC frequently participated in investor conferences in Taiwan,
Hong Kong, Singapore, New York, and Beijing, and periodically visited
main investors in the European, American and Asia regions. At the
same time, foreign and domestic institutional investors and analysts
frequently visit our investor relations department or contact it by phone.
Going forward, HTC will continue to advance its work in every aspect of
investor relations in order to fulfill the responsibilities of a listed company
toward its investors and shareholders.
(3) Supplier relations and rights of interested parties
HTC has adopted Procedures for Transactions with Specific Companies,
Group Enterprises, and Related Parties to guarantee the rights and
interests of HTC and interested parties. Purchasing contracts are also
signed with suppliers to govern to transactions and cooperative eorts
to protect the lawful rights and interests of all parties.
(4) Professional development of Directors, Supervisors, and managerial
ocers:
HTC Directors and Supervisors voluntarily attend seminars held by
professional training institutes as required by law and regulation. In
addition, to further strengthen implementation of corporate governance,
regular courses are also planned on finance, business, commerce, law,
and accounting subjects that are related to corporate governance, as
well as courses on internal control and responsibility in connection with
preparation of financial reports. Details of professional development
courses taken by Directors, Supervisors, and managerial ocers for 2010
can be found in Appendixes 1 and 2.
(5) Status of implementation of risk management policies and standards for
measurement of risk:
HTC has adopted relevant risk management policies and standards for
measurement of risk, and has established a dedicated unit to carry out
risk management and risk measurement. With respect to implementation,
HTC has reassessed its business risks after transitioning into a brand
company. Risk factors are also reflected in financial statement items such
as bad debts and warranty reserves which are reviewed by Supersivors
and CPAs to ensure they are reasonable and appropriate.
HTC's management of potential risk associated with promotion of its
global brand is explained below:
1. Exchange rate risk: Foreign exchange movements are monitored and
managed / hedged by dedicated personnel. Reserves for on-book
liabilities are valued at the exchange rate on the balance sheet date,
reducing as much as possible the eects of currency fluctuations on
HTC's business and finances.
2. Receivables risk: Receivables risk is managed eectively by the
finance department to ensure receivables quality and lower the risk of
bad debt.
3. Management of idle inventory: In addition to enhancing supplier
management and demand forecast, idle inventory is attended to early
and reserves for loss taken in an appropriate manner.
4. Global tax risk: Handling of tax issues and risks has been outsourced
to an international tax aairs institution, which undertakes necessary
tax assessments and planning. A proposal for reorganization of the
Company's overseas subsidiaries was approved by the Board of
Directors on April 30, 2009.
5. Product design quality: To ensure quality of design, HTC has
established a department for design quality, which is exclusively
responsible for control and management of quality in hardware
and software, product safety, and conformance with environmental
regulations around the world. The department provides a complete
range of product testing and certification.
(6) Status of customer-protection policy implementation:
HTC strictly abides by the contracts it signs with customers to protect
consumer rights and interests. Regular deliberation on and assessment
of the Product Warranty Reserve for after-sales services ensures that
allocations made to such reserves are reasonably sucient and warranty
responsibilities of the Company are adequately expressed.
(7) Liability insurance provided by HTC to Directors and Supervisors:
HTC amended its Articles of Incorporation by passage of a resolution
at the 2006 ordinary Shareholders' Meeting. Article 16 of the amended
Articles of Incorporation provides that the company may acquire
liability insurance for all Directors and Supervisors throughout their
term, within the scope of the indemnity liability they bear under the
law in connection with their business responsibilities. Currently, HTC
has purchased Liability Insurance for Directors, Supervisors, and key
personnel (please see Appendix 3 for details), thereby transferring
the risk arising from negligence or erroneous or improper conduct by
Directors, Supervisors, or key personnel and enhancing the soundness of
company management.
8. If the Company has a self corporate governance evaluation or has
authorized any other professional organization to conduct such an
evaluation, the evaluation results, major deficiencies or suggestions, and
improvements are stated as follows:
As of 2010, HTC has not yet issued any corporate governance self-
assessment report or engaged any other professional institute to perform
a corporate governance assessment. It has become a member of the
ROC's Corporate Governance Association (CGA). Regular participation
of its Directors, Supervisors, and management-level personnel in the
CGA's Directors and Supervisors Association provides opportunities for
exchanges with government, business, and academia on topics such as
enterprise orientation, strategy development, operations and management,
and financial,legal, and corporate governance issues, thereby strengthening
HTC's enterprise management and corporate governance.