HTC 2011 Annual Report Download - page 34

(3) Currently, prior to the establishment of the audit committee, most of the committee's functions are performed by the Supervisors meetings. That
is, in accordance with Article 14-5 of the Securities and Exchange Act, matters intended to be handled by the audit committee are first passed to
the Supervisors meeting before submission to the Board of Directors for deliberation and voting. In addition, regular Supervisors meetings are
convened on a quarterly basis to hear reports on important financial, legal, and internal audit matters. There is also a joint assessment between the
Supervisors and CPA on the principles and appropriateness of various allowances and reserves in the financial statements.
(4) HTC has also been endeavoring in recent years to enhance the timeliness and transparency of its information disclosure. In addition to
making timely posting of important financial and business information on the Market Observation Post System, HTC also convenes online
investor conferences on a quarterly basis to allow investors timely access to information on the company's operations and performance. In
December 2008, the HTC Investor Relations Website was revised. A special corporate governance page was added along with disclosures
of financial information. HTC achieved "A+" rating for the first time in the sixth Information Disclosure and Transparency Ranking organized
by the Securities and Futures Institue (SFI) and achieved "A+" rating for three consecutive years. In the seventh evaluation, HTC was
recognized as one of the top 10 public companies with "A+" ratings. In four consecutive evaluations from the fifth Information Disclosure
and Transparency Ranking, HTC was listed as one of the more transparent among exchange or OTC listed companies in making voluntary
disclosure of information.
(2) Supervisor participation in Board of Directors meetings
The Board of Directors conducted ten meetings in 2011. The Supervisors' attendance status is as follows :
Title Name Addendance in
Person (B)
Attendance Rate (%)
[B/A] Notes
Supervisor Wei-Chi Investment Co., Ltd. Representative:
Shao-Lun Lee 10 100%
Supervisor Huang-ChiehChu 5 83.33% Newly elected in 2011.06.15
Shareholders' meeting.
Supervisor Caleb Ou-Yang 0 0% Caleb Ou-Yang left office on
2012.05.07.
Supervisor Po-Cheng Ko 2 100.00% Po-Cheng Ko left office on
2011.04.20.
Other matters to be included:
1. Composition and Responsibilities of Supervisors:
The structure of the Supervisors' Meetings at HTC is well established and it carries out most functions at the audit committee.
(1) Supervisor communication with employees and 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 communicate with management-level officers and with shareholders.
(2) Supervisor communication with Chief Internal Auditor and CPAs (e.g., financial and operational matters on which they communicate, their
methods, and results)
HTC Supervisors communicate through their regular quarterly Supervisor Meetings with HTC's financial, legal, and internal audit officers,
who report to the Supervisors on issues such as risk management, major litigations, and internal audit reports.
Based on the principle of sound, conservative accounting, HTC's Supervisors and CPAs regularly undertake joint reviews of major
account items in the financial statements to assess the reasonableness of basic assumptions underlying various allowances and reserves.
Assessments are also performed and reserves taken against potential liabilities associated with intellectual property risks in order to reduce
the impact on HTC's finances.
Supervisors also hold regular private meetings with CPAs. Supervisors must first review and be satisfied with the CPA's independence and
professional fees before such matters are submitted to the Board of Directors for resolution.
In 2011, the management team continuously emphasized and provided full support on corporate governance. Headquarters actively
reviewed and enhanced the processes of supervision and management of subsidiaries, and developed global policies and procedures. All
departments in the company conducted risk-oriented internal control assessment to evaluate the controls' efficiency and effectiveness,
for the purpose of improving the internal control system. In the area of internal control self-assessment, HTC has asked all departments to
evaluate the efficiency and effectiveness of their controls' design and execution to ensure the concreteness and transparency of the internal
control statement. All departments were required to issue individual internal control statements based on their evaluation results and the
company would issue the internal control statement based on individual department evaluation results.
2. If Supervisors in attendance at a Board 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 Supervisors meeting at which important matters relating to finance,
legal, and internal audit are reported to the Supervisors. The Supervisors in turn produce a quarterly Supervisors' report for submission to the
Board. Important related-party transactions are first submitted to the Supervisors meeting, which must first review the transactions and issue
an unqualified opinion before they are submitted for deliberation and resolution by the Board. There has been no instance of a Supervisor
expressing a dissenting opinion regarding a Board resolution during the most recent fiscal year.
2. The State of the Company's Implementation of Corporate
Governance:
(1) The State of Operations of The Board of Directors:
The Board of Directors conducted ten meetings in 2011. The Directors and Supervisors' attendance status is as follows :
Title Name Addendance in
Person (B) By Proxy Attendance Rate in Person(%) [B/A] Notes
Chairman Cher Wang 9 1 90%
Director Wen-Chi Chen 9 1 90%
Director HT Cho 9 1 90%
Director Tan Ho-Chen 10 0 100%
Director David Bruce Yoffie 2 4 33.33% Newly elected in 2011.06.15
Shareholders' meeting.
Independent
Director Chen-Kuo Lin 10 0 100%
Independent
Director Josef Felder 4 6 40%
Supervisor Wei-Chi Investment Co., Ltd.
Representative: Shao-Lun Lee 10 0 100%
Supervisor Huang-ChiehChu 5 0 83.33% Newly elected in 2011.06.15
Shareholders' meeting.
Supervisor Caleb Ou-Yang 0 0 0% Caleb Ou-Yang left office on 2012.05.07.
Supervisor Po-Cheng Ko 2 0 100.00% Po-Cheng Ko left office on 2011.04.20.
Other matters to be included:
1. There was no independent director expressing opposition or reservation with respect to any Board of Directors meeting during the preceding
fiscal year, and no written record or written statement of related board resolutions.
2. Directors' abstention from discussion due to conflicts of interests in 2011:
(1) Director: Cher Wang, Wen-Chi Chen
Content of proposal: Discussion on the cooperation between the defendants in different Apple patent litigation matters, being Company and
the related parties S3 Graphics Co., Ltd and S3 Graphics, Inc. ("S3G")
Reason for abstention from voting participation: Chairman Cher Wang and Director Wen-Chi Chen are the related persons of S3 Graphics
Co., Ltd, and S3 Graphics, Inc.-the trading counterpart under this proposal.
(2) Director: Cher Wang, Wen-Chi Chen
Content of proposal: To acquire the entire patent portfolio owned by S3 Graphics Co., Ltd. covering key graphics technologies, HTC proposes
to purchase 100% stock share of S3 Graphics Co. Ltd. from VIABase Co., Ltd and WTI Investment International, Ltd. through increasing the
capital of HTC Investment One (BVI) Corporation by an amount of US$300 million
Reason for abstention from voting participation: Chairman Cher Wang and Director Wen-Chi Chen are the related persons of VIABase Co.,
Ltd and WTI Investment International, Ltd.-the trading counterpart under this proposal.
(3) Director: HT Cho
Content of proposal:Proposal on the donation of NTD 300 million to HTC Cultural Educational Foundation and HTC Foundation.
Reason for abstention from voting participation: Director HT Cho is Chairman of the HTC Cultural Educational Foundation and HTC
Foundation-the subject recipients of the donation under this proposal.
(4) Director HT Cho and Independent Director Chen-Kuo Lin
Content of proposal: Proposal on the appointment of the Company's Compensation Committee members and the compensation of each
Compensation Committee member.
Reason for abstention from voting participation: Director HT Cho and Independent Director Chen-Kuo Lin are nominated candidates for the
Company's Compensation Committee members.
3. Measures taken to strengthen the functionality of the Board of Directors and the status of implementation during current and preceding fiscal years:
(1) At the time of end-of-term elections for Directors and Supervisors in the 2010 fiscal year, HTC selected two Independent Directors in accordance with
the provisions of the Securities and Exchange Act in order to strengthen the independence and functions of Directors and enhance the operational
effectiveness of the Board. In 2008, the "Guidelines for Corporate Governance" were completed and adopted, guaranteeing that the Board of Directors has
the authority to independently supervise corporate operations and to make all decisions necessary to fulfill its responsibilities to shareholders and to society.
(2) In compliance with the Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company
whose stock is listed on the Stock Exchange or traded over the counter as per Letter No. 1000009747 issued by the Executive Yuan Financial
Supervisory Commission on March 18, 2011, the Company formulated the Compensation Committee Charter and under which appointing
Independent Director Mr. Chen-Kuo Lin; Director Mr. HT Cho and independent professional advisor Mr. Harvey Chang to the Compensation
Committee. The official functions of the Committee are to professionally and objectively evaluate the policies and systems for the compensation
of HTC directors, supervisors, and managers, and submit recommendations to the board of directors for its reference in decision making.
4
CORPORATE GOVERNANCE
| 64 |
4
CORPORATE GOVERNANCE
| 65 |