Professional Qualifications and Independence of the Board
Cathay FHC has the "Corporate Governance and Nomination Committee" and implements the "Nomination System for Candidates." All of the candidates for the Board of Directors are nominated and qualified for review by the Corporate Governance and Nomination Committee. After the qualifications of all candidates for directorship are reviewed and approved by the Committee and the Board of Directors, the list of qualified candidates is then submitted to the shareholders' meeting for election. According to Paragraph 3, Article 30 of the Cathay Financial Holdings Corporate Governance Best Practice Principles, the members of the Board of Directors shall possess the knowledge, skills, and experience necessary for performing their duties. To achieve the ideal goal of corporate governance, the Board of Directors shall possess the following abilities:
1. Ability to make operational judgments;
2. Ability to perform accounting and financial analysis;
3. Ability to conduct management administration (including ability to conduct management subsidiaries);
4. Ability to handle crisis management;
5. Knowledge of the industry;
6. An international market perspective;
8. Ability to make policy decisions;
9. Risk management knowledge and skills.
Cathay FHC's Board of Directors comprises 8 non-executive directors, 3 independent directors, and 1 executive director (Cathay FHC President Chang-Ken Lee). All members are professionals and well-experienced in finance, business, and management matters. The directors are on average 66 years in age. Cathay FHC’s 6th Board of Directors had convened 7 meetings with an attendance rate of 88% in 2018. Directors on average serve 8.9 year terms (Independent directors on average serve 5 year terms.)
To strengthen corporate governance and the sound composition and structure of the Board of Directors, Cathay FHC incorporated a board diversity policy in Paragraph 2, Article 30 of the Cathay Financial Holdings Corporate Governance Best Practice Principles, which was amended in 2017. The related contents and implementations are described as follows: the composition of the Board of Directors shall be determined by giving due consideration to operational structure, business development direction, future trends and other needs, and it is advisable to assess aspects of diversity including but not limited to basic compositions (e.g., gender, age, nationality and race), professional experience (e.g., financial holding, banking, insurance, securities, industry and technology) and professional knowledge and skills (e.g., business, finance, accounting, law, marketing and digital technology).
Cathay FHC's Implementation of the Board Diversity Policy
Furthermore, Cathay emphasizes gender equality in the composition of its Board of Directors. As of December 31, 2018, 89% of Cathay FHC's subsidiaries in Taiwan appointed female directors or supervisors as board members, an increase of 11% compared with 2017. In addition, in order to enhance the board diversity of Cathay's subsidiaries, starting from the 5th Board of Directors meeting on June 20, 2016, Cathay Securities' newly recruited Tina Pan, the Chairman of the Modern Women's Foundation, joined as the independent director.
Evaluation of the Board and Functional Committee’s Performance and Third-party Certification
Besides establishing the Guidelines for Evaluation of Directors’ Performance and the Guidelines for Directors’ Remuneration for implementing corporate governance and improving the Board and Functional Committee’s performance, the Regulations Governing the Evaluation of the Board and Functional Committee’s Performance was also established for the Board and Functional Committee's overall operations. Corporate sustainability indicators, including compliance, corporate governance, risk management, and corporate sustainability and CSR, were incorporated into the Regulations to ensure that the Board and Functional Committee fulfills its corporate governance, operation, and CSR tasks, thereby enabling the Company to advance toward sustainability. In 2018, the result of Cathay FHC's Board and Functional Committee’s performance evaluation was “above standard", demonstrating the success of the Company’s efforts in improving the Board and Functional Committee’s performance.
To strengthen the independence and effectiveness of the Board performance evaluation, Cathay FHC will appoint an external independent institution or an expert to carry out the Board performance evaluation once every three years, starting from 2017. Evaluation results will be submitted to the Board of Directors for discussion and disclosed in the annual report or on the company website. The commissioning of an external professional independent institution for conducting external evaluations of the Board performance is expected to be completed before the end of 2019.
Since 2007, Cathay FHC has purchased liability insurance for its directors, supervisors, and key staff members, including those from its subsidiaries. This is in line with the legal requirements during their terms in office. Contents of the insurance policy are reviewed annually, and the insured amount, coverage, premium rate, and other major contents are reported in the next board meeting after the policy is renewed each year starting in 2017. We hope to thus lower the risks taken on by directors, supervisors, and the Company, and establish a well-rounded corporate governance mechanism.
Valuing the Rights and Interests of Shareholders
Cathay FHC's website has a "shareholders' section" that announces information on shareholders' meetings, dividends, and financial information. There is also a spokesperson system, investor services, and "contact us" mailbox for shareholders to express their opinions at any time. Cathay carefully handles all suggestions, questions, disputes, and litigations involving shareholders in accordance with the “Cathay Financial Holdings Guidelines for Handling Shareholder Suggestions, Questions, Disputes, and Litigation." In addition. Cathay has urged corporate shareholders, including major shareholders as well as insurance, investment trusts, and securities companies, to exercise their right to vote via electronic means. In 2018, the electronic voting rate reached 91% which is increased year by year.