Corporate Governance

Under the leadership of Chairman & CEO Eddie W.H. Chuo, HIWIN’s board members excel in their respective professional fields and demonstrate independence in their primary responsibility of corporate oversight. The board ensures compliance with legal requirements, maintains financial transparency, and ensures the timely disclosure of significant information. To enhance their supervisory roles, the board has implemented several structures and mechanisms, such as the Remuneration Committee, internal audits, and internal reporting systems.

The board’s second responsibility is to provide leadership to the management team at HIWIN. On a quarterly basis, the management team presents reports to the board regarding economic and sustainability matters, such as risk and opportunity evaluations, adherence to international standards, and business ethics. The board evaluates the feasibility of the corporate strategies developed by the management team and consistently monitors their implementation. If needed, the board may recommend adjustments to the management team.

The third responsibility of the board is to appoint and terminate managers, as well as assess their performance. At HIWIN, there is regular and transparent communication between the board and the management team. The management team is committed to implementing the board’s instructions and ensuring smooth business operations to maximize profits for all shareholders.

To enhance corporate governance and improve the board’s effectiveness, HIWIN has implemented a Key Performance Indicator (KPI) to strengthen operational efficiency. On December 27th, 2018, HIWIN established measures for evaluating board performance in accordance with letter No. 1070025395 of the Taiwan Governance Code. These measures were approved by the board. Each year, the Company’s deliberative unit will request directors to complete self-assessment questionnaires for the Board of Directors, board members, and functional committees, in order to conduct an annual board performance assessment. The board will then review the questionnaire results and make necessary improvements during the first quarter board meeting of the following year. The board’s performance in 2022 has been evaluated as excellent, with no significant deficiencies or areas requiring improvement. This performance assessment was presented during the board meeting on February 24th, 2023. Currently, the performance of the current Board of Directors is not linked to Environmental, Social, and Governance (ESG) factors, and there has been no engagement with an external third-party independent organization to assess the board’s performance. However, the assessment of such practices in the future is currently being considered.

Organization & Structure

HIWIN’s management team is committed to upholding corporate governance policies that protect shareholder equity and enhance our information transparency. Our endeavors have received extensive recognition. Main Practices:

Organization Chart

HIWIN is a joint-stock company in terms of its ownership and legal form. As of 2022, the management structure of HIWIN is as follows:

The parent company, subsidiaries, and sub-subsidiaries as of the end of 2022:

Internal Control

The internal control system is designed by management, approved by the board, and implemented by the board, management, and employees. Its purpose is to promote efficient operations and provide reasonable assurance.

Information Disclosure

HIWIN is committed to transparency and good faith in disclosing Company information. We provide transparent and open access to operational performances, financial reports, and ESG reports on investor service platforms and our official website. Furthermore, we announce information regarding shareholder meetings and roadshows on our website. To ensure effective communication with investors and shareholders, we have established a spokesperson system to address their queries. This system serves as a reliable channel of communication between HIWIN and our valued investors. In 2022, HIWIN released 45 items of Material Information (Note).

Note: Material Information. https://www.hiwin.tw/stock/stock_annual_report.aspx

Structure of the Board of Directors

The HIWIN Board of Directors consists of 7 to 11 directors and follows the candidate nomination system outlined in Article 192-1 of the Company Act. The director nomination process is thorough, considering the candidate’s professional competence, ethical conduct, and leadership reputation. Currently, HIWIN does not consider ESG background in its director nomination process. Directors at HIWIN serve a three-year term and may be eligible for re-election as per the ” Procedures for the Selection and Appointment of Directors. ”

The 12th Board of Directors consists of 10 directors and serves from June 27th, 2022 to June 26th, 2025. Chairman & CEO Eddie W.H. Chuo leads the Board of Directors. Among the directors, 30% are independent directors, and 30% are employee directors. Our Company has not yet set specific targets for the number of employee and non-employee directors or the number of independent directors. To enhance corporate governance and address stakeholder concerns, HIWIN has established an Audit Committee and Nomination Committee, both of which are composed entirely of independent directors.

The directors of HIWIN possess extensive educational and professional backgrounds in business management, finance, engineering, and trading. In order to promote diversity, the HIWIN Board of Directors includes four female members. These directors offer valuable insights and guidance for our Company’s business operations and development. Additionally, HIWIN provides liability insurance for directors and management, safeguarding them against personal liabilities and financial losses arising from third-party claims related to their duties at HIWIN.

As of the conclusion of 2022, the directors’ primary educational background, industry experience, and professional expertise are outlined in the table below:

Independent Director

Independent directors possess professional expertise and the capacity to comprehend and evaluate financial reports. Equally important, they must possess qualities that foster independent oversight, such as integrity and fair judgment. These attributes are crucial as they execute and uphold corporate governance, fulfilling their obligations of integrity and diligence to the listed company and its shareholders. In strict adherence to relevant laws, regulations, and the Company’s Articles of Association, HIWIN’s independent directors conscientiously and diligently fulfill their duties to safeguard the Company’s interests and ensure the legitimacy and reasonableness of minority shareholders.

Independent directors fulfill their responsibilities without being influenced by the Company’s main shareholder, actual controller, or other stakeholders. They maintain objectivity and fairness, providing suggestions based on their extensive professional experience. In accordance with the general rule, HIWIN’s independent directors are limited to serving on the boards of five listed companies concurrently, ensuring they have ample time and energy to carry out their duties.

The Board of Directors has established three functional committees: the Remuneration Committee, Audit Committee, and Nominating Committee. All committees consist of independent directors. The HIWIN board meets at least once every quarter to primarily review the Company’s business performance and discuss important strategies.

In 2022, HIWIN convened eight board meetings. All directors were present at all eight meetings.

Director Training Programs

The board has authorized the ESG Committee to conduct performance evaluations on economic, environmental, and social dimensions. As a result, the highest governing body does not directly assess the performance of actions towards sustainable development. To enhance the highest governing body’s understanding of economic, environmental, and social dimensions, directors receive training on corporate governance, sustainable development, and securities laws as necessary. Additionally, each director participates in advanced training courses for over 6 hours to strengthen their professional skills and knowledge. These courses cover topics such as ESG, taxation, accounting, risk management, business management, and corporate governance. In 2022, the number of board members enrolled in relevant courses and the total hours completed are as follows:

Directors & Profit-sharing

HIWIN is a business that requires significant capital investment. Once profits have been cleared, the Company must prioritize setting aside provisions for taxes and losses from previous years. Afterward legal reserves (10%) and surplus reserves must be allocated. Next, a maximum of 6% of the remaining profits should be designated for dividend payments. Finally, a maximum of 4% should be allocated as remuneration for directors, while a minimum of 1% should be designated for employee bonuses.

In order to adhere to the Balanced Dividend Policy established by the Securities and Futures Bureau, HIWIN has developed a profit-sharing plan that aligns with the Company’s current business climate and its commitment to sustainable management and long-term growth. This profit-sharing plan places a primary focus on cash dividends, while also incorporating stock dividends. The allocation of stock dividends is limited to a maximum of two-thirds of the total dividend and extra dividends for the year. The Board of Directors will create and present an annual profit-sharing plan to the shareholders’ meeting for approval prior to distributing dividends.

Functional Committees

Remuneration Committee

The Remuneration Committee consists of three independent directors who assist the board in implementing and assessing the Company’s overall remuneration and benefits policy, including compensation for directors and management. In accordance with laws and regulations, the Remuneration Committee determines and approves the remuneration of senior executives, which is then disclosed in the annual report for all stakeholders.

Performance evaluations and compensation for directors and management at HIWIN are conducted in accordance with the Company’s articles of association, Corporate Governance Best Practice Principles, and Procedures for Director & Management Performance Evaluations. The Remuneration Committee determines compensation based on the Company’s overall business performance, future industry risks and development trends, and individual contributions to the Company’s performance.

HIWIN has established a Chairman Mailbox and Independent Director Mailbox on its website, allowing stakeholders to directly communicate with the Remuneration Committee regarding the Company’s remuneration. Material Topics will be included in the Remuneration Committee’s meeting agenda to assess whether stakeholder proposals warrant changes to the Company’s remuneration policy. For details on compensations paid to directors and major managers in 2021, please refer to the 2022 Annual Report (Note). In 2022, the committee held four board meetings, with all members present at each meeting.

Note: https://www.hiwin.tw/stock/stock_annual_report.aspx

Audit Committee

The Audit Committee consists of three independent directors. In order to enhance corporate governance, HIWIN has established an Audit Committee to replace the previous supervisors. The Audit Committee is tasked with supervising the Company’s financial reports, the independence, appointment, dismissal, and performance of CPAs, the effectiveness of internal control systems, and regulatory compliance. In 2022, the Audit Committee held seven meetings, with all members in attendance for each meeting.

Nomination Committee

The Nominating Committee consists of three independent directors. Authorized by the Board of Directors, the committee is responsible for the following functions and powers: formulating selection criteria for board members and senior executives, selecting and reviewing candidates for directors and senior executives, planning and conducting performance evaluations for the Board of Directors, functional committees, board members, and senior executives, organizing director training programs, and reviewing the organization’s procedures and Corporate Governance Best Principles. In 2022, the committee held three board meetings, with all members present at each meeting.

Other Committees

Environmental and Health Committee

The Environmental and Health Committee focuses on the Company’s business plans and vision. They also organize training programs and make arrangements for environmental protection, occupational health and safety, and energy management. These programs ensure that employees involved in ESH work have the necessary professional knowledge to implement Company policies. On a daily basis, the committee oversees operations in various departments, holds review meetings, and provides suggestions to ensure compliance with management system requirements.

Quality Committee

The main responsibility of the Quality Committee is to develop and establish product quality standards and strategies. Additionally, they are responsible for consistently monitoring and participating in a range of quality activities, including the creation, implementation, and evaluation of product quality systems. The committee also oversees the management of pre- and after-sales service quality, ensuring adherence to the PDCA (Plan-Do-Check-Act) cycle.

Safety and Culture Committe

The Safety and Culture Committee was established to develop a framework for HIWIN’s safety management system, taking into account future developments and the production environment. This system encompasses physical and mechanical designs, protective measures, activity evaluation, and employee conduct training. Additionally, the committee conducts regular inspections to ensure the safety of both employees and machines.

ESG Committee

Under the leadership of President Enid H.C. Tsai, the ESG Committee convenes monthly meetings to discuss the environmental, social, and regulatory dimensions of sustainable development topics (e.g. carbon reduction) and related response measures. With the ESG Committee, we hope to better manage material topics related to corporate sustainable development. The ESG Committee reports the outcomes of sustainability actions to the board at least once a year.

The direction, achievements, benefits, and future goals for the year 2022 were reported to the Board of Directors on May 10, 2023. The agenda included the following points:

① Sustainability issues of concern and corresponding measures.

② Oversight of the implementation and execution status of sustainable business plans.

If the directors provide suggestions after hearing the report, the ESG Committee will take them into consideration. Additionally, these suggestions will serve as a basis for the management team to adjust their strategies.

Senior Executives Remuneration

The remuneration of senior executives includes base salary, bonuses, dividends, and retirement benefits, among others. The related performance assessment and the reasonableness of remuneration are evaluated and reviewed annually by the Remuneration Committee and the Board of Directors. The remuneration is primarily determined by considering the achievement rates of performance targets of the responsible units, the status of ESG implementation projects, the benefits generated, and the contribution to the Company. This is also taken into account alongside the overall operational performance of the Company, potential future industry risks, and the balance between corporate governance performance and risk management. A fair remuneration is provided based on these factors. Please refer to the 2022 Annual Report for compensations paid to senior executives in 2021 (Note).

Note: https://www.hiwin.tw/stock/stock_annual_report.aspx

Remuneration Decision Process

The remuneration payment policy and process at HIWIN are as follows:

(1) Article 31 of the Company’s Articles of Association states that if the Company generates a profit in a given year, it must allocate a minimum of 1% of employee remuneration and a maximum of 4% of director remuneration. The Remuneration Committee will review this amount and present it for discussion to the Board of Directors before it can be distributed. Additionally, it must be reported to the shareholders’ meeting.

(2) The Company has implemented a process for determining the compensation of directors, presidents, and vice presidents. This compensation is determined by taking into account the overall operational performance, future risks in the industry, and development trends, as well as the results of performance evaluations and contributions to the Company. The Remuneration Committee presents recommendations to the Board of Directors for approval. The compensation system is regularly reviewed to align with current operating conditions and applicable laws, ensuring a balance between sustainable business operations and risk management.

Rigorous Control & Audit

HIWIN’s operations are overseen and audited by the Remuneration Committee, internal audits, and independent directors. The Board of Directors effectively communicates sustainability topics across economic, environmental, and social dimensions. Senior executives then review and formulate operational plans to mitigate material risks. HIWIN diligently manages and controls internal processes, implementing job rotation for critical tasks, continuously improving processes, and updating documents to ensure timeliness and security. Additionally, HIWIN conducts audits and inspections as needed through auditing agencies and establishes various management and control systems to minimize the possibility of materializing risks. The Company rigorously controls and manages internal processes, implementing regular job rotations for important functions, and conducts audits and inspections through auditing agencies as needed to minimize the risks of corruption and confidential information leaks.

Integrity Management

(1) Policy and System Establishment

In accordance with the Company’s management philosophy and mission statement, employees are strictly prohibited from engaging in any form of bribery, kickbacks, or other corrupt practices for personal or third-party gain while performing their duties. To ensure compliance with our anti-corruption policies, HIWIN emphasizes its philosophies and core values during onboarding and functional training sessions. Additionally, when recruiting new employees, HIWIN carefully selects individuals who align with our Company culture. HIWIN has established an Integrity Management Code that explicitly prohibits HIWIN, directors, management, employees, and actual controllers from directly or indirectly offering, committing, requiring, or receiving any form of illegal profits from customers, distributors, contractors, suppliers, government officials, or other stakeholders in the course of their duties. We expect the Board of Directors and management team to fully adhere to our integrity management policies. The Company’s business philosophy of “ professional standards, enthusiasm for work, and ethical conduct “ is reinforced daily, including during morning meetings, to instill these principles in our employees. As an example of our commitment, all HIWIN locations achieved 100% compliance with anti-corruption campaigns in 2022, effectively demonstrating our core values of integrity and honesty. The Integrity Management Code is publicly available on our Company website.

Note: Please refer to HIWIN Integrity Management Code. https://www.hiwin.tw/stock/corporate_governance.aspx

(2) Report Process and Channel

HIWIN encourages the reporting of any unethical or improper behavior. If stakeholders identify suspicious behavior by HIWIN employees or any relevant individuals that may violate the Code of Ethics, they can utilize the reporting management system. The Company will evaluate and inspect the matter and may impose disciplinary measures, including termination, for serious cases. The Company’s official website has established a communication mailbox for stakeholders, and the internal website has announced an internal independent reporting mailbox or special line. These include the argon mailbox (global chairman communication channel), hope mailbox (president communication platform), and help mailbox (human resources feedback platform) to encourage employees or stakeholders to express their opinions or report violations. The identity of the whistleblower and the content of the report will be kept confidential, and the whistleblower will be protected from any inappropriate actions. In 2022, HIWIN received 13 opinions and reports related to management systems, all of which have been thoroughly addressed and resolved.

Auditing agencies and HIWIN’s internal control systems regularly evaluate corruption risks within the Company and formulate audit plans accordingly. The audits are then conducted in accordance with the audit plans. Results are regularly reported to the Audit Committee and Board of Directors to actively prevent corruption. There were no major instances of corruption in 2022.

Training Outcomes

HIWIN conducts annual trainings on laws compliance for directors, managers, and employees. These trainings are conducted through monthly meetings, new hire orientations, supervisor trainings, basic trainings, and promotion trainings. The training materials are customized to cater to the different nationalities of our colleagues, with versions available in Chinese, English, and Vietnamese. These initiatives encompass a variety of methods such as online and physical courses, company websites, internal electronic announcements, and meetings. The main objective of these trainings is to promote ethical business conduct principles and disseminate the content of the ” Integrity Management Code ” and the ” Operating Procedures and Guidelines for Integrity Management. ” The trainings emphasize the importance of avoiding conflicts of interest, refraining from accepting gifts from manufacturers, preventing insider trading, protecting trade secrets, and more. The following are the relevant outcomes of these trainings:

Compliance with Regulations

HIWIN upholds strict adherence to regulatory and legal compliance as fundamental principles. We conduct regular reviews and actively monitor changes in government regulations, promptly making necessary adjustments. Through the modification of relevant documents, educational training, and issuing announcements, we ensure that all members are informed and compliant with operational laws. We also periodically organize awareness campaigns on regulations and actively monitor compliance within each department. Our efforts aim to enhance employees’ legal awareness and assist in resolving practical challenges.

Additionally, we seek guidance from consultants, lawyers, accountants, and other relevant entities regarding significant domestic and international policy and regulatory changes. When necessary, we engage their services to evaluate, suggest, and plan appropriate responses to ensure compliance with laws and mitigate negative financial impacts. Our objective is to achieve medium to long-term adherence to relevant socio-economic regulations without any major violations.

To meet customer demands and ensure timely deliveries, employees voluntarily work overtime. In order to promote work-life balance and prevent excessive work hours, HIWIN has reviewed the attendance system and implemented an overtime alert function. We also regularly advocate for compliance with overtime policies at labor-management meetings on the factory level, urging supervisors and employees to adhere to these policies.

In 2022, HIWIN encountered seven disciplinary cases related to environmental, social, and economic matters. However, there were no significant disciplinary cases, which are defined as instances involving substantial fines exceeding US$32.6 thousand.

Anti-competitive Behavior

HIWIN strictly prohibits engaging in price-fixing by fixing production volumes and sales volumes with peers and associations. The Company also strictly adheres to local and foreign regulations. In terms of organizational structure, HIWIN has implemented comprehensive internal control systems and measures, such as management policies, authorization systems, and separation of duties. These systems and measures are reinforced by internal audits to prevent any instances of corruption. In 2021, there were no legal cases related to anti-competitive practices, anti-trust practices, or monopolistic behaviors.

Conflict of Interests

Please refer to the 2022 Annual Report for information on HIWIN directors serving concurrently at other companies, stakeholder shareholding, and controlling shareholders and affiliates.

Note: Please refer to the 2022 Annual Report. https://www.hiwin.tw/stock/stock_annual_report.aspx