KTB continues to enhance the functionality of the Board of Directors, improve the efficiency of the operating team, strive for information transparency, ensure the rights and benefits of shareholders and investors, and build a foundation for sustainable development. From 2018 to 2022, KTB was ranked among the top 5% of TWSE-listed companies in the "Corporate Governance Evaluation" by the Taiwan Stock Exchange Corporation (4th to 7th session) for 5 consecutive years, demonstrating the determination and achievements of KTB in building its corporate governance policy. The number of further study of each director conformed to stipulations in "Key Points for Further Study of Directors and Supervisors from TWSE/GTSM Listed Companies", and relevant achievements in 2022 are as follows
Corporate Governance
A Sound Board Structure
KTB's Board of Directors is the supreme governing body of the company, and it now has 7 Directors (not being employees), and 3 Independent Directors which accounts for 43% of all directors. For strengthening the Board's supervisory and management functions, multiple functional commit tees, including the "Audit Committee", "Compensation Committee", and "Corporate Governance and Nomination Committee" are established directly subordinate to the Board of Directors. These committees are responsible for the discussion and resolution of key issues and issues in the economic, social, and environmental aspects. The functional committees consist of or participated by Independent Directors to achieve effective independent supervision and the check and balance mechanism to ensure all resolutions and actions of the Board are submitted to the Board of Directors for report and discussion. Furthermore, in February 2019, the Board of Directors appointed Vice President Chien-Ko, Yang, who has more than 5 years of work experience in finance, stock affairs, and business administration, to serve as the "Corporate Governance Officer", who is responsible for providing necessary information for the Directors to carry out their duties, regulations regarding meeting procedures and resolutions, continuing training of Directors, and other necessary assistance.
Independence and Interest Recusal
In terms of the Board operation, KTB's Board of Directors carries through the promise of ethical management and has formulated the "Regulations Governing Procedure for Board of Directors Meetings", which stipulates in Article 15 that, any motions at the board meetings that pose a conflict of interest with the Director himself/herself or the entity he/she is representing, the Directors shall recuse himself/herself from the discussion and voting on the matters, and he/she must not vote on other Directors' behalf, in accordance with the regulation or in a more rigorous approach. For the implementation status of the directors' recusal of proposal involved in conflicts of interest, please refer to [Page 29 of King's Town Bank Co., Ltd. 2022 Annual Report]. Furthermore, for fulfilling the requirement of independence, the "King's Town Bank Co., Ltd. Corporate Governance Best-Practice Principles" states the number of seat, qualifications, tenure, functions, and responsibilities of Independent Directors, and explicitly stipulates that the number of independent directors shall not be less than two and shall not be less than 1/3 of total number of directors, and the term of independent directors shall not exceed 3 terms. In addition, KTB has formulated the "Rules Governing the Scope of Powers of Independent Directors" for independent directors to follow to perform their duties well and effectively enhance the operation of the Board of Directors and the Company's business performance. For the details on the professional qualifications of directors and independence of independent directors, please refer to "Page 13 of King's Town Bank Co., Ltd. 2022 Annual Report".
Diverse Board Members
To actively implement the director and diversity policy, and give consideration to both specialty and gender balance, KTB states explicitly in the "King's Town Bank Co., Ltd. Corporate Governance Best-Practice Principles" and "Procedures for the Election of Directors" that constitution of board members should take a diversity policy into consideration, i.e. their basic conditions (gender, age, nationality, etc.) and professional knowledge and skills (professional background, professional skills and industry experience, etc.). All director candidates shall be nominated by the Nomination Committee by "Candidate Nomination System" in accordance with the Company Act, where, the Nomination Committee shall take development strategy of the company and overall functional configuration of the Board of Directors into account, and then submit to the Board of Shareholders for appointment after being passed upon resolution of the Board of Directors. Currently, all 7 of KTB Directors are males, and possess rich work experience, solid education background, and also diverse backgrounds. This has brought more perspectives to KTB and improved KTB's tolerance in the face of changes. In the future, KTB will also continue to look for appropriate female candidates for directors, to further improve diversity of directors. Implementation of diversity of KTB's board members is as follows.
Continuing Education and Performance Evaluation of the Board of Directors
All the KTB directors complete their continuing education in accordance with the "King's Town Bank Co., Ltd. Directions for the Implementation of Continuing Education f or Directors" every year. In 2022, the average duration of training for KTB's Directors was 9.14 hours, which was 6 hours higher than the period as recommended by regulations. The courses include "Principle of Fair Hospitality and 21-discipline Management of Science and Technology", "Corporate Governance System and Relevant Regulations on Anti-Money Laundering", "Discussion on Supervision of Independent Directors and Board of Directors from International Perspective", "About Codes and Cases on Ethical Corporate Management, Corporate Governance and Sustainable Development" and so on, and the contents cover corporate governance, regulatory compliance, sustainable development and other latest topics, so as to enhance their professionally, enhance operation decision-making as well as risk governance function of the Board of Directors by arranging diversified courses.
In addition, KTB has formulated the "King's Town Bank Regulations on the Board and the Functional Committee Performance Evaluation". The Corporate Governance and Nomination Committee carries out annual performance evaluation on the Board and functional committees. The overall performance evaluations of the Board and the functional committees, and the self-evaluation by the Board m embers are carried out in the first quarter of every year, and the evaluation results are compiled by the board's meeting organization unit. In addition to review of operation performance, the evaluation contents also cover non-financial projects, such as: improvement of corporate governance, diversity and professionally of board members, review of risk management system, effectiveness of implementation of sustainable development and other economic, environmental and population impact projects, and report the result to the Board of Directors, to serve as reference for remuneration and successor nomination of individual director. In 2022, performances of the Board of Directors and all functional committees were all evaluated as "Excellent", and the report to Corporate Governance & Nomination Committee and Board of Directors was made on February 20, 2023. For detailed evaluation contents, please refer to "Results of the Functional Committee Performance Evaluation".
Moreover, the "King's Town Bank Regulations on the Board and the Functional Committee Performance Evaluation" stipulates that the board performance evaluation shall be conducted by an external professional independent institution or an external professional scholar team every three years. KTB has appointed "EY Advisory Service Inc." to carry out the 2021 external board performance evaluation in 2022. The performance evaluation result was "Advanced", and the evaluation summary is as follows:
• The composition and establishment of King's Town Bank's Board of Directors and Functional Committees are set up pursuant to related regulations issued by the competent authority, and relevant bylaws and rules of procedure are in place. Board members have diverse background, including expertise in accounting, financial analysis, international market perspective, and risk management, so as to provide the Board suggestions from diverse perspectives.
• All the Directors fully understand their roles and responsibilities and the division of tasks between different units, skills and technology, and the importance of the mechanism to establish the mutual trust of the management team. Through efficient work division and communication, the Board and the management team are able to jointly handle emergencies and resume operation in the shortest possible time, and thus won the trust of customers.
• The meeting organization unit arranges lectures for newly-appointed directors, to familiarize him/her with the overview of corporate culture, industry overview, the Bank's performance, and legal liabilities. Before each Board meeting, the Directors may request supplementary materials and communication through telephone with the meeting organization and proposal units, to provide the Directors with a better understanding of the motion content and facilitate the discussion of motions.
Other relevant information is disclosed on KTB's official website "External Evaluation Results of the Performance of the Board of Directors". The next external performance evaluation is scheduled for the first quarter of 2025.
Remuneration Policy
(1) Director
Remuneration of KTB directors follows stipulations in Article 33 of the Articles of Association: "in case KTB makes profit in the current year, provision for director remuneration not higher than 2% of such profit shall be made, however, if KTB still has accumulated loss, the make-up amount shall be reserved from such profit first". No director remuneration has been provided in recent two years.
In addition, it is provided in Article 25(1) of the Articles of Association that: "remuneration of the directors shall be determined by the Board of Directors by reference to the level of related peers and listed companies". Remuneration of KTB directors is paid by reference to peer level, individual performance of the directors, operational performance of the Company and "Evaluation Results of the Performance of the Board of Directors". In addition, in accordance with Article 5 of "Specification for Scope of Responsibility of Independent Directors," and considering that responsibility and commitment time of independent directors are different from general directors, therefore, reasonable remuneration different from that of general directors is made for independent directors. In addition to fixed remuneration every month, the independent directors do not acquire additional remuneration to directors as stipulated in the Articles of Association, and the business execution expense is determined by reference to the standard for general directors. For remuneration to directors, please refer to "Page 23-24 of King's Town Bank Co., Ltd. 2022 Annual Report". Relevant performance evaluation and remuneration rationality are examined by the Compensation Committee and the Board of Directors.
President, Senior Vice President and Managerial Officers
Performance evaluation and remuneration system regarding the President and senior managerial officers of the Company are handled respectively in accordance with "Regulations on the Annual Employee Performance Evaluation", "Regulations on the Employee Benefit Payment" and "Regulations on the Distribution of Annual Bonus" passed by the Board of Directors. The bonus is related with the unit performance evaluation results, and the unit performance evaluation contents include both business indicators and non-business indicators, and in the meantime, reasonable remuneration is provided by taking individual performance, responsibility assumed and individual contribution into account. Every year, remuneration treatment and relevant performance evaluation of the managerial officers would be proposed and discussed at meeting of the Compensation Committee, and then submitted to the Board of Directors for examination and approval.
In terms of business indicators, to strengthen consistency between goals of the management and overall ESG sustainable development strategies of KTB, KTB has listed "ESG Implementation" as one of the measuring item for departments and sections of the Headquarters since 2021, and further requires that its ESG goals shall be set the weight no less than 5% since 2023.
