Corporate Governance Operations

Corporate Governance Practices

Actively implement operational transparency and continuously optimize organizational structure.

In order to improve corporate governance and strengthen the Company's competitive advantage to ensure the rights and interests of shareholders, THC has established the Audit Committee and the Remuneration Committee, subcommittees of the Board of Directors, to play a key role in assisting the Board’s responsibilities. In addition, THC has established the Auditing Office which takes responsibility of regularly performing an internal audit and reporting audit results to the Audit Committee and the Board.

  • In November 2015, THC established “ Corporate Governance Best Practice Principles ” to draw up guidelines for corporate governance, in the hopes of fostering sound corporate governance and correctly managing risks arising from changes in the markets.
  • In November 2017, THC set up the Corporate Governance Committee to devise and adopt corporate governance methods to institutionalize, standardize, and rationalize business operations with comprehensive systems, so as to improve the total synergy and competitiveness of the Company and achieve the goal of sustainable development.
  • In March 2018, THC passed the rating evaluation of international credit rating agency Taiwan Ratings Corporation. Taiwan Ratings consider that THC is a market leader in beverage packaging market and successfully expand to China and Southeast Asian countries, maintaining great relationships with customers. Therefore, THC received a long-term credit rating of “twA-”, and the long-term ratings outlook was “Stable”.
  • On March 23, 2021, the Board of Directors resolved to appoint Ms. Chuang, Kuei-Ching, the Vice President of the Financial Department, as the corporate governance officer with more than three years of experience as the supervisor of finance and shareholder services at public companies. The main duties of this position are to handle of matters relating to Board of Directors meetings and shareholders meetings in compliance with law, preparation of minutes of Board of Directors meetings and shareholders meetings, assistance in onboarding and continuing education of the directors, provision of information required for performance of duties by the directors, assistance to the directors in complying with laws and regulations,assistance in Board performance evaluation and so forth.
  • Continuing education and training of head of corporate governance in 2021 are as follows:
Date of Course Organizer The course name Education hours
2021/05/11 Securities and Futures Institute The Latest Practical Development of Insider Trading in our Country and Countermeasures for Corporate Prevention and Control 3
2021/06/07 Accounting Research and Development Foundation Investigation of "Cash Flow" of Fraudulent Financial Statements and Discussion of Related Legal Liability Cases 3
2021/07/20 Accounting Research and Development Foundation New Policies for Sustainable Development of Enterprises and Aspects of Climate Governance 3
2021/08/12 Accounting Research and Development Foundation New Regulations on Directors and Supervisors' remuneration and Analysis of Corporate Governance Practices 3
2021/08/20 Accounting Research and Development Foundation Role and Operational Practice of Independent Directors in Corporate Governance 3
2021/08/25 Securities and Futures Institute Discussion on Legal Risks and Responses of Directors and Supervisors from Major Enterprise Malpractice Cases 3

In the future, THC’s implementation of corporate governance will primarily focus on consolidation of the Board structure and its operation, enhancement of information transparency, and integration of sustainability into corporate governance.

Ethical Management

THC has drawn up “ Corporate Governance Best Practice Principles ", Ethical Corporate Management Best Practice Principles ”, “Ethical Conduct Codes of Directors and Managers”, and “Whistle-blowing Procedures for Violations of Ethical Corporate Management”, and appropriate prevention measures against corruption and malfeasance. All THC Directors, senior management, and employees are committed to thoroughly implement such policies. The Auditing Office is in charge of assessing the internal operating procedures of the internal control system based on established duties and responsibilities of various departments and the Company’s management policy of organization, authority and responsibility, and conducting regular and irregular internal control and audit every year to establish a supervisory mechanism to prevent the occurrence of internal unethical and improper behaviors.

Ethical Corporate Management Best Practice Principles

The General Administration Department of the Company made " Ethical Corporate Management Best Practice Principles " in November 2015 which has been resolved by the Board of Directors that year and resolved in the shareholders’ meeting. These Principles have been released on the THC website for the reference of all stakeholders. These Principles state that when engaging in commercial activities, directors, managers, and employees shall not directly or indirectly offer, promise to offer, request or accept any improper benefits, nor commit unethical acts including breach of ethics, illegal acts, or breach of fiduciary duty for purposes of acquiring or maintaining benefits. These Principles have been amended by the Board of Directors on March 23 and May 8, 2020 and resolved in the shareholders’ meeting on June 19, 2020.

Whistle-blowing Procedures for Violations of Ethical Corporate Management

To implement the ethical management policy and actively prevent unethical conduct, the General Administration Department set up Whistle-blowing Procedures for Violations of Ethical Corporate Management on July 24, 2018 which has been implemented after approval by the CEO/Chairman to build up the policy of the Company’s internal and external whistle-blowing channels and procedures. Reporting channel:

  • Email: ethics@mail.honchuan.com.tw
  • Address: No.6, 2nd. Road, Industrial Park, Xitun Dist., Taichung Taiwan, R.O.C (To Auditing Office)
2021 Performance
  • The Company holds related courses in “ Ethical Corporate Management Best Practice Principles ” to every new employees, and provides related educational trainings and promotion irregularly for directors, managers and employees. In 2021, the Company held in total 236 attendants and 260.5 hours of courses related to ethical corporate management.
  • Irregularly promote ethical management in departmental meetings and operations meeting, and require all employees to implement it.
  • The execution of ethical management in 2020 was reported to the Board of Directors by the chief auditor on March 23, 2021.

Implementation Status of Preventing Insider Trading

The Company has established “ Operating Procedures for Handling Internal Material Information and Preventing Insider Trading ” approved by the Board of Directors on March 23, 2020 to draw up that the Company should, at least once per year, conduct educational campaigns to raise awareness of compliance among internal personnel (including directors, managers, and employees) with respect to related laws and regulations.

  • Provide the Directors with continuing education courses or seminars of related regulations to assist the Directors in complying with laws and regulations. The implementation status of the Directors’ continuing education has been published on the Company’s website and in the Market Observation Post System (MOPS).
  • Conduct regular educational campaigns among all directors, managers, and employees with respect to related laws and regulations. Educational campaigns are provided to new directors, managers, and employees in a timely manner.
  • The Company's the Directors, managers, and employees received related educational campaigns every year, including insider trading lessons in the sources of law, requisite elements, the civil and criminal liability, and some true stories. The contents of lessons provided also involve the scope of material inside information, confidentiality operations, disclosure procedures, and disciplinary measures. The slides of the lessons were also offered to all Directors, managers, and employees for reference. The course topic held on November 13, 2021 is: Prevention of Insider Trading Seminar. A total of 49 people participated and the training hours were 24.5 hours.
      

Risk Management

THC has set a long-term goal with stable and sustainable development to set up a“Risk Management Policy and Procedure,” all departments carry out potential risk identification, and assessment of the environmental, social and corporate governance issues affecting the Company’s operations. All employees are responsible for comprehensive risk management to set up defenses through daily routines. THC has formed a crisis management team to immediately carry out appropriate actions and execute relevant plans in response to a risk loss occurring, ensuring the survival of the Company and resuming normal production and business activities soon.

The Company passed “Risk Management Policy and Procedure” on March 22, 2022, formulating the guidelines for the assessment of the risk of the environmental, social, and corporate governance issues that may affect the operation of the Company and relevant countermeasures. At least once a year, report to the Board of Directors on the status of the risk management. The 2021 implementation was reported to the Board of Directors on June 17, 2022.

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Risk Identification and Management Procedures

Aiming at the three major issues of environment (E), society (S), and corporate governance (G), THC identifies risks, including market, financial, operational, environmental, and other risks. According to the materiality principle to evaluate the risks of each issue, relevant risk management strategies and implementation are as follows: 

Issue Type of Risk Item Strategy Units
Environment
(E)
Environmental Risk Climate change
  • To conduct collecting and analysis of climate change and energy risk. Refer to the ISO 14001 risk identification procedure to identify and assess the risks associated with climate change to reduce the impact.
Sustainable Development Committee- Sustainability Team
Water resources& Wastewater management
  • Establish water conservation goals and management systems based on circular economy thinking, and set up collection and treatment facilities of runoff wastewater to improve the quality of runoff rainwater and implement water conservation and wastewater recycling plans.
Occupational Safety and Health Center
Greenhouse gas management
  • Promote the integration of energy and resources across plants and companies, hold monthly energy conservation and carbon reduction promotion meetings, review the promotion progress, and improve various energy conservation and carbon reduction improvement technologies.
  • Develop green products, improve the weather resistance and recyclable, reduce carbon emissions in the production process, and extend the product life cycle.
Engineering Division/ R&D Technical Dept.
Energy management
  • Promote energy-saving and high-efficiency equipment, and formulate energy-saving goals to reduce the unit electricity consumption of products continuously.
  • Promote energy consumption reduction, energy reuse, equipment efficiency improvement, and energy management.
Engineering Division
Air pollution management
  • Continuously review air pollution emissions, invest in new process equipment (such as flexographic printing machines) that is environmentally friendly and pollution-free, and actively train environmental personnel.
Occupational Safety and Health Center
Waste management
  • Strengthen source control, identify and develop raw materials and processes with the potential of circular economy, and strive toward the goals of circular economy of waste minimization to continuously reduce our environmental impact.
Occupational Safety and Health Center
Society
(S)
Operational Risk Human right
  • The Company complies with International Bill of Human Rights, such as gender equality, rights at work and rights to prohibit discrimination, as well as the work rules and regulations stipulated by the Labor Standards Law and relevant regulations, and formulates human resources policies to ensure the rights and privileges of workers.
Human Resources Dept.
Recruitment and Development
  • Build diverse recruitment channels for stable human resources, such as industry-academia collaboration, job fair, and employment service station.
  • Establish the “Hon Chuan Academy” to devote to talent cultivation plans to retain top talent. By putting the right person into the right position, THC aspires to grow along with talent.
  • Training employees for second skill, as well as improving the manufacturing process automation.
Human Resources Dept.
Food safety risk
  • Establish auditing systems of food safety and sanitation, such as random quality inspection, inspections by the food safety HACCP team, and customer audits.
Quality Assurance Dept./Packing Technical Group/Beverage Technical Group
Quality risk
  • In addition to holding the annual QCC (Quality Control Circle) activities, THC also actively introduces various types of management system certification, such as ISO 9001, FSSC 22000, HACCP, Taiwan Quality Food Development Association (TQF).
Quality Assurance Dept./Production Line Units
Occupational
safety and health
  • Set up to formulate the safety and health management plan, implement, review and plan related issues.
  • All plants of THC employ full-time occupational health nurses, and provide contracted doctors on-site service, health education lectures, and annual health examinations for all employees.
  • All plants of THC actively introduce Occupational Health and Safety Management System, such as ISO45001 and TOSHMS.
Occupational Safety and Health Center-Occupational Safety and Health Committees
Market Risk Horizontal competition
Fast moving consumer goods boom
International political and economic trends
  • Hold executive meetings regularly to discuss issues concerning domestic and foreign customers trends, market environment, and political and economic trends, and create risk response strategies.
  • Simulate situations of production and sales on the basis of orders estimation. Implement the strategy of “aim at the domestic market, supplemented by export”, and depend on the situation to perform a product line adjustment or arrange annual repair work.
Sales Dept.
Other Risk Infectious disease risk
  • Establish the Pandemic Prevention Committee are responsible for pandemic situation control, procurement support, plant disinfection, body temperature taking, inspection, emergency handling and external speech according to tasks.
  • Hold regular/irregular meetings to review various epidemic prevention measures.
Occupational Safety and Health Center
Corporate governance(G) Operational Risk Professional ethics
  • Formulate various codes of ethical conduct, and establish corporate governance and risk control mechanism. Assess the risk of dishonest behavior, formulate relevant preventive measures, and promote integrity management.
General Administration Dept.-Legal affairs Office
Regulatory compliance
  • Establish internal control systems of trade secrets to administer measures to prevent a breach of confidential information.
  • The Company require our employees to sign the “Letter of Integrity and Honesty”and our suppliers also sign the “Declaration of Integrity” to implement the Company's Integrity Management Policy.
  • Conduct compliance training and check relevant laws and regulations of all departments.
General Administration Dept.-Legal affairs Office
Information security Specific Information Security Protection Measures:
  • Conduct drills in social engineering security and training courses on information security, it trains colleagues have a good information security awareness.
  • Conduct vulnerability scans on the device. Due to the information security at tacks, we introduced protective equipment and hardware to reduce the information risk and establish comprehensive information security protection capabilities.
  • Established remote back up by the core system and conducted disaster recovery exercise twice a year to ensure the availability of information.
General Administration Dept.-MIS Office
Supply chain risk
  • Capture and analyze international raw material trends regularly, controlling key sources of raw material.
  • Draw up complete procurement specification and review mechanism, and review our supplier list to develop the second sourcing strategy; additionally, regularly track inventory of raw materials and set safety stock levels to avoid material interruption.
  • Prudence evaluations and develop the new raw material. In addition to reducing the risk of supply interruptions, use alternative materials and formulations that are more eco-friendly.
Procurement Dept./
R&D Technical Dept.
Financial Risk Interest rate changes
Foreign exchange risk
Credit risk
Risk in financial decision making
  • In addition to issuing corporate bonds which provide the ability to lock in medium- and long-term funding and avoid rising interest rates, THC has managed the risk by maintaining an appropriate mix of fixed and floating rate borrowings, and evaluated hedging activities regularly to align with interest rate views and defined risk appetite ensuring the most cost-effective hedging strategies are applied.
  • In respect of foreign exchange position arising from import and export, THC have adopted the natural hedging strategy for offset between expenses and revenue, and timely grasped the trend of exchange rate fluctuations. We also, within the scope as permitted by law, utilize foreign exchange forward contracts to manage the Company’s exposure to risks associated with exchange rate fluctuations.
  • In order to minimize credit risk, the management of THC has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, THC reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts.
Financial Dept.

 

InternalAudit

The Company has established an Auditing Department which operates under the Board of Directors. There is a Chief Auditor who manages internal audit operations and supervises the Auditing Department in conducting internal audits as well as two additional auditors in the Department. The Chief Auditor is appointed by the Board of Directors. According to our Corporate Governance Best Practice Principles , appointment, dismissal, evaluation and review, salary and compensation of internal auditors of the Company shall be submitted by the Chief Auditor to the Board chairperson for approval. The Department is responsible for:
  • Implementing regular audits for the headquarters and projects.
  • Investigating and evaluating the completeness, rationality and effectiveness of the internal monitoring system and various management measures.
  • Investigating and evaluating the efficiency of various departments in carrying out work, projects and measures. These include appropriateness of manpower deployment, adequate recording of all transaction cycles, and ability to prevent waste, embezzlement and inefficient use of resources such as cash, inventories, and other assets. The Department also compares, evaluates and reviews operational performance and adopts effective countermeasures to increase operational efficiency.
Job Scope of the Chief Auditor
  • Supervises corporate operations and management systems.
  • Devises audit plans for each internal control, audit and management systems.
  • Assists the Board of Directors and Board of Supervisors in monitoring the company.
  • Devises guidance plans for regular and aperiodic production, sales, human resource, development and finance audits both locally and internationally.
  • Conducts audits in accordance with orders from the executives and the Board.
  • Reports audit updates to the Boards regularly and presents at Board meetings.
  • Supervises, reviews, manages, and trains the company’s auditors
  • Prepares audit and management reports.
Job Scope of the Auditor
  • Implement audits for the nine business cycles of the internal control system in accordance with the annual audit plan.
  • Assists the promotion, establishment, rectification and implementation of internal control and management systems in the company.
  • Proclaims relevant audit information in accordance with the requirements of the Financial Supervisory Commission.
  • Responsible for collection, investigation, organization, analysis and interpretation of audit data, and devises reports and suggestions.
  • Conducts audits on operation of existing systems, regulations, plans, and policies in accordance with orders from executives.
  • Assists supervisors in conducting regular and aperiodic production, sales, human resource, development, and finance audits locally and internationally.
  • Assists supervisors in conducting audits in accordance with the orders of the executives and the Boards.
Annual audit plan
  • Our company has established an Auditing Department which operates directly under the Board in accordance with Article 11 of the “Criteria for Establishment of Internal Control Systems in Listed Companies”. The Department is currently led by Chief Auditor Hong-Long Hsieh.
  • The Auditing Department formulates annual audit plan and implements the following audit cycles in accordance with the “Criteria for Establishment of Internal Control Systems in Listed Companies” to evaluate the completeness, rationality and effectiveness of the company’s internal control system.
  • Sales and receivables cycle
  • Production cycle
  • Procurement and payment cycle
  • Human resource and payroll cycle
  • Fixed asset cycle
  • Financing cycle
  • Investment cycle
  • Digitalized information system management
  • R&D cycle

In addition, in accordance with the regulations of the Securities and Futures Bureau, the Department conducts various audits periodically. These includes monthly audit for stock operations and transactions of financial derivatives, seasonally audits for endorsements and monitor of capital leases to others and subsidiaries. In addition, self-assessments of the internal control system, stakeholder transactions, management of the Board meeting, management of the Remuneration/Compensation Committee, compliance with International Financial Reporting Standards, and evaluation of accounting judgement procedure, measures and work flow for estimates are conducted annually to boost the company’s operational performance.

Procedure for self-assessment of the internal control system

Self-assessment of the internal control system is first performed by respective departments in accordance with internal control measures before the result are inspected and evaluated by the Auditing Department and submitted to the Board for review. The audit reports and following-ups are submitted to the company supervisor before the end of the next month after the audit in accordance with the “Criteria for Establishment of Internal Control Systems in Listed Companies”. The Auditing Department then issues a Statement of Internal Control and submits the Statement with audit reports to the Board for review. Upon approval, the reports are submitted for proclamation.

The Auditing Department of our company shall complete the following online proclamations
within the deadline set forth by the Financial Supervisory Commission.
  • Annual Audit Plan for next financial year (before the end of December)
  • Basic information of the Chief Auditor and auditors for the current financial year (before the end of January)
  • Audit Plan Execution for the previous financial year (before the end of February)
  • Statement on the Internal Control System for the previous financial year (before the end of March)
  • Report of Internal Control Deficiencies and Abnormalities Improvement for the previous financial year (before the end of May)

Cyber Security

Cyber Security Management Structure
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To establish the information security supervisor and personnel, are in charge of information security policy formulation, implementation, risk management, and compliance audits, with an Information Security Team under its supervision. Information Security’s highest-level supervisor delivers reports on information security management performance, related issues, and directions every year to the Board of Directors.

Cyber Security Policy

An Information Security Team let the Company's concept of information security take root through the “Information Protection Working Committee.” The Committee, which covers all organizations with Taiwan plants and overseas subsidiaries, convenes regular meetings to keep track of situations and utilizes the Plan-Do-Check-Act(PDCA) cycle to inspect the policy applicability and measures such as information protection.

internal-audit-plan-en

Plan : Refer to relevant information security systems, and formulate information policy and management measures.
Do : Multi-layer information security protection: and management(physical security, network security, device security, access management, and information security  maintenance and operation.)
Check : Information security monitoring.
Action : Review and improvement on information security measures, introduce the new information security protective tools, and training programs and promotion campaigns on information security.
 

Concrete management programs

Multi-layer information security protection:

Item Concept
Network Security
  • Deploy IPS intrusion detection protection system between the intranet and internet.
  • Strengthen network firewall and network control, shut down non-essential networks and services to reduce the risk of malicious attack.
Devices Security
  • Monthly patch updates for the Windows operating system.
  • Endpoint anti-virus measures based on computer type.
Host and application security
  • Enhance system and software vulnerability remediation .
  • Implemented intrusion protection system for important host computers;conducted two disaster recovery exercises for core systems.
Education,training and awareness promotion
  • Conduct information security promotion and social engineering drills regularly to cultivate employees' information security awareness.

Investments in resources for cyber security management

In 2021, the corporate information security measures implementation results:
a. The core system to conduct disaster recovery drills: 2 times
b. Conducted email social engineering drills: 2 times
c. Information security promotion: 2 times
d. The information security supervisor participated in the 2021 information security promotion training by the Ministry of Economic Affairs, ROC.
e. There has been no major information security incident occurred.

Although the Company has not purchased the cyber insurance, the performance of the Information Security Team and the implementation of the Information Security Policy can also create a secure IT environment to ensure the information security of the Company's various services.