Governance Briefing — August 14, 2020
Taiwan's Financial Supervisory Commission launched the Corporate Governance 3.0 – Sustainable Development Roadmap, setting new board diversity, stewardship, and disclosure milestones through 2023.
Executive briefing: On 14 August 2020 Taiwan’s Financial Supervisory Commission (FSC) published Corporate Governance 3.0 – Sustainable Development Roadmap, a three-year program that recalibrates board composition expectations, embeds environmental, social, and governance (ESG) performance into disclosure rules, and elevates stewardship obligations for institutional investors. Boards, sustainability leaders, and compliance teams must translate the roadmap’s policy levers into tactical execution plans that address near-term milestones in 2021 while staging investments for 2022–2023 deliverables.
Understand the phased reforms and applicability
The roadmap consolidates six policy pillars that affect listed companies, financial institutions, and institutional investors. Pillar 1 expands board diversity targets and requires listed issuers to disclose gender composition and independence metrics in annual reports starting in 2021, with the FSC expecting boards with at least one-third female directors by 2023 for TWSE- and TPEx-listed companies with paid-in capital above NT$10 billion. Pillar 2 raises transparency obligations by requiring sustainability reports for all listed companies with paid-in capital above NT$2 billion beginning with fiscal year 2023, while high-impact sectors such as finance, chemical manufacturing, and food processing must adopt the Global Reporting Initiative (GRI) Standards and greenhouse gas (GHG) verification earlier. Pillar 3 intensifies stewardship, directing securities investment trust and consulting enterprises (SITEs and SICEs) to fully implement the Stewardship Principles for Institutional Investors, publish stewardship reports, and vote according to ESG criteria. Pillar 4 promotes responsible corporate behavior by integrating ESG metrics into performance evaluation and compensation policies. Pillar 5 bolsters information disclosure quality through upgraded XBRL taxonomy and mandatory bilingual (Chinese-English) reporting for international investors. Pillar 6 enhances regulatory incentives, leveraging green finance recognition and inclusion in sustainability indices for compliant issuers.
Legal scope varies: state-owned enterprises, banks, and insurers supervised by the FSC face the most aggressive timelines. Emerging stock companies are encouraged to align voluntarily, but the roadmap anticipates future rulemaking that will codify several expectations. Compliance leads should map entity exposure by listing board composition, industry classification, capital size, and investor base to determine which milestones trigger mandatory obligations versus soft expectations. This mapping should include subsidiaries and overseas affiliates if the parent is listed domestically, because consolidated reporting obligations will require alignment across corporate groups.
Board and nomination committee action plan
Audit and nomination committees need to convert high-level diversity goals into seat-planning models. Begin with a skills and diversity matrix that records gender, independence, tenure, and functional expertise for each director across the group. Use that matrix to identify gaps relative to the one-third female target and the FSC’s guidance on professional backgrounds (e.g., finance, technology, risk management). Committees should adopt a succession timeline aligned to director term expirations so that recruitment pipelines deliver qualified female candidates before 2023. Update bylaws to formalize diversity objectives, and ensure disclosure in the corporate governance chapter of annual reports. To avoid tokenism, integrate onboarding programs and mentorship so new directors can influence strategy from the outset.
Compensation committees must embed ESG metrics into executive incentives. The FSC expects remuneration policies to articulate how sustainability performance influences pay. Develop weighted scorecards that blend financial, customer, internal process, and ESG indicators such as energy efficiency, workplace safety, or digital governance. Document board deliberations in meeting minutes and maintain evidence demonstrating that ESG targets are meaningful, measurable, and linked to the company’s core strategy. During investor engagements, articulate how the compensation framework promotes long-term value creation and aligns with stewardship expectations.
Upgrade ESG disclosure systems and internal controls
Finance and sustainability officers should initiate a disclosure modernization project that covers data governance, technology tooling, and assurance. Conduct a gap assessment against the roadmap’s requirements, GRI Standards, Task Force on Climate-related Financial Disclosures (TCFD) recommendations, and the Taiwan Stock Exchange (TWSE) Corporate Social Responsibility (CSR) Best Practice Principles. Prioritize data domains that regulators and investors scrutinize, including carbon emissions, energy consumption, water usage, diversity metrics, supply chain labor conditions, cybersecurity governance, and board oversight narratives.
Implement data collection workflows using an enterprise ESG platform or extend existing enterprise resource planning (ERP) and business intelligence (BI) systems with structured templates. Establish data owners for each metric, set reporting calendars that align with annual report deadlines, and build validation checkpoints. Where the roadmap requires third-party assurance—for example, limited assurance over GHG inventories for high-carbon industries—engage accredited verifiers early to scope engagements and remediate control deficiencies.
Given the bilingual reporting mandate, coordinate with investor relations and legal to produce consistent English disclosures. Translate not only narrative sections but also key performance indicators (KPIs) and methodologies, ensuring terminology matches international frameworks. Develop style guides and glossary references to maintain fidelity and reduce translation risk.
Institutional investor stewardship execution
SITEs, SICEs, and asset owners must update stewardship policies to reflect ESG integration. Create a stewardship operating manual that covers research, engagement, proxy voting, escalation, and reporting. Incorporate screening criteria for controversies such as environmental violations or governance failures, and define how investment teams document engagement outcomes. Set up cross-functional stewardship committees that include portfolio managers, ESG analysts, legal counsel, and compliance officers to oversee policy adherence.
Proxy voting systems should be enhanced to capture rationales for votes, particularly when voting against management or supporting shareholder proposals related to sustainability. Automate post-season reporting that discloses voting statistics, thematic engagement case studies, and alignment with stewardship principles. For global mandates, ensure coordination with custodians and proxy advisors to secure timely vote execution despite differing record dates and time zones.
Investor engagement with portfolio companies should emphasize collaborative improvement. Draft engagement templates that outline expectations for board diversity, disclosure quality, and risk management. Track each interaction in a customer relationship management (CRM) system or stewardship database to provide evidence to the FSC and beneficiaries.
Risk management, assurance, and communication
Internal audit should expand its audit universe to include governance and ESG processes. Plan multi-year audit cycles that test board nomination procedures, diversity data accuracy, ESG data governance, and compliance with reporting deadlines. Coordinate with risk management to integrate ESG risks into enterprise risk management (ERM) registers, categorizing issues such as climate transition risk, regulatory penalties, reputational damage, and talent retention challenges. Assign risk owners, establish key risk indicators, and present quarterly updates to the board.
Legal and compliance teams must monitor ongoing FSC guidance, including potential amendments to the Securities and Exchange Act, Company Act, and listing rules that will codify roadmap expectations. Subscribe to FSC circulars, TWSE market observation posts, and industry association updates. Maintain a regulatory tracker that documents rulemaking progress, consultation deadlines, and comment opportunities. Where the roadmap encourages self-regulation—for example, adoption of corporate governance evaluation indicators—benchmark performance against peer companies using public scorecards.
Communications should proactively narrate the company’s governance evolution. Publish dedicated sections on corporate websites summarizing diversity targets, ESG initiatives, and stewardship dialogues. Engage domestic and international investors through webcasts and sustainability reports that explain how the roadmap strengthens resilience. For multinational companies, align messaging with global ESG strategies to present a cohesive story to credit rating agencies and sustainability indices.
Implementation timeline and resource allocation
Create a detailed implementation roadmap that sequences deliverables:
- 2020 Q4–2021 Q2: Complete gap analyses, update board diversity policies, launch succession planning, and begin data governance upgrades.
- 2021 Q3–Q4: Publish enhanced annual report disclosures with expanded diversity metrics; pilot ESG data collection platform; initiate stewardship reporting enhancements.
- 2022: Extend sustainability reporting across broader entities, obtain GHG verification where required, and integrate ESG KPIs into compensation plans.
- 2023: Achieve the one-third female director benchmark, deliver comprehensive sustainability reports for all covered entities, and secure positive evaluations in the TWSE Corporate Governance Assessment.
Budget considerations should include board recruitment costs, data platform licensing, assurance engagements, training programs, and potential external advisory support. Establish a governance transformation office that reports to the chief sustainability officer or corporate secretary, with clear accountability for each workstream.
Training and culture change
Conduct training for directors on ESG oversight, scenario analysis, and stakeholder expectations. Use workshops to explore case studies on climate risk, supply chain ethics, and digital governance. For management, provide modules on data quality, KPI ownership, and integrating ESG into operational decision-making. Align human resources policies with diversity and inclusion goals, including pipeline development for female leaders and mentoring programs.
Embed ESG considerations into corporate culture by linking them to mission statements and performance evaluations. Recognize teams that deliver sustainability innovations, and celebrate milestones such as GHG reduction achievements or community investment outcomes. Encourage cross-functional collaboration by establishing ESG working groups that bring together finance, operations, technology, and compliance professionals.
Monitoring external benchmarks and stakeholder expectations
Track scores from the TWSE Corporate Governance Evaluation System, MSCI ESG Ratings, Sustainalytics Risk Ratings, and Taiwan Institute of Directors assessments to gauge external perceptions. Compare performance against domestic peers and regional leaders in Japan, South Korea, and Singapore to contextualize progress. Engage with stakeholder groups—including labor unions, community representatives, and NGOs—to validate that governance reforms address material concerns.
Use investor feedback loops to refine strategy. Host ESG-specific investor days, publish Q&A documents addressing common inquiries, and participate in collaborative initiatives such as the Taiwan Stewardship and Corporate Governance Forum. Document how stakeholder input translates into governance enhancements, and disclose outcomes in sustainability and annual reports.
Key takeaways for leadership
Corporate Governance 3.0 is both a compliance mandate and a competitive opportunity. Companies that move early will demonstrate credibility to investors, regulators, and global supply chain partners. Leadership teams should treat the roadmap as a catalyst to institutionalize ESG data governance, strengthen board effectiveness, and unlock access to green finance. By resourcing dedicated implementation teams, updating policies, and communicating transparently, organizations can meet the FSC’s milestones and position themselves as sustainability leaders in the Asia-Pacific market.
Follow-up: Taiwan’s FSC updated the roadmap for 2023–2025, expanding mandatory sustainability reports to all listed companies by 2024 and tightening board diversity metrics for TWSE and TPEx issuers.
Sources
- FSC announcement: Corporate Governance 3.0 – Sustainable Development Roadmap — Financial Supervisory Commission, Taiwan; Press release detailing Corporate Governance 3.0 diversity, stewardship, and disclosure milestones through 2023.
- Corporate Governance 3.0 roadmap overview — Financial Supervisory Commission, Taiwan; English summary of implementation timelines for Corporate Governance 3.0 standards.