Chang Hwa Bank|Corporate Social Responsibility-Performance & Remuneration of Board of Directors

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Performance Evaluation of the Board of Directors

The Bank has established the "Rules of Performance Evaluation of the Board of Directors" , which establishes performance goals to enhance the operational efficiency of the board of directors, and conducts annual performance evaluations in accordance with the evaluation procedures and evaluation indicators stipulated in these measures. The process is as follows:
(1) Frequency of Performance Evaluations
The Bank shall conduct the performance evaluation at the end of each year in accordance with the evaluation procedures and evaluation indicators set in the Rules, and shall complete and report to the Board of Directors before the first quarter of the following year. The external evaluation shall be conducted by external independent professional institution or a panel of external experts and scholars at least once every 3 years.
(2) Performance Evaluation Method
A. Internal Evaluation

Remuneration Policies and Procedure for Determining Remuneration

Remuneration Policies

1. Remuneration of Senior Managers
(1) Remuneration of Directors (including Chairperson and Independent Directors)
According to Item 13, Article 20 of the Bank’s Articles of Incorporation, the remuneration of the Directors shall be on par with the salary levels of Directors of financial institutions similar in size to the Bank and decided by the Board of Directors. The Remuneration Committee and the Board of Directors will combine the performance evaluation results of the Board of Directors to evaluate remuneration of Directors (including Chairperson, Directors and Independent Directors) annually in accordance with Item 2, Paragraph 1, Article 7 of Rules of Performance Evaluation of the Board of Directors.
(2) Remuneration of President
According to Item 14, Article 20 of the Bank’s Articles of Incorporation, remuneration of President is determined by the Board of Directors.
(3) Remuneration of Executive Vice Presidents
According to Item 14, Article 20 of the Bank’s Articles of Incorporation, remuneration of Executive Vice Presidents is determined by the Board of Directors within the scope of the Bank’s “Salary Scales List for Personnel”.
2. Remuneration Deferral Policy for Senior Managers
To motivate senior managers to achieve greater performance, duly conduct risk management, and enhance corporate governance, we have formulated a remuneration deferral policy for senior managers (including the President, the Executive Vice Presidents, the EVP & Chief Auditor, the EVP & Chief Compliance Officer, heads of divisions at the head office, regional centers, and domestic and overseas business units), in the "Chang Hwa Commercial Bank Employee Bonus Payment Regulations". As per the policy, 80% of the performance bonus should be paid first, and the remaining 20% should be deferred and paid three months later (if the Board of Directors does not resolve a decision to retain the performance bonus due to a risk of improper conduct, which may cause the Bank to suffer losses). This has indicated that the Bank insists on ethical management to promote sustainable development.

Procedure for Determining Remuneration

The members of the Remuneration Committee shall faithfully perform the following duties and responsibilities with the attention of good stewardship:
1. To evaluate and review the Bank’s overall salary and remuneration policy.
2. To establish and periodically review the performance evaluation (including performance evaluation standards) and remuneration policies, systems, standards and structures of the Directors, President, Executive Vice Presidents, the EVP & Chief Auditor, the EVP & Chief Compliance Officer, consultants, and heads of head office divisions and branches of the Bank, and to fully disclose the performance evaluation standards to shareholders in the annual report.
3. To periodically evaluate and set the remuneration of Directors, President, Executive Vice Presidents, EVP & Chief Auditor, EVP & Chief Compliance Officer, consultants, and heads of head office divisions and branches of the Bank.
4. To establish performance evaluation standards and remuneration standards for the Bank’s sales staff of various financial products and services, and to fully disclose the principles, methods and objectives of such standards or structures and systems to shareholders in the annual report.
5. To deliberate the following matters of the Bank’s subsidiaries:
(1) Decision on salary and remuneration levels of Directors, Supervisor, Chairperson, President, and Executive Vice Presidents.
(2) Formulation and revision of rules governing salary, bonus and remuneration for employees.

◎ The Metrics of President(CEO)’s Compensation:

In accordance with item 14, Article 20 of the Bank’s Articles of Incorporation, the remuneration of President is determined by the Board of Directors.

Fixed salary: NTD$3,096 thousand / 50% of remuneration
Variable compensation: NTD$3,096 thousand / 50% of remuneration

◎ Remuneration Deferral Policy for Senior Managers

As per the policy, 80% of the performance bonus should be paid first, and the remaining 20% should be deferred and paid three months later, that is, paid in the next year. (1) performance period: 1 year. (2) time vesting period: 1 year.

◎ CEO Chao-Chung Chou holds 102,000 shares of the Bank, with their market value being 0.29 times of his salary.

◎ The Indicators for Performance bonus of President

Indicator	Description	Weight (%)
Financial profits	● Earnings before tax ● ROA ● ROE ● NPL ratio	40%
Expense control	● Promote service and operation efficiently	15%
Risk management	● Strengthen risk management mechanism ● Enhance risk awareness of employee ● Establish a complete post-loan monitoring mechanism to improve the effectiveness of risk control.	15%
Market share	● Develop new corporate and individual products ● Enlarge domestic and international market shares of corporate banking and consumer banking products (such as loan, syndicated loan, Foreign exchange, Digital Finance etc.)	10%
Human capital	● Performance-oriented human resources ● Hipo talent organization	10%
ESG & disclosure	● Sustainable environment ● Employee Care ● Social Inclusion ● Governance ● Responsible finance ● Disclosure	10%

Currency: TWD Year: 2023	(A) Median	(B) Mean
	annual compensation of all employees(except President)
	1,171 thousand	1,270 thousand
The ratio between the total annual compensation of President and (A) or (B)	5.29	4.88