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
1. Evaluation Method: Members of the Board of Directors (including the Functional Committee) shall self-assess using the "Performance Self-Evaluation Form" , and the results of each indicator of the "Performance Evaluation Form" shall be calculated based on the actual operation of the Board of Directors (including the Functional Committee).
2. Evaluation Aspect

	Board of Directors	Functional Committee
Evaluation Indicator	(1) 6 aspects in 50 indicators: Participation in the operation of the Bank. Improvement of the quality of the Board of directors' decision making Composition and structure of the Board of directors Election and continuing education of the director Internal control Action in respect to Sustainability Management (ESG) (2) Each director makes supplementary explanations based on their specific contributions to various important issues such as operational performance, ESG, Treating Customers Fairly Principles, and digital transformation.	5 aspects in 25 indicators: Participation in the operation of the Bank Awareness of the duties of the functional committee Improvement of quality of decisions made by the functional committee Makeup of the functional committee and election of its members Internal control.

3. Evaluation Results: The consolidated comprehensive evaluation results of the "Performance Evaluation Form" of the Board of Directors and the Functional Committee are divided into the following three levels: (1) Exceeding the standard: above 90 points; (2) Meets the criteria: above 80 points but less than 90 points; (3) To be strengthened: less than 80 points

►The overall evaluation results of the Bank's 2024 board of directors and functional committees were all "exceeding the standard".
B. External Evaluation
1. The external evaluation is conducted by an external independent organization or a team of external experts or scholars who meet the qualifications below as per the indicators and procedures (usually questionnaires and on-site interviews) they set:
(1) Professional and independent.
(2) Relevant institutions or management consulting firms, which mainly offer education and training courses for the board of directors or provide services to improve corporate governance.
(3) At least three members should be the experts or scholars specialized in the field of board of directors members or corporate governance.
2. Evaluation Results
The Bank conducts external performance evaluations of the Board of Directors every three years. The external Taiwan Corporate Governance Association (hereinafter referred to as the "Corporate Governance Association") was commissioned to conduct the evaluation. The Corporate Governance Association is a professional and independent institution for corporate governance system evaluation, appraisal, and board performance assessment. It is staffed by corporate governance professionals serving as members or executive members and provides training services for directors and supervisors of listed and publicly issued companies, ensuring professionalism and independence. The Bank has formulated specific improvement plans based on the improvement recommendations provided by the Corporate Governance Association's comprehensive evaluation criteria across five major aspects: "the composition and division of labor of the Bank's board of directors," "the guidance and supervision by the board," "the authorization and risk management by the board," "the communication and collaboration of the board," and "the self-discipline and improvement of the board." Relevant details are available on the Bank's official website.
The Rules of Performance Evaluation of the Board of Directors
Evaluation Result of the Performance of the Board of Director

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.