Corporate Governance

Fubon Financial Holdings'commitment tocorporate governance has been widely acclaimed by prestigious financial media outlets at homeand abroad for years. But Fubon and its mainsubsidiaries have gone the extra mile to improvecorporate governance functions and verify theeffectiveness of their corporate governancesystems by taking part in the Taiwan Corporate Governance Association's "Corporate Governance System Assessment Certification" process since 2009. The companies have earned certificationfour straight times, most recently under the TCGA's advanced CG6009 standard on Sept.30, 2014. The certification is valid for two yearsuntil Sept. 29, 2016.

Safeguarding Shareholder Rights

In electing a new board in 2014, the Companyused a system in which all board directorcandidates are nominated and all 13 boardmembers are elected. The system safeguardsshareholder rights, treats shareholders fairly andstrengthens the transparency of the directornomination review process.Fubon Financial Holdings was the first in theindustry in 2011 to have shareholders vote onproposals to be adopted and proposals to bediscussed case-by-case.

Strengthening the Board’s Independence, Enhancing Its Functions

Fubon was both the first publicly listed companyin Taiwan to introduce an independent directorsystem and the first domestic financial institutionto have independent directors make up morethan a third of its board. For a new board electionin 2014, Fubon adopted a system where allcandidates were nominated and voted on. Theelection yielded a board with more than half ofthe members remaining outside directors (sevenmembers, including four independent directors).There were also no independent directors electedwho were given effective terms of more than nineyears, preventing long terms of service that cancompromise directors’ independence andenabling them to fulfill their duties objectively.

Protecting the Rights of Stakeholders

Measures have also been taken to build unimpeded channels of communication with key stakeholders, including setting up a spokesperson system and posting on the website ways to contact the Company’s Investor Relations Division and the free 0800 service hotlines for Fubon subsidiaries. In addition, several separate mailboxes have been set up that enable employees to report abuses, file grievances, express opinions, or communicate directly with independent board directors.

All told, stakeholders can choose the communication channel of their choice based on their different identities and areas of concern through which to interact with the Company.

Operations of the Board of Directors

Of the 13 members elected to Fubon Financial Holdings’ board in 2014, four were independentdirectors. The other threeoutside directors were three Taipei officialsnominated by the Taipei City Government.Directors serve three-year terms, and the current term for board members runs from June 6, 2014 to June 5, 2017.

Fubon Financial Holdings’ board of directorsmeets at least once every two months. In2014, it held five regularly scheduled meetingsand four extraordinary meetings, and thedirectors had an attendance rate of 95.0% (100% if authorized proxies included).

Fubon Financial Holdings’ board of directorsdrafted or amended several importantregulations and guidelines in 2014, includingestablishing “Corporate Governance BestPractices Principles”; revising the “GuidelinesGoverning Interested Party Transactions” ofboth the Company and its subsidiaries; andamending the Company’s “ProceduresGoverning the Acquisition or Disposal ofAssets,” “Standards for Subsidiaries to ReportMajor Asset Transactions to the Financial HoldingCompany’s Board of Directors,” and “Guidelineson Payment of Remuneration to Directors.

Functional Committees

Audit Committee

The Audit Committee is responsible foroverseeing the fair presentation of the Company’sfinancial statements, the hiring (dismissal),independence and performance of its certifiedpublic accountants, and the effectiveness ofthe Company’s internal controls. Other keyfunctions include supervising theappropriateness of internal complianceprocedures and plans and overseeing themanagement of existing or potential risk. In2014, aside from considering proposals inaccordance with statutory provisions, theAudit Committee discussed in detail a planto change the accounting treatment of FubonFinancial Holdings and its subsidiaries’investment property from a cost model to a fairvalue model. It eventually resolved to adopt thefair value model after consulting regulations onappraising property set by regulatory agencies.In 2014, the committee met nine times, with anaverage attendance rate of 97.2%.

Remuneration Committee

The Remuneration Committee assists the boardin establishing and reviewing the Company’spolicies, systems, standards and structuresrelated to the performance evaluations andremuneration of board members and topexecutives, and it regularly assesses the actualremuneration paid to board members and topexecutives. In 2014, the committee did morethan simply perform its standard function ofevaluating the performances and consideringthe year-end bonuses of the Company’s boardmembers and executives and the chairmenand vice chairmen of Fubon subsidiaries. Itrevised Fubon’s “Guidelines on Payment ofRemuneration to Directors” to ensure that thedirector remuneration system was furtherrationalized and established a highly competitivesalary structure, reflected in revisions to the“Guidelines on Remuneration for Executives.”In 2014, the committee held four meetings, withan average attendance rate of 100%.

Corporate Governance and Sustainability Committee

The Corporate Governance Committee isprimarily responsible for helping the boardrecruit, nominate, and verify the Company’sboard director candidates and for recommendingto the board potential independent directorsfor Fubon subsidiaries and the make-up ofthe board’s committees. The committee alsoadvises the board on its internal operationsand management issues, with an eye towardstrengthening the board’s functions. In 2014,the committee reviewed the number of peopleto be elected to the Company’s sixth board andthe length of their terms and recommended afull slate of board director candidates. It alsorecommended independent director candidatesfor the boards of Fubon subsidiaries. Thecommittee met seven times in 2014 and had anaverage attendance rate of 95.2%.