| dc.description.abstract | Legally regulated by Taiwan’s financial supervisory authority starting from 2012, each Taiwan’s listed company must establish a remuneration committee in order to gear Taiwan in line with international standards and strengthen corporate governance. The purpose of this study is to explore how the remuneration committees of Taiwan’s IC design industry, which is selected for investigation for it being on a highly talented staff base and with high production value, carry out their responsibilities and implement supervisory mechanisms in an effective and efficient manner. Taiwan’s IC design industry can accordingly benefit a win-win situation for both itself and shareholders and achieve sustainable and long-term development.
This thesis focuses on discussing the two main subjects of the remuneration committees and executive compensation of the 34 Taiwan’s listed companies, sampled from a group of IC design family. The first part of this study can be further divided into three sub-categories: (1) the membership of the committee, (2) the scope of its rules and powers, and (3) the analysis of practical implementation challenges. The other part of this study, on the other hand, deals with the executive officers’ salary, the composition of their compensation package, and the relationship between compensation structure and job performance review.
This study discloses that the regulations governing the appointment and exercise of powers by the remuneration committees were essentially set for the prevention of scandals by Taiwan’s financial supervisory authority. The enacted regulations of Taiwan are largely identical but with minor minorities of those of the US and European countries in response strategy. All the collected samples indicate that 50.48% of the 34 listed companies concerning IC design with the appointment of independent directors as remuneration committee members comply with the regulations of the financial supervisory authority. In addition, the rest of remuneration committee members are from outside independent professional experts and are from inside directors of the surveyed companies at 32.38% and 17.14%, respectively. The remuneration committee members of the outside independent professional experts consist of 68.97% from industry, while the other 31.03% are hired from academy. The current scopes of the rules and powers of the remuneration committees only emphasize the importance of regulations enforcement and put their focus on how to comply with the legality of the regulations as the top priority.
From the standpoint of agency theory, an agency problem commonly exists in between top managers and shareholders among the listed companies with high-dispersion stocks. Only by good corporate governance and perfect mechanism can the cost of agency be effectively reduced. Gibbons and Murphy (1990) emphasized that the remuneration contracts stating executive compensation were better to include both incentive and insurance effects. It can be assured from this study that the total 33 surveyed listed companies (exclusive of Media Tech, Taiwan) where their remuneration structure accounts for 55%~60% in salaries, 11%~19% in rewards, and 26%~34% in bonuses. The obtained data can also explain that the percentage of various bonuses in the total remuneration structure tends to progressively decrease year by year. The companies, on the other hand, provide alternative stock option for their executive officers makes up only 53% of the total 33 surveyed listed companies, and are mostly to have inferior earnings performance.
Referring to the net income after tax of the companies, the relationship between executive remuneration and operation performance in 2009 exhibited that 19 companies out of the sampled companies had towards positive relation, amounting to 56% of the collected samples. In 2010 the number of the companies indicated positive relation increased from 19 to 27, or took up 79% of the collected samples, suggesting that the average executive remunerations were closely related to the operation performance compared with those in 2009. The data shown in this study may also conclude that the investigated IC design companies prefer to award their employees with performance bonus and cash bonuses, both of which are short-term incentive awards.
Taiwan’s financial supervisory authority is suggested to enhance or redistribute current regulations, having companies use more adjustable and flexible long-term remuneration packages for executive compensation. By loosening the regulations governing the issue of restricted stocks along with the enforcement of deferred income tax enables companies to build up robust schemes integrated the oversight of company performance, remunerations with risks. Not only can the executive compensation become perfect and complete but they can be operated under strict oversight of shareholders, supervisory authority and other related institutions if the salary systems are systematically established. Furthermore, in long term the setup of the regulations can even help companies hire, retain and even motivate the most talented and key leaders in the companies, thereby making overall companies’ competitiveness enhanced.
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