CEO Compensation Indicators
To attract and retain brilliant talents, we are committed to building a competitive and transparent remuneration system that rewards employees the fruits of corporate operational performance as appropriate. The "Compensation Committee" has been set up to review the compensation system on a regular basis, including performance evaluation of directors and executives, compensation policies, systems, standards and structures to ensure sound corporate governance and effective sustainability management.
The CEO compensation is positively correlated with the performance of the Company, divided into fixed and variable compensations. The compensation indicators include financial and comprehensive management indicators, as shown in the following table:
| Indicator Category | Indicators |
|---|---|
| Financial Returns | Return on Equity （ROE）, Return on Asset（ROA） |
| Relative Financial Metrics | Turnover, Earnings per share (EPS),Total corporate-level assets, and Owner's equity |
| Comprehensive Management Indicators | The ESG performances of the Company on the medium- and long-term management approaches, risk management, etc. |
Senior-level Management Long-term Incentive Mechanism
To incentivize the senior management to achieve the corporate vision of a sustainable development, a plan was initiated in 2023 to develop a more motivating incentive mechanism in alignment with the medium- and long-term performance goals of the Company.
Senior-level Management Compensation Indicators
For senior executives, we have established the "Directions Governing the Senior Management Performance and Related Remuneration." Also, in line with the corporate vision and strategies for sustainable development, ESG indicators are incorporated into performance management. Specifically, the remuneration of senior management is linked to ESG performances (with the linkage ratio increased year by year, as the table below). The annual ESG performances of senior executives will directly affect their bonuses and total compensation, so as to strengthen the commitment of senior executives to ESG-related strategies and action plans, realizing the sustainable development vision of the Company and achieving the established sustainability targets.
ESG-linked Compensation Indictors for the Senior Executives
| Category | Annual Evaluation Items |
|---|---|
| ESG Indicators | (1) Power Usage; (2) Renewable Energy; (3) SME Digital Empowerment; (4) Code of Conduct; and (5) Ethical Management |
| The ratio of the linking ESG performance to Executive Variable Compensation | ||||
|---|---|---|---|---|
| Year | 2022 | 2023 | 2024 | 2025 |
| Ratio | 10% | 15% | 25% | 30% |
Incentive Compensation Clawback Policy for the Senior-level Management
Chunghwa Telecom continued to strengthen its corporate governance by following international best practices. Through adopting “Incentive Compensation Clawback Policy”, the Company stands as a pioneer in the Taiwan telecom industry and as one of the few companies in Taiwan to facilitate the Compensation Clawback Policy to further enhance interest alignment between top management and shareholders.
The U.S. Securities and Exchange Commission (SEC) requires all NYSE-listed foreign private issuers must comply with Section 303A.14 of the NYSE Listed Company Manual, to adopt a Clawback Policy. ROC law does not contain such requirement. The board of directors passed a resolution to approve “Incentive Compensation Clawback Policy of Chunghwa Telecom Co., Ltd.” (the “Policy”) on November 8, 2023 (Session 8, 10th Board of Directors).
This Policy states that the Company should recover Erroneously Awarded Compensation which any portion of such Incentive Compensation is received by the Covered Executives during the last three completed Fiscal Years or any applicable Transition Period preceding the date that the Company is required to prepare a Restatement which resulting from the issuer’s material noncompliance with any financial reporting requirement under securities laws.
CEO Incentive Compensation Clawback Policy
The bonuses and compensations to CHT senior executives are made in cash in principle. To ensure the sustainability and ethical management of the Company, in the event of a material risk incident that brings impact to the corporate goodwill or major failure in internal control, Article 12 of the Standards Governing the Administrative Rewards and Discipline of Chunghwa Telecom Personnel stipulates that in the event of any malpractice carried out by any employee, CEO included, the reward(s) approved for such employee is to be revoked upon disciplinary actions as the collected prize amount shall be clawed back in accordance with the Incentive Compensation Clawback Policy for the Senior-level Management of Chunghwa Telecom.