Sustainability Governance and Risk Management
Corporate governance is the core foundation of sustainable business operations. In addition to responding to the increasing expectations of authorities and stakeholders in recent years, it is also fundamental to ensuring the company's stable operation. We continue to optimise our corporate governance system and actions through our comprehensive rules and regulations and corporate systems. Recognised by the Taiwan Stock Exchange, our competent authority, we were able to stand out among the 734 rated OTC companies in the 9th Corporate Governance Assessment, ranking among the top 5% for the fourth consecutive year, and demonstrating outstanding overall performance in four major areas, namely, "Protecting Shareholders' Interests and Equal Treatment of Shareholders", "Strengthening Board Structure and Operation", "EnhancingInformation Transparency", and "Promoting Sustainable Development".
Operating OrganizationStructure
Board
The Board of Directors is the highest decision-making and governance body of the Company and is responsible for overseeing the overall operational responsibilities and the results of management's policy implementation.The Board of Directors adopts a candidate nomination system in accordance with the "Articles of Incorporation" and the "Regulations Governing the Election of Directors" and elects seven directors for a term of three years.
Nova Tech has 4 independent directors, accounting for approximately 57% of all directors. In order to achieve women's participation in decision-making and to maintain a non-sexist working environment, and to realise SDG5's goal of empowering all women, the current number of women directors is 2, and the target is for more than one-third of the board to be women directors.
The Board of Directors meets regularly each year to discuss major issues of the Company. The Code of Conduct for Directors' Meetings also sets out the matters that should be reported to the Board of Directors and the system designed to avoid conflicts of interest of the Directors. Nova Tech's directors are highly disciplined, avoiding discussions and voting on issues that conflict with their own interests, and do not exercise their voting rights as proxies for other directors, in order to protect the rights and interests of interested parties. The Board attendance rate for 2023 is 98.21%. In addition, Nova Tech has an Audit Committee, a Compensation Committee and a Nominating Committee to enhance the implementation of corporate governance.
Board Diversity
In accordance with the Code of Corporate Governance Practices, Board members should consider the diversity and formulate appropriate policies for their own operations, business models and development needs, including but not limited to: basic conditions and values and professional knowledge and skills. At the same time, the Board members should generally possess the eight competencies of knowledge, skills and qualities necessary to perform their duties in order to achieve the objectives of corporate governance.
In accordance with the above principles, the tenth session of the Board of Directors of the Company consists of seven members, namely:Chairman LIANG, CHIN-LI, Director MA, WEI,
and Director WU, PI-HUI, who have experience in operating companies in different industries, and are experienced in leadership, business management and possess knowledge of
different industries, decision-making ability and international market outlook; Director LI, CHENG with relevant experience in legal affairs; Directors CHI, CHIH-YI and YANG, SHENGYUNG with expertise in financial services; Director CHIU, HUIYIN, a certified public accountant. Each of these Directors and Independent Directors possesses a full range of qualifications and experience, which enables the Board of Directors of the Company to continue to perform the functions of operational decision-making, leadership and supervision.
Continuing Education for Board Members
The Company has continued to organize continuing education courses for its Board members to strengthen their professional knowledge and management functions. The courses cover three aspects, including economic governance, environment and society, and include topics such as corporate governance, sustainable corporate transformation, disclosure of sustainable financial information, and climate change. In 2023, all continuing directors would have 6 hours or more of training, which was 100% in line with the requirements for directors' and supervisors' training hours. For details, please refer to page 77 of the Company's 2023 Annual Report.
Evaluation of the Board Performance
To implement corporate governance and continuously strengthen the operational efficiency of the Board of Directors and functional committees, Nova Tech has established the "Board of Directors' Performance Evaluation Method", which regulates the cycle, scope, method, procedure, and standard of performance evaluation for the Board of Directors and functional committees. The results of the evaluation will be used as a reference for the selection or nomination of directors. In addition to "compliance with laws and regulations","corporate governance," and "risk control", the performance evaluation of the Board of Directors also includes sustainability indicators, such as "corporate sustainability“, to ensure that the Board of Directors and the functional committees are able to fulfil their duties in the areas of corporate governance, management and operations, and corporate sustainability practices. For 2023, the internal performance assessment of the Board was conducted in early 2024, and the internal assessment scores were 90 and above, indicating that the Board is functioning well. In addition to internal self-assessment, we commission an external professional and independent Organization to evaluate the performance of our Board of Directors every three years. In 2023, the Taiwan Institute of Ethical Business (TIEB) was appointed to conduct an on-site evaluation of the Board's effectiveness. The TIEB provides guidance to help the Board perform its functions adequately and provides a professional and objective review report. The results of the evaluation
are published on the Company's website.
Communication Mechanism for Major Events on Sustainability
The Sustainable Promotion Unit established by Nova Tech regularly reports to the Board of Directors on the progress of sustainable development every year. The mission of the Board of Directors includes setting a vision for the sustainable development of the company. In addition to keeping track of the Sustainable Promotion Unit's reports and regularly monitoring the progress of the various groups, Nova Tech is also required to take into account the company's operational performance and the implementation of sustainability issues such as social, environmental and corporate governance, as well as to make statements and recommendations on corporate sustainability policies. At least once a year, the company reviews the effectiveness and channels of communication with stakeholders. In November 2023, Nova Tech reported to the Board of Directors on the status of stakeholder communications as of the third quarter of 2023.
During 2023, the Board of Directors completed discussions or rulings on the following motions related to sustainability issues:
Operating Teams
Nova Tech's management team consists of a general manager and department managers. In accordance with the management philosophy of "building a high-tech industry ecosystem for customers and supply chain partners", the Board of Directors resolves major matters in accordance with the principles of sustainable management, integrity and risk assessment authorisation to ensure the rights and interests of employees and shareholders. The academic qualifications, work experience and background of Nova Tech's operating team members can be found on page 19 of Nova Tech's annual report for the year 2023 or on the Market Observation Post System.
Risk Management
Risk is one of the key aspects of the company's operation and growth. In order to control and reduce operational risks, support the Company's operational growth and achieve sustainable operation, Nova Tech has formulated the "Risk Management Policy" as the highest guiding principle of risk management and as the basis for its implementation, which specifies the policies, objectives, scope, Organizational structure, authority and responsibility of each unit, the risk management mechanism and the implementation process of risk management.
The Board of Directors and the Audit Committee are the highestmanagement units of Nova Tech's risk management. The General Manager is in charge of the promotion and operation of the risk management program. The Board of Directors and the Audit Committee also have various departmental units responsible for promoting risk management in various businesses and reporting to the Audit Committee and the Board of Directors on a regular basis. All employees are also responsible for identifying and reporting risks. Any significant risk event that may affect the Company's operations should be reported immediately to the respective supervisor and the risk team. The supervisor and the risk team will evaluate procedures to mitigate the risk and impact.
Organizational Structure for Risk Management
Risk Management Procedures
Major Risks and Countermeasures
Internal Audit
Nova Tech has established an internal control system in accordance with the "Guidelines for Establishment of Internal Control System for Public Companies". Each of the Company's operating units is subject to internal auditing by the Audit Office of the Board of Directors. The Audit Office is headed by an Internal Audit Supervisor and is staffed with appropriate and suitable auditors based on the Company's size, business conditions, management needs, and other relevant laws and regulations. The auditors prepare an annual audit plan based on the results of the risk assessment, which is approved by the Board of Directors for review. Auditors record audit reports on internal control deficiencies and irregularities, and report to the Audit Committee and the Board of Directors on a regular basis on the status of audit execution and the results of quarterly improvement
of deficiencies.
In 2023, audit operations consisted of on-site audits or written reviews on each of Nova Tech's operating units and Winmax Control Technology Co. Ltd. (Shanghai), Winmax Technology Co. Ltd. (Suzhou), Winmega Technology Corp., NTEC, Rayzher Industrial Co., Ltd. Etc. In addition, we conduct self-assessment of relevant internal control systems and review of operational risk indicators. In 2023, a total of 80 audit reports were submitted and 56 recommendations were made for improvement of deficiencies. There was no major breach of integrity management risk.
Fixed Internal Audit Procedures
Business Performance
Nova Tech is accountable to its stakeholders through good operating performance, which serves as the basis for sustainable business operations and enables the company to invest more resources in optimising corporate governance, enhancing environmental protection and promoting social participation in the future. In view of this, Nova Tech has formulated relevant systems and held annual management review meetings to review and improve the company's operations and financial performance, as well as to implement various management tracking indicators.
Performance
Benefiting from the booming semiconductor industry and aggressive plant expansion, Nova Tech's consolidated operating revenue for fiscal 2023 will be $9,140 million, an increase of approximately 6.4% from fiscal 2022 and the highest in the last three years. On the profit side, Nova Tech's net income after tax in 2023 will be 1,154 million, an increase of 20.7% over 2022 and the highest in the last three years. The economic value generated and distributed by the Organization in 2023 is shown below. For more information on operating performance, please refer to the investor section of the Company's website.
Management Review Meeting
Nova Tech has established the Management Review Procedure to regulate and track the achievement of management system objectives and to provide preventive and improvement alerts during the operation of the company. To ensure the continued relevance, accuracy and timeliness of the management system, management review meetings will be held periodically to review and improve the company's operations and achievement of performance indicators. The scope of the meeting covers the company's management system and
procedures and the incorporation of risk management measures. Senior executives lead the top managers of each unit to conduct business reviews. In addition to assigning the responsible units to make improvements in accordance with the resolutions of the meeting, the General Manager and the assigned personnel will receive formal written or real-time email reports for the purpose of executing the business, which aims to ensure that the resolutions will receive immediate and effective suggestions for improvement and the resources required to achieve the company's performance targets successfully.
Process of Management Review Meeting
