Audit Committees: Assessing the Substance Behind the Structure
Every listed company in Taiwan is required by law to establish an audit committee composed of independent directors, charged with overseeing financial reporting, internal controls, and significant transactions. The more meaningful question, however, is not whether a committee exists—but whether it functions.
A Structural Nuance Worth Understanding
Taiwan's regulations include a provision with material governance implications: even when an audit committee objects to a proposed resolution, the board of directors may override that objection with a two-thirds supermajority vote—provided the dissent is publicly disclosed. This design places a practical ceiling on the committee's de facto blocking power, making the caliber and independence of its members all the more consequential.
Practical Indicators of Committee Effectiveness
Several observable signals merit review in company filings: the annual frequency of committee meetings (infrequent meetings are unlikely to support deep oversight); whether meeting records reflect any deliberation or dissent (consistent unanimity across all resolutions warrants scrutiny); and whether the external auditor has changed recently (auditor turnover can sometimes signal friction between management and the auditing function).
The Remuneration Committee Dimension
The remuneration committee—also composed of independent directors under Taiwan's regulations—serves a parallel function: assessing whether executive compensation structures are aligned with long-term company performance. A company that maintains elevated executive pay through a period of declining profitability raises legitimate questions about the committee's independence from management.
Where to Look
Meeting frequency and attendance records for both committees are disclosed in annual reports and accessible through Taiwan's Market Observation Post System (MOPS: https://mops.twse.com.tw).
Committees are only as effective as the people within them—and whether those people are genuinely willing to say no.