Audit Committee

The Audit Committee assists the Board in fulfilling its oversight of the quality and integrity of the accounting, auditing, reporting, and financial control practices of the Company.

The Audit Committee is responsible to review the following major matters:

  • Financial reports; 
  • Auditing and accounting policies and procedures; 
  • Internal control systems and including related policies and procedures; 
  • Material asset or derivatives transactions; 
  • Material lending funds, endorsements or guarantees; 
  • Offering or issuance of any equity-type securities; 
  • Derivatives and cash investments; 
  • Legal compliance; 
  • Related-party transactions and potential conflicts of interests involving executive officers and directors; 
  • Ombudsman reports; 
  • Fraud prevention and investigation reports; 
  • Corporate information security; 
  • Corporate risk management; 
  • Performance, independence, qualification of independent auditor; 
  • Hiring or dismissal of an attesting CPA, or the compensation given thereto; 
  • Appointment or discharge of financial, accounting, or internal auditing officers; 
  • Assessment of Committee Charter and fulfillment of Audit Committee duties; and 
  • Self-assessment of the Committee’s performance, etc.

Under R.O.C. law, the membership of Audit Committee shall consist of all independent Directors. TSMC's Audit Committee satisfies this statutory requirement. The Committee also engaged a financial expert consultant in accordance with the rules of the U.S. Securities and Exchange Commission. The Audit Committee annually conducts self-evaluation to assess the Committee's performance and identify areas for further attention.

TSMC's Audit Committee is empowered by its Charter to conduct any study or investigation it deems appropriate to fulfill its responsibilities. It has direct access to TSMC's internal auditors, the Company's independent auditors, and all employees of the Company. The Committee is authorized to retain and oversee special legal, accounting, or other consultants as it deems appropriate to fulfill its mandate.

 

Audit Committee Meeting Status in 2021

The Committee meets at least once every quarter. Sir Peter L. Bonfield, Chairman of the Audit Committee, convened four regular meetings and two special meetings in 2021. In addition to these meetings, he also convened one special meeting and three telephone conferences to discuss the Company’s Annual Report to be filed with the Taiwan and U.S. authorities and investor conference materials with management. The Committee members and consultant’s attendance status is shown in the following table.

Title Name Attendance in Person By Proxy Attendance Rate in Person (%) Telephone
Conferences
Attendance Rate of Telephone 
Conferences (%)
Notes
Chair

Sir Peter L. Bonfield

7 0 100% 3 100% Renewal of office (Note)
Member Stan Shih 4 0 100% 2 100% Term expired (Note)
Member Kok-Choo Chen 7 0 100% 3 100% Renewal of office (Note)
Member Michael R. Splinter 7 0 100% 3 100% Renewal of office (Note)
Member Moshe N. Gavrielov 7 0 100% 3 100% Renewal of office (Note)
Member Yancey Hai 7 0 100% 2 100% Renewal of office (Note)
Member L. Rafael Reif 3 0 100% 1 100% New office assumed (Note)
Financial Expert Consultant Jan C. Lobbezoo 5 0 100% 3 100% None

Annotations:
A.    (1) Resolutions related to Securities and Exchange Act §14-5:

Meeting Date Resolution
2021 1st Regular Meeting
February 8
  • 2020 annual financial statements
  • 2020 business report
  • 2020 fourth quarter earnings distribution
  • Disposal of a portion of VisEra shares in preparation for its planned IPO
  • 2020 Statement of Internal Control System
2021 1st Special Meeting
April 13
  • 2021 first quarter financial statements
2021 2nd Special Meeting
April 22
  • Issuance of employee restricted stock awards for year 2021
2021 2nd Regular Meeting
June 8
  • 2021 first quarter business report
  • 2021 first quarter earnings distribution
  • Related-party sale of existing TSMC equipment to TSMC Nanjing Company Limited
  • Comfort letter service provided by Deloitte for the U.S. bond issuances
  • Additional service fee to Deloitte for the issuance of employee restricted stock awards
  • Amendments to TSMC’s internal control related policies and procedures
2021 3rd Regular Meeting
August 9
  • 2021 second quarter financial statements
  • 2021 second quarter business report
  • 2021 second quarter earnings distribution
  • Ratification of TSMC’s security investments classified as non-current assets
2021 4th Regular Meeting
November 8
  • 2021 third quarter financial statements
  • 2021 third quarter business report
  • 2021 third quarter earnings distribution
  • Ratification of the comfort and consent services, and the additional service and service fee for the review of IFRS 1H’21 financial statement, by Deloitte & Touche for the 4.5 billion U.S. bond issuance
  • Additional 2021 service fees to Deloitte & Touche for TSMC Japan 3DIC R&D Center & new Japan Fab
  • 2022 service fee and out-of-pocket expense for Deloitte & Touche

Independent directors’ objections, reservations or major suggestions: None.

Resolution of the Audit Committee and the Company’s response to the Audit Committee’s Opinion: The members of the Audit Committee unanimously approved all the resolutions, and the Board of Directors approved all such resolutions recommended by the Audit Committee.

  (2) There were no other resolutions which was not approved by the Audit Committee but was approved by two thirds or more of all directors in 2021.

B.    There were no recusals of independent directors due to conflicts of interests in 2021.

Note: Sir Peter L. Bonfield, Kok-Choo Chen, Michael R. Splinter, Moshe N. Gavrielov, Yancey Hai and L. Rafael Reif were elected as TSMC’s independent director and became member of the Audit Committee on July 26, 2022. Their respective tenures are from July 26, 2021 to July 25, 2024.

 

Descriptions of the Communications between the Independent Directors , the Internal Auditors, and the Independent Auditors in 2021

These Closed Door Sessions relate to corporate finance and operations matters, and are between the Independent Directors and the Internal Auditors or the Independent Auditors. The communication principles are as follows,

  1. The internal auditors have sent the audit reports to the members of the Audit Committee periodically and presented the findings of all audit reports in the quarterly meetings of the Audit Committee. The head of Internal Audit will immediately report to the members of the Audit Committee any material matters. During 2021, the head of Internal Audit did not report any such material matters. The communication channel between the Audit Committee and the internal auditor functioned well.
  2. The Company’s independent auditors have presented the findings of their quarterly review or audits on the Company’s financial results. Under applicable laws and regulations, the independent auditors are also required to immediately communicate to the Audit Committee any material matters that they have discovered. During 2021, the Company’s independent auditors did not report any irregularity. The communication channel between the Audit Committee and the independent auditors functioned well.

 

The Communications between the Independent Directors and the Internal Auditors or the Independent Auditors

Meeting Date Communications between the Independent Directors and the Internal Auditors Communications between the Independent Directors and the Independent Auditors
2021 1st Regular Meeting
February 8
  • Internal Auditor’s report (Closed Door Session)
  • 2020 Audit issue trend analysis (Closed Door Session)
  • Report on SOX 404 self-testing results for the year 2020 (Closed Door Session)
  • 2020 Statement of Internal Control System (Closed Door Session)
  • External auditor relationship (i.e. qualification, performance and independence) 
  • External auditor’s report on Project KY Debriefing
  • Report of regulatory developments
  • Any audit problems or difficulties and management’s response in connection with 2020 annual financial statements (Closed Door Session)
2021 2nd Regular Meeting
June 8
  • Internal Auditor’s report (Closed Door Session)
  • Amendments to TSMC’s internal control related policies and procedures (Closed Door Session)
  • The result of 2020 CPA evaluation questionnaire 
  • Report of regulatory developments 
  • Any review problems or difficulties and management’s response in connection with 2021 first quarter financial statements (Closed Door Session)
2021 3rd Regular Meeting
August 9
  • Amendments to 2021 internal audit plan
  • Internal Auditor’s report (Closed Door Session)
  • Report of regulatory developments 
  • Any review problems or difficulties and management’s response in connection with 2021 second quarter financial statements (Closed Door Session)
2021 4th Regular Meeting
November 8
  • Internal Auditor’s report (Closed Door Session)
  • 2022 internal audit plan (Closed Door Session)
  • Report of regulatory developments
  • Any review problems or difficulties and management’s response in connection with 2021 third quarter financial statements (Closed Door Session)

Result: all of the above matters were reviewed and/or approved by the Audit Committee whereupon independent directors raised no objection.

Board Committee Membership
Name Audit Committee Compensation Committee
Peter L. Bonfield(Independent Director) (Chair)
Kok-Choo Chen (Independent Director)
Michael R. Splinter;(Independent Director) (Chair)
Moshe N. Gavrielov (Independent Director)
Yancey Hai (Independent Director)
Rafael Reif (Independent Director)
Jan C. Lobbezoo Note (Financial Expert Consultant)  
Note: Jan C Lobbezoo was appointed to serve as financial expert consultant to TSMC Audit Committee from April 1, 2007. He currently serves as the Chairman of the Supervisory Board of ASMI NV, a supplier of semiconductor wafer processing equipment and process solutions. He also serves on the supervisory board of several private companies in the Netherlands. Jan C Lobbezoo worked at the Philips group for approximately 36 years in various finance and control positions in countries like Nigeria, South Africa, Scandinavia as well as The Netherlands. He served for over 11 years as CFO of Philips Semiconductors (now known as NXP) until 2005. Thereafter he became Executive Vice-President of Philips International until retirement in December 2006. He was Philips' representative and served as a Director of TSMC Board between 1994 to March 2007. He holds a master degree in business economics from the Erasmus University in Rotterdam, The Netherlands; where he also obtained an accounting degree as Register Accountant. He is a member of the Dutch Institute of Chartered Accountants (NBA).
Compensation Committee

The Compensation Committee assists the Board in discharging its responsibilities related to TSMC’s compensation and benefits policies, plans and programs, and in the evaluation and compensation of TSMC’s directors of the Board and executives.

The members of the Compensation Committee are appointed by the Board as required by R.O.C. law. According to TSMC’s Compensation Committee Charter, the Committee shall consist of no fewer than three independent directors of the Board. The Compensation Committee is comprised of all six independent directors. The Chairman of the Board and the Chief Executive Officer are invited by the Committee to attend all meetings and are excused from the Committee’s discussion of their own compensation.

TSMC’s Compensation Committee is authorized by its Charter to retain an independent consultant to assist in the evaluation of CEO, or executive officer compensation. The Compensation Committee Charter is available on TSMC’s corporate website.

The Committee meets at least once every quarter. Please consult TSMC’s Taiwan Annual Report for the relevant year for the number of meetings convened and each member’s attendance rate.

 

Compensation Committee Meeting Status in 2021

Mr. Michael R. Splinter, Chairman of the Compensation Committee, convened four regular meetings in 2021. The Committee members’ attendance status is as follows:

Title Name Attendance in Person By Proxy Attendance Rate in Person (%) Notes
Chair Michael R. Splinter 6 0 100% Renewal of office (Note)
Member Sir Peter L. Bonfield 6 0 100% Renewal of office (Note)
Member Stan Shih 3 0 100% Term expired (Note)
Member Kok-Choo Chen 6 0 100% Renewal of office (Note)
Member Moshe N. Gavrielov 6 0 100% Renewal of office (Note)
Member Yancey Hai 6 0 100% Renewal of office (Note)
Member L. Rafael Reif 3 0 100% New office assumed (Note)

Annotations:
A. the Compensation Committee conducted four regular meetings on February 8, June 8, August 9 as well as November 8.  The Committee also conducted 2 special meetings on April 22 and July 26.  The discussion items are as follows:

  • Report the matters related to employee compensation
  • Total amount of quarterly business performance bonus
  • Total amount of annual profit sharing
  • The amount of quarterly business performance bonus for executive officers, CEO and Chairman
  • The annual compensation of Directors and executive officers, and the disclosure of the same in annual report 
  • Employee Restricted Stock Awards Rules for Year 2021
  • Chairperson of the Compensation Committee Election

     All of above matters were reviewed and/or approved by the Compensation Committee.

B. There was no recommendation of the Compensation Committee which was not adopted or was modified by the Board of Directors in 2021.

C. There were no written or otherwise recorded resolutions on which a member of the Compensation Committee had a dissenting opinion or qualified opinion

Note: At the meeting of July 26, 2021, TSMC’s Board of Directors approved the appointment of all six independent directors, Michael R. Splinter, Sir Peter L. Bonfield, Kok-Choo Chen, Moshe N. Gavrielov, Yancey Hai, and L. Rafael Reif, as members of the Compensation Committee.  Their respective tenures are from July 26, 2021 to July 25, 2024.

 

Chairman, CEO, and Executive Officers’ Ownership Requirements

TSMC believes that the long-term ownership of company shares by corporate officers helps align their interests with those of all shareholders, therefore, the Company formulated Corporate Officer Shareholding Guidelines in 2020. The required value for Chairman, CEO, and other corporate officers’ holding of TSMC shares is proportional to their annual base salary (18 times for Chairman and CEO, 9 times for other officers in Taiwan, and 3 times for overseas officers). Officers shall fulfill the required value within 3 years of appointment. Officers keep the required value for the entire period of employment.