Audit and Risk Committee

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

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

  • Financial reports;
  • Auditing and accounting policies and procedures; 
  • Internal control systems and 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 Committee duties;
  • Self-assessment of the Committee’s performance; and
  • Any other matters that shall be reviewed by the Audit and Risk Committee Meeting as required by relevant laws and regulations or its Committee Charter, or that are deemed to be material by the regulatory authorities.

Under R.O.C. law, the membership of audit committee shall consist of all independent directors. TSMC’s Audit and Risk 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 and Risk Committee annually conducts self-evaluation to assess the Committee’s performance and identify areas for further attention.

TSMC’s Audit and Risk 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 and Risk Committee Members’ Professional Qualifications and Experiences

Please refer to Directors' Biographies.

 

Audit and Risk Committee Meeting Status in 2023

Tenures of the Audit and Risk Committee members are from July 26, 2021 to July 25, 2024. Sir Peter L. Bonfield, Chairman of the Audit and Risk Committee, convened four regular meetings in 2023. In addition to these meetings, he also convened one special meeting and three telephone conferences to review the Company’s Annual Report to be filed with the Taiwan and U.S. authorities and investor conference materials. The Committee members’ and consultant’s attendance status is as follows.

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

Sir Peter L. Bonfield

5 0 100% 3 100% None
Member Kok-Choo Chen 4 1 80% 3 100% None
Member Michael R. Splinter 5 0 100% 3 100% None
Member Moshe N. Gavrielov 5 0 100% 2 67% None
Member Yancey Hai 5 0 100% 3 100% None
Member L. Rafael Reif 5 0 100% 2 67% None
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
2023 1st Regular Meeting
February 13
  • 2022 annual financial statements
  • 2022 business report
  • 2022 fourth quarter earnings distribution
  • Capital injection of not more than US$3.5 billion to TSMC Arizona
  • Fund-lending to TSMC Arizona for an amount not to exceed US$3 billion and a period not to exceed one year
  • Amendments to TSMC’s “Procedures for Endorsement and Guarantee”
  • NTD corporate bond issuance
  • Issuance of total 2,110,000 shares of 2022 employee restricted stock awards
  • Issuance of 2023 employee restricted stock awards
  • 2022 Statement of Internal Control System
2023 2nd Regular Meeting
May 8
  • 2023 first quarter financial statements
  • 2023 first quarter business report
  • 2023 first quarter earnings distribution
  • NTD corporate bond issuance
  • Amendments to TSMC’s internal control related policies and procedures
2023 3rd Regular Meeting
August 7
  • 2023 second quarter financial statements
  • 2023 second quarter business report
  • 2023 second quarter earnings distribution
  • Capital injection of not more than €3,499,930,000 to European Semiconductor Manufacturing Company GmbH (ESMC)
  • Capital injection of not more than US$4.5 billion to TSMC Arizona
  • Ratification of TSMC’s security investments classified as non-current assets
2023 4th Regular Meeting
November 13
  • 2023 third quarter financial statements
  • 2023 third quarter business report
  • 2023 third quarter earnings distribution
  • Related-party sale of existing TSMC equipment to Japan Advanced Semiconductor Manufacturing, Inc. (JASM)
  • 2024 service fees and out-of-pocket expenses for Deloitte

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

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

  (2) There were no other resolutions which was not approved by the Committee but was approved by two thirds or more of all directors in 2023.

B.    Recusals of Independent Directors due to conflicts of interests: Given that NXP Semiconductors N.V. is a party to the sale of a 30% equity share of TSMC’s wholly-owned German subsidiary, European Semiconductor Manufacturing Company (ESMC) GmbH, in an arrangement of TSMC selling 10% each to Bosch, Infineon and NXP, Mr. Moshe N. Gavrielov recused himself from the discussion and voting as he also serves as a Director of NXP.

 

Descriptions of Independent Directors’ Communications with the Internal Auditors and the Independent Auditors in 2023

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 Committee periodically and presented the findings of all audit reports in the quarterly meetings of the Committee. The head of Internal Audit will immediately report to the members of the Committee any material matters. During 2023, the head of Internal Audit did not report any such material matters. The communication channel between the 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 Committee any material matters that they have discovered. During 2023, the Company’s independent auditors did not report any irregularity. The communication channel between the Committee and the independent auditors functioned well.

 

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

Audit and Risk Committee Meeting Date Communications between the Independent Directors and the Internal Auditors Communications between the Independent Directors and the Independent Auditors
2023 1st Regular Meeting
February 13
  • Internal Auditor’s report (Closed Door Session)
  • Report on SOX 404 self-testing results for the year 2022 (Closed Door Session)
  • 2022 Statement of Internal Control System (Closed Door Session)
  • External auditor relationship (i.e. qualification, performance and independence) 
  • Report of regulatory developments
  • Any audit problems or difficulties and management’s response in connection with 2022 annual financial statements (Closed Door Session)
2023 2nd Regular Meeting
May 8
  • Internal Auditor’s report (Closed Door Session)
  • Amendments to TSMC’s internal control related policies and procedures (Closed Door Session)
  • The result of 2022 CPA evaluation questionnaire 
  • External auditors’ report on Deloitte China and KY matters
  • Report of regulatory developments 
  • Any review problems or difficulties and management’s response in connection with 2023 first quarter financial statements (Closed Door Session)
2023 3rd Regular Meeting
August 7
  • Internal Auditor’s report (Closed Door Session)
  • Report of regulatory developments 
  • Any review problems or difficulties and management’s response in connection with 2023 second quarter financial statements (Closed Door Session)
2023 4th Regular Meeting
November 13
  • Internal Auditor’s report (Closed Door Session)
  • 2024 internal audit plan (Closed Door Session)
  • Report of regulatory developments
  • Any review problems or difficulties and management’s response in connection with 2023 third quarter financial statements (Closed Door Session)

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

Board Committee Membership
Name Audit and Risk Committee Compensation and People
Development Committee
Nominating, Corporate Governance
and Sustainability Committee
Mark Liu (Chairman)       
Peter L. Bonfield (Independent Director)  (Chair)  
Kok-Choo Chen (Independent Director)  
Michael R. Splinter (Independent Director)  (Chair)  
Moshe N. Gavrielov (Independent Director)  (Chair)
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 and Risk Committee from April 1, 2007. He currently serves on the Supervisory Board of a private owned investment company in the Netherlands; he is also a member of the Advisory Board of the Register Accountant education at the University of Maastricht. Jan C Lobbezoo worked at the Philips Group for approximately 36 years in various Finance and Control functions, in countries like Nigeria, South Africa, Scandinavian countries 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).
Nominating, Corporate Governance and Sustainability Committee

The Nominating, Corporate Governance and Sustainability Committee assists the Board in selecting candidates for nomination to be elected as independent directors to the Board, building diversified and professional board, and advising on corporate governance and sustainability matters.

According to its Charter, the Committee shall be composed of the Chairman of the Board and three to six independent directors. Currently, the Committee consists of the Chairman of the Board and all six Independent Directors.

The Nominating, Corporate Governance and Sustainability Committee is authorized by its Charter to hire independent legal, financial and other advisors as it may deem necessary to fulfill its responsibilities.

 

Nominating, Corporate Governance and Sustainability Committee Meeting Status in 2023

According to its Charter, the Committee shall be composed of the Chairman of the Board and three to six independent directors. Currently, the Committee consists of the Chairman of the Board and all six Independent Directors. The Nominating, Corporate Governance and Sustainability Committee assists the Board in strengthening the selection mechanism for directors, selecting candidates for nomination to be elected as independent directors to the Board, building diversified and professional board, and advising on corporate governance and sustainability matters.

On February 14, 2023, the Board established the Nominating, Corporate Governance and Sustainability Committee. Tenures of the Committee members are from February 14, 2023 to July 25, 2024. Mr. Moshe N. Gavrielov, Chairman of the Governance and Sustainability Committee, convened five meetings in 2023. The Committee members’ professional qualification and experience, attendance status, and discussion items are as follows: 

Criteria Professional Qualification and Experience Attendance in Person By Proxy (Note) Attendance Rate in Person
(%)
Notes
Name/Title
Moshe N. Gavrielov (Chair)
Independent Director
TSMC’s Nominating, Corporate Governance and Sustainability Committee is comprised of the Chairman of the Board and all six independent directors. For members professional qualification and experience, please refer to Directors' Biographies 5 100% None
Mark Liu
Chairman of the Board
5 100% None
Sir Peter L. Bonfield
Independent Director
5 100% None
Kok-Choo Chen
Independent Director
5 100% None
Michael R. Splinter 
Independent Director
5 100% None
Yancey Hai
Independent Director
5 100% None
L. Rafael Reif
Independent Director
4 80% None

Annotations:

A. In 2023, the Nominating, Corporate Governance and Sustainability Committee conducted five meetings on February 14, March 23, May 8, August 7 and November 13.  The discussion items were as follows:

  • Committee’s operation
  • Future candidates for Independent Directors
  • Establishment of the TSMC’s Corporate Governance Guidelines
  • Sustainable Development Action Plans for Listed Companies (2023)
  • Quarterly ESG report
  • Annual reviewing and assessing the Committee charter and fulfillment of Committee duties

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

B. There were no resolutions on which any member of the Committee had an objection opinion.

C. The Board of Directors approved and adopted all recommendations of the Committee without modification.

Note: The Committee members shall attend the meetings in-person, and there is no proxy available for the Committee members who are unable to attend the meeting.

Compensation and People Development Committee

The Compensation and People Development Committee assists the Board in discharging its responsibilities related to TSMC’s compensation and benefits policies, plans and programs, in the evaluation and compensation of TSMC’s directors of the Board and executives, and the review of the pipeline planning of the Company's senior executives to ensure the long-term sustainability of the Company.

The members of the Compensation and People Development Committee are appointed by the Board as required by R.O.C. law. According to its charter, the Committee shall consist of no fewer than three independent directors of the Board, whereas the actual 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 and People Development Committee is authorized by its charter to retain an independent consultant to assist in the evaluation of CEO’s or executive officer’s compensation.

 

Compensation and People Development Committee Meeting Status in 2023

Tenures of the Compensation and People Development Committee members are from July 26, 2021 to July 25, 2024. Mr. Michael R. Splinter, Chairman of the Committee, convened four regular meetings in 2023. The Committee members’ qualification and attendance are as follows.

Title Name Attendance in Person By Proxy Attendance Rate in Person (%) Notes
Chair Michael R. Splinter 4 0 100% None
Member Sir Peter L. Bonfield 4 0 100% None
Member Kok-Choo Chen 4 0 100% None
Member Moshe N. Gavrielov 4 0 100% None
Member Yancey Hai 4 0 100% None
Member L. Rafael Reif 4 0 100% None

Annotations:
A. In 2023, the Compensation and People Development Committee conducted four regular meetings on February 13, May 8, August 7 and November 13.  The discussion items were as follows:

  • Report on 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 same in the Annual Report
  • Vest of Employee restricted stock awards for 2021
  • Grant of Employee restricted stock awards for 2022
  • Employee restricted stock awards rules for 2023
  • Claw-back Policy
  • Organization and Executive Succession Discussion
  • The renaming the “Compensation Committee” to the “Compensation and People Development Committee” and the amendments to its Charter

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

B. The Board of Directors adopted all recommendations of the Committee without modification.

C. There were no written or otherwise recorded resolutions on which any member of the Committee had an objection or reservation opinion.

 

Chairman, CEO, and Executive Officers’ Shareholding 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 and maintain the required value for the entire period of employment.