2015 TSMC Annual Report

TSMC Annual Report > 2015 > Corporate Governance > Code of Ethics and Business Conduct

Code of Ethics and Business Conduct

Ethics at TSMC

Code of Conduct: Integrity is the most important core value of TSMC’s culture. TSMC is committed to acting ethically in all aspects of our business; constantly and vigilantly promoting integrity, honesty, fairness, accuracy, and transparency in all that we say and do. At the heart of our corporate governance culture is TSMC’s Code of Ethics and Business Conduct (the “Code”) that applies to TSMC and its subsidiaries. The Code requires that each employee bears a heavy personal responsibility to preserve and to protect TSMC’s ethical values and reputation and to comply with various applicable laws and regulations.

Major Ethics Code Obligations

Do not advance personal interests at the expense of, or in conflict with the Company;
Refrain from corruption, unfair competition, fraud, and waste or abuse of corporate assets;
Avoid any efforts improperly to influence the decisions of anyone, including government officials, agencies, and courts, as well as our customers, suppliers, and vendors.
Do not undertake any practices detrimental to TSMC, the environment and to society;
Procure all of our raw materials from socially responsible sources;
Protect proprietary information of TSMC and our customers; and
Abide by both the letter and spirit of all applicable laws, rules and regulations.

Intellectual Property Protection: In order to build and sustain an environment of innovation, technology leadership, and sustainable profitable growth, the Code requires that we promote business relationships founded upon an unwavering respect for the intellectual property rights, proprietary information and trade secrets of TSMC, our customers, and others.

Public Disclosures: TSMC’s officers, especially our CEO, CFO, and General Counsel, with oversight from our Board, are responsible for the full, fair, accurate, timely, and understandable financial accounting and financial disclosure in reports and documents filed by the Company with securities authorities and in all TSMC public communications and disclosures. TSMC has a variety of measures in place to ensure compliance with these disclosure obligations.

Any modification to the Code requires the approval of our Audit Committee to ensure our ethics compliance program is independently reviewed against corporate best practices.

Code Implementation

High Standard Ethical Culture: Our ethics program is implemented in four ways by all of our employees, officers and Board members. First, TSMC’s management sets the “tone from the top” by acting in accordance with the Code so that they may be an example to all stakeholders. Second, working-level managers are responsible for ensuring their staff’s understanding of and compliance with applicable rules and regulations. Third, we encourage an environment of open communications in discussing any questions related to the Code. Any stakeholder may consult his or her direct supervisors, Human Resources or Legal to obtain timely advice. Lastly, TSMC requires all employees to stay vigilant and report any noncompliance by anyone to their supervisors, the function head of Human Resources, the responsible corporate Vice President that oversees the Ombudsmen system, or to the Chairman of the Company’s Audit Committee directly and, if desired, anonymously.

Self-Assessment of All Departments and Employees:
Self-assessment of all departments and employees is an important part of our ethics compliance program. All departments and subsidiaries of TSMC are required to conduct Control Self-Assessment (CSA) tests annually to review employees’ awareness of the Code. The CSA results are reviewed to track the results of our compliance program. In addition, all employees must disclose any matters that cause, or may cause, actual or potential conflict of interest. In addition to such proactive disclosure requirement, employees with certain job responsibilities and senior officers must annually declare any relationships that may constitute a conflict of interest, which is then reviewed by executive management.

Internal Auditing: The Internal Auditor of TSMC plays a critical role in ensuring the Company’s compliance with the Code and relevant rules and regulations. To ensure that our financial, managerial, and operating information is accurate, reliable, and timely and that our employee’s actions are in compliance with applicable policies, standards, procedures, laws and regulations, our Internal Auditor conducts audits of various control points within the Company in accordance with its annual audit plan approved by the Board of Directors and subsequently reports its audit findings and remedial issues to the Board and management on a regular basis.

Training and Promotion: To promote awareness to our employees of their responsibilities under the Code, we publish our Code and related policies and documents on our intranet and, provide training courses, posters, and internal news articles. For incoming employees, we provide an introductory training course on the Code which is available to all employees online, as well as advanced courses delving into more specific individual topics such as anti-corruption, PIP, export control and insider trading.

In addition to our internal compliance efforts, we expect and assist our customers, suppliers, business partners, and any other entities with whom we deal (such as consultant or third party agents who act for or on behalf of TSMC) to recognize and understand TSMC’s ethical standards to fulfill our responsibilities as a corporate citizen. For instance, we require all of our suppliers, vendors and contractors to declare in writing that they will not engage in any fraud or any unethical conduct when dealing with us, our officers, or employees. In 2015, TSMC became a full member of the Electronic Industry coalition dedicated to electronics supply chain sustainability. In addition to adopting the EICC Code of Conduct at all of its facilities, TSMC applied the EICC’s standards to enhance our audit program of our suppliers and relevant business partners. to our business partners through regular live seminars to prevent any unethical conduct and detect any sign of Code violations. We exchange views on appropriate business conduct and TSMC’s ethical standards with our customers as part of customer audit programs and other occasions.

Reporting Channels and Whistleblower Protection

To ensure that our conduct meets the highest legal and ethical standards, TSMC provides multiple channels for reporting business conduct concerns. First of all, we have implemented the “Complaint Policy and Procedures for Certain Accounting and Legal Matters” and “Procedures for Ombudsman System” that allow employees or any whistleblowers with relevant evidence to report any financial, legal, or ethical irregularities. To foster an open culture of ethics compliance, we encourage our employees and the third parties we do business with to report any suspected wrongdoing by TSMC or by any parties with whom we do business.

TSMC treats any complaint and the investigation thereof in a confidential and sensitive manner, and strictly prohibits any form of retaliation against any individual who in good faith reports or helps with the investigation of any complaint.

Code Violation Disciplinary Action

We do not tolerate any violation of the Code and treat every possible violation incident seriously. Any violator of the Code (or relevant regulations) will be severely disciplined to the full extent of our policies and the law, including immediate dismissal, termination of business relationship, and judicial prosecution as appropriate.

Compliance Activities (image)

Taiwan Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory Commission

Assessment Item	Implementation Status			Non-implementation and Its Reason(s)
Assessment Item	Yes	No	Explanation	Non-implementation and Its Reason(s)
1. Establishment of Corporate Conduct and Ethics Policy and Implementation Measures (1) Does the company have bylaws and publicly available documents addressing its corporate conduct and ethics policy and measures, and the commitment regarding implementation of such policy from the Board of Directors and the management team? (2) Does the company establish relevant policies which are duly enforced to prevent unethical conduct and provide implementation procedures, guidelines, consequence of violation and complaint procedures in such policies? (3) Does the company establish appropriate compliance measures for the business activities prescribed in paragraph 2, article 7 of the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies and any other such activities associated with high risk of unethical conduct?	V V V		(1) Integrity is the most important core value of TSMC’s culture. TSMC is committed to acting ethically in all aspects of our business. We have established TSMC Code of Ethics and Business Conduct (the “Code”) to require that each employee bears a heavy personal responsibility to uphold TSMC’s ethics value. For more details on the Code and the measures that TSMC Board of Directors (the “Board”) and the management team take to ensure compliance of the Code please refer to TSMC’s Annual Report and the Corporate Social Responsibility Report. (2) At the heart of our corporate governance culture is the Code that applies to TSMC and its subsidiaries, and this Code requires that each employee bears a heavy personal responsibility to preserve and to protect TSMC’s ethical values and reputation and to comply with various applicable laws and regulations. Specificrequirements under the Code could be found in our Annual Report. In addition, to educate and remind our employees of their responsibilities under the Code, we publish our Code, relevant policies and documents on our intranet and promote its awareness through training courses, posters, and internal news articles. Furthermore, to ensure that our conduct meets the highest legal and ethical standards, TSMC provides multiple channels for reporting business conduct concerns. Please refer to Assessment Item 3 for details. We do not tolerate any violation of the Code and treat every possible violation incident seriously. Any violator of the Code (or relevant regulations) will be severely punished to the full extent of our policies and the law, including immediate dismissal in accordance with TSMC Employee Recognition, Disciplinary and Ombudsman Procedure, termination of business relationship, and judicial prosecution as appropriate. (3) Under the framework of the Code, TSMC has established policies, guidelines and procedures in other policy areas, including: Anti- corruption, Anti-harassment/ discrimination, Antitrust (unfair competition), Environment, Export Control, Financial Reporting/Internal Controls, Insider Trading, Intellectual Property, Proprietary Information Protection (“PIP“), Privacy, Record Retention and Disposal, as well as procuring raw materials from socially responsible sources (“Conflict-freeMinerals“). The above-mentioned policies are crucial in strengthening overall compliance with the Code. TSMC, its employees and its subsidiaries and affiliatesare expected to fully understand and comply with all laws and regulations that govern our businesses. The Internal Auditor of TSMC also plays a critical role in ensuring the Company’s compliance with the Code and relevant rules and regulations. To ensure that our financial,managerial, and operating information is accurate, reliable, and timely and that our employee’s actions are in compliance with applicable policies, standards, procedures, laws and regulations, our Internal Auditor conducts audits of various control points within the Company in accordance with its annual audit plan approved by the Board of Directors and subsequently reports its audit findingsand remedial issues to the Board and Management on a regular basis.	None
2. Ethic Management Practice (1) Does the company assess the ethics records of whom it has business relationship with and include business conduct and ethics related clauses in the business contracts? (2) Does the company set up a unit which is dedicated to or tasked with promoting the company’s ethical standards and reports directly to the Board of Directors with periodical updates on relevant matters? (3) Does the company establish policies to prevent conflictof interests, provide appropriate communication and complaint channels and implement such policies properly? (4) To implement relevant policies on ethical conducts, does the company establish effective accounting and internal control systems that are audited by internal auditor s or CPA periodically? (5) Does the company provide internal and external ethical conduct training programs on a regular basis?	V V V V V		(1) We expect and assist our customers, suppliers, business partners, and any other entities with whom we deal (such as consultant or third party agents who act for or on behalf of TSMC) to understand and act in accordance with TSMC’s ethical standards. For instance, as for our suppliers, vendors and contractors, we require all of them to declare in writing that they will not engage in any fraud or any unethical conduct when dealing with us or our officersand employees. In addition to periodic audit, we also provide training and communicate our ethical culture to our business partners through regular live seminars to prevent any unethical conduct. We exchange views on business conduct and TSMC’s ethical standards with our customers in customer audit programs and other proper occasions. (2) TSMC’s Board of Directors strives to perform the responsibilities of supervising the corporate conduct and ethics compliance practice through the Audit Committee and the Compensation Committee, the hiring of a financial expert for the Audit Committee, and coordination with the Internal Audit department. In addition, General Counsel, the responsible corporate Vice President who oversees the Ombudsmen system and Internal Auditors update the Board ethical standards compliance issues on a regular basis. Moreover, TSMC’s officers,especially our CEO, CFO, and General Counsel, with oversight from our Board, are responsible for the full, fair, accurate, timely, and understandable financialaccounting and financialdisclosure in reports and documents filedby the Company with securities authorities and in all TSMC public communications and disclosures. (3) TSMC requires newly hired employees to declare any conflictof interest situation as appropriate. In addition, all employees must disclose any matters that have, or may have, the appearance of undermining the Code (such as any actual or potential conflictof interest). Furthermore, key employees and senior officersmust periodically declare their compliance status with the Code according to relevant procedures. (4) TSMC continues maintaining the integrity of its financialreporting processes and controls and establishes appropriate internal control systems for preventing higher potential unethical conduct, and the Internal Auditors formulate annual audit plans based on the results of the risk assessment and subsequently reports its audit findingsand remedial issues to the Board andManagement on a regular basis. In addition, all departments and subsidiaries of TSMC are also required to conduct Control Self-Assessment (CSA) tests annually to review the effectiveness of the internal control system. (5) Training is a major component of our compliance program, conducted throughout the year to refresh TSMC’s employees’ commitment to ethical conduct, and to get updated information on laws and regulations related to their daily operations. As for our suppliers, vendors and contractors, we communicate our ethical culture to our business partners through regular live seminars to ensure their fully understanding of our commit to ethical conduct.	None
3. Implementation of Complaint Procedures (1) Does the company establish specificcomplaint and reward procedures, setup conveniently accessible complaint channels, and designate responsible individuals to handle the complaint received? (2) Does the company establish standard operation procedures for investigating the complaints received and ensuring such complaints are handled in a confidential manner? (3) Does the company adopt proper measures to prevent a complainant from retaliation for his/her filinga complaint?	V V V		(1) TSMC has implemented the “Complaint Policy and Procedures for Certain Accounting and Legal Matters“ and “Procedures for Ombudsman System“ that allow employees or any whistleblowers with relevant evidence to report any financial,legal, or ethical irregularities. TSMC also requires all employees to stay vigilant and whistle-blow any noncompliance by anyone to their supervisors, the function head of Human Resources, the responsible corporate Vice President that oversees the Ombudsmen system, or to the Chairman of the Company’s Audit Committee directly and anonymously. In particular, the Ombudsmen system is open to external parties such as our vendors and subcontractors. (2) TSMC treats any complaint and the investigation thereof in a confidential and sensitive manner, and such manner is clearly stated in our bylaws. (3) TSMC strictly prohibits any form of retaliation against any individual who in good faith reports or helps with the investigation of any complaint, and such requirement is clearly stated in our bylaws.	None
4. Information Disclosure Does the company disclose its guidelines on business ethics as well as information about implementation of such guidelines on its website and Market Observation Post System (“MOPS”)?	V		Our internal website provides guidelines and informative articles on ethics and honorable business conduct (in both Chinese and English) for employees’ easy access. In addition, TSMC discloses relevant policies and information in its Annual Report (which is also available at the MOPS) and CSR Report (available at: http://www.tsmc.com)	None
5. If the company has established corporate governance policies based on TSE Corporate Conduct and Ethics Best Practice Principles, please describe any discrepancy between the policies and their implementation. TSMC has established the Code to require that all employees, officersand board members comply with the Code and the other policies and procedures. There is no discrepancy between the Code, including its affiliatepolicies and procedures, and its implementation. For more details, please refer to “Code of Ethics and Business Conduct” of this Annual Report.
6. Other important information to facilitate better understanding of the company’s corporate conduct and ethics compliance practices (e.g., review the company’s corporate conduct and ethics policy). For details on the implementation of TSMC’s Corporate Conduct and Ethics, please refer to “Code of Ethics and Business Conduct” of this Annual Report.