2016 TSMC Annual Report

• TSMC Vision, Mission & Core Values
• 30 Years of TSMC
• Letter to Shareholders
• Company Profile
  1. An Introduction to TSMC
  2. Market/Business Summary
  3. Organization
  4. Board Members
  5. Management Team
• Corporate Governance
  1. Overview
  2. Board of Directors
  3. Major Resolutions of Shareholders' Meeting and Board Meetings
  4. Taiwan Corporate Governance Implementation as Required by the Taiwan Financial Supervisory Commission
  5. Code of Ethics and Business Conduct
  6. Regulatory Compliance
  7. Internal Control System Execution Status
  8. Status of Personnel Responsible for the Company's Financial and Business Operation
  9. Information Regarding TSMC’s Independent Auditor
  10. Material Information Management Procedure
• Capital and Shares
  1. Capital and Shares
  2. Issuance of Corporate Bonds
  3. Preferred Shares
  4. Issuance of American Depositary Shares
  5. Status of Employee Stock Option Plan
  6. Status of Employee Restricted Stock
  7. Status of New Share Issuance in Connection with Mergers and Acquisitions
  8. Financing Plans and Implementation
• Operational Highlights
  1. Business Activities
  2. Technology Leadership
  3. Manufacturing Excellence
  4. Customer Trust
  5. Human Capital
  6. Material Contracts
• Financial Highlights and Analysis
  1. Financial Highlights
  2. Financial Status and Operating Results
  3. Risk Management
• Corporate Social Responsibility
  1. Overview
  2. Environmental, Safety and Health (ESH) Management
  3. TSMC Education and Culture Foundation
  4. TSMC Volunteer Program
  5. TSMC i-Charity
  6. Social Responsibility Implementation Status as Required by the Taiwan Financial Supervisory Commission
• Subsidiary Information and Other Special Notes
  1. Subsidiaries
  2. Status of TSMC Common Shares and ADRs Acquired, Disposed of, and Held by Subsidiaries
  3. Special Notes
• Financial Statements
  1. Consolidated Financial Statements for the Years Ended December 31, 2016 and 2015 and Independent Auditors' Report
  2. Parent Company Only Financial Statements for the Years Ended December 31, 2016 and 2017 and Independent Auditors' Report
• Contact Information
• Downloads
• Previous Annual Reports
• CHINESE

TSMC Annual Report >  2016 > Operational Highlights > Human Capital

Human Capital

Human capital is one of TSMC’s most important assets.

The Company is committed to providing quality jobs with good compensation, meaningful work, and a safe work environment for its employees. Moreover, TSMC is dedicated to fostering a dynamic, effective work environment.

Based on the commitment to employees, TSMC believes that all employees should be treated with dignity and respect. In the aspect of upholding international proclaimed human rights, TSMC has initiated and implemented "TSMC Human Rights Policy" based on “A Guide for Business – How to Develop a Human Rights Policy" and is also compliance with "the International Bill of Human Rights", "The International Labour Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work" and "he United Nations Global Compact’s Ten Principles ". In addition, TSMC participates in the Electronic Industry Citizenship Coalition (EICC) as a full member.

Workforce Structure

At the end of 2016, TSMC had over 46,968 employees worldwide, including 4,909 managers, 20,719 professionals, 3,934 assistants, and 17,406 technicians. The following table summarizes TSMC’s workforce as of the end of February, 2017:

Recruitment

TSMC’s growth depends on the continued contributions of its dedicated employees. In order to strengthen growth momentum, the Company is dedicated to recruiting top-notch professionals for all positions available. TSMC is an equal employment opportunity employer and operates on the principles of open-and-fair recruitment. The Company evaluates all candidates according to their qualifications as related to the requirement of each position without regard to race, gender, age, religion, nationality or political affiliation.

TSMC’s continuous growth requires constant talent sourcing and recruitment activities to support its business. The Company recruited over 3,400 employees in 2016, including over 2,300 managers and professionals, as well as over 1,100 assistants and technicians.

People Development

Employee development is an integral and critical factor for the growth of a company and should be goal oriented, disciplined and planned. TSMC is committed to cultivating a consistent and diverse learning environment. To this end, the Company has initiated the “TSMC Employee Training and Education Procedure” to ensure the Company’s and the individuals’ development objectives can be achieved through the integration of internal and external training resources.

An individual development plan (IDP) is drawn up based on the nature of the individual’s job, work performance and career development path. At the same time, TSMC also actively develops talent and creates a high-performance work environment through development programs based on business objectives. The Company not only provides employees a diverse network of learning resources, including on-the-job training, classroom training, e-learning, coaching, mentoring and job rotation, but also creates a learning atmosphere through learning enablement activities in response to organization development requirements and employee capability enhancement needs.

The Company provides employees with a wide range of onsite general, professional and management training programs systematically. In addition to engaging external experts as trainers, hundreds of TSMC employees are trained to be qualified instructors to deliver their valuable knowhow in internal training courses.

TSMC’s training programs include:

• New employee training: includes basic training and job orientation for new employees. Furthermore, newcomers’ managers and the Company’s well-established buddy system are in place to support new hires in their assimilation process in both corporate culture and work requirements.
• General training: refers to training required by government regulations and/or Company policies, as well as training on general subjects for all employees or employees of different job functions. Topics include industry-specific safety, workplace health and safety, quality, fab emergency response, languages and personal effectiveness.

• Professional/functional training: technical and professional training required by different functions within the Company. TSMC offers training courses on equipment engineering, process engineering, accounting, information technology, and so forth.

• Management training: programs are tailored to the needs of managers at all levels, including new, experienced, and senior managers; optional courses are also available.

• Direct labor training: enables production line employees to acquire the knowledge, skills and attitudes they need to perform their jobs well and to pass the certification for operating equipment. Includes direct labor skill training, technician “Train the Trainer” training, and manufacturing leader training.

• Customized training: programs are tailored to the needs of the organization and/or the people development plan.

In 2016, TSMC conducted 1,228 internal training sessions, which translated to a companywide total of 623,711 training hours with the participation of 450,756 attendees. Employees on average attended over 13 hours of training with total training expenses reaching NT$75,401,157.

Apart from internal training resources, our employees are also subsidized when pursuing external short-term courses, for-credit courses and degrees.

Compensation

TSMC provides a diversified compensation program that is competitive externally, fair internally, and adapted locally. TSMC adheres to the philosophy of sharing wealth with employees in order to attract, retain, develop, motivate and reward talented employees. With excellent operating performance, employment at TSMC entitles employees to a comprehensive compensation and benefits program above the industry average.

TSMC’s compensation program includes a monthly salary, employees’ cash bonus based on quarterly business results, and an employee profit sharing bonus based on annual profit.

The purpose of the employee cash bonus and profit sharing bonus programs is to reward employee contributions appropriately, to encourage employees to work consistently toward ensuring the success of TSMC, and to align employees’ interests with those of TSMC’s shareholders. The Company determines the amount of the cash bonus and employees compensation based on operating results and industry practice in the Republic of China. The amount and form of the employee cash bonus and employees’ profit sharing bonus are recommended by the compensation committee to the board. In addition, the profit sharing bonus is distributed upon the approval of the board of directors. Individual awards are based on each employee’s job responsibility, contribution and performance.

In addition to providing employees of TSMC’s overseas subsidiaries with a locally competitive base salary, the Company grants annual bonuses as a part of total compensation. The annual bonuses are granted in line with local regulations, market practices, and the overall operating performance of each subsidiary, to encourage employee commitment and development within the Company.

Employee Engagement

Both local labor laws in each operation location and the fundamental conventions of International Labour Organization prohibit all forms of forced or compulsory labor. TSMC stands firmly with these protocols and has never forced labor from involuntary persons or menaced them with any penalty.

The Company encourages employees to maintain a healthy and well-balanced life while accomplishing their missions effectively. TSMC continuously implements programs to enhance employee communication, well-being, benefit, rewards and recognition. The various initiatives include the following programs:

Employee Communication

TSMC values two-way communication and is committed to keeping communication channels among management levels, subordinates and peers open and transparent. To ensure that employees’ opinions and voices are heard and their issues are addressed effectively, impartial submission mechanisms, including quarterly labor-management communication meetings, are in place to provide timely support. TSMC makes continuous efforts to facilitate mutual and timely employee communication, based on multiple channels and platforms, which in turn fosters harmonious labor relations and creates a win-win situation for the Company and employees.

A host of two-way communication channels are constructed to maintain the free flow of information between managers and employees, including:

• Communication meetings for various levels of managers and employees.
• Periodic employee satisfaction surveys, with follow-up actions based on the survey findings.
• The employee portal, myTSMC, an internal website featuring the Chairman’s talk, corporate messages, executive interviews, and other activities of interest to employees.
• eSilicon Garden, a website hosting TSMC’s internal electronic publications providing real-time updates on major activities of the Company, as well as inspirational content featuring outstanding teams and individuals.
• The Whistleblower Reporting System owned by Audit Committee and the Ombudsman system led by an appointed vice president – two distinct channels, each with a strict confidentiality – to handle complaints regarding major management, financial, auditing, ethics and business conduct issues.
• The employee opinion box provides an opportunity for employees to submit suggestions or opinions regarding their work and the overall work environment.
• The Fab Caring Circle in each fab addresses the issues related to employees’ work and personal life; the system is dedicated mainly to the Company’s direct labor workers.

Core values are the foundation of the Company. As part of our practice on “Integrity”, means, among other things, that TSMC abides by the law and goes above and beyond to act in accordance with the spirit of the law. “Commitment” entails providing employees with meaningful jobs, a safe working environment and competitive compensation and benefits. Under this premise, TSMC respects employees’ rights entitled by global labor standards and local regulations, including the UN Global Compact’s Ten Principles and Taiwan’s Labor Union Act. In addition, as a member of the Electronic Industry Citizenship Coalition (EICC), TSMC adopts the EICC Code of Conduct (http://www.tsmc.com/english/csr/eicc_membership.htm) and does not impede employees’ freedom of association. The principle and regulation above not only align with TSMC’s goal, but also provide practical standards and measurement of implementation, which support the Company’s continuous enhancement.

The relationship between TSMC management and employees has been harmonious over the years; internal communication channels are transparent and effective. The Company respects for employees’ right of forming a labor union, however, no employees have pursued this avenue or issued a request to form one so far.

In 2016 and as of the date of this annual report, there have been no losses resulting from labor disputes.

Employee Benefit Programs

• Convenient onsite services: cafeterias, laundry services, convenience stores, travel, banking, and commuting assistance are accessible for employees in the fabs.
• Comprehensive health enhancement and management programs: health enhancement programs include weight control, in-fab clinic and dentist services, smoking cessation, massage service, cancer screening activity, blood donation, as well as monthly seminars to raise personal health awareness. Health management programs include post health-exam follow-up activities for abnormal cases, prevention of cerebrovascular disease, ergonomic hazards management, and maternal care and protection. Employee assistance programs include five free annual counseling sessions for mental health and financial/legal issues, with extensions available depending on the individual’s needs.
• Diverse employee welfare programs: including 80 hobby clubs, 70 speeches covering various topics, Sports Day, and Family Day. In addition, holiday bonuses, marriage bonuses, condolence allowances and emergency subsidies are also available to address employees’ needs.
• Premium sports centers: a variety of workout facilities available to all employees and their families, as well as exercise sessions conducted by professional instructors to improve employee wellness.
• Flexible preschool service: childcare service, operated to meet employees’ work schedules, is available in three fabs in Hsinchu and Tainan.

Employee Recognition

TSMC sponsors various internal award programs to recognize outstanding achievements by employees, both individual and at a team level. With these award programs, TSMC aims to encourage continued employee development, which, in turn, adds to the Company’s competitive advantage.

TSMC’s award programs include:

• Medal of Honor: recognizes those who contribute significantly to the Company’s business performance.
• TSMC Academy: recognizes outstanding TSMC scientists and engineers whose individual technical capabilities make significant contributions to the Company.
• TSMC Excellent Labor Award: recognizes excellent TSMC technicians and group leaders whose outstanding performance make significant contributions to the Company.
• Total Quality Excellence Award for each fab: recognize employees’ continuous efforts in creating value for the Company.
• Service Award and TSMC’s appreciation of senior employees: recognize senior employees’ long-term commitment and dedication to the Company.
• Excellent Instructor Award: praises the outstanding performance and contribution of the Company’s internal instructors in training courses for employees.
• Function-wide awards dedicated to innovation, such as the Idea Forum and TQE Awards, which recognize employees' initiative and continuous implementation of innovative practices.

Apart from corporate-wide awards, TSMC recommended employees to participate several external talent awards. In 2016, distinguished TSMC employees continued to be recognized through a host of national awards, including Outstanding Young Engineer Award, National Manager Excellence Award and National Industrial Innovation Award.

Retention

Continuous growth is a major component of TSMC’s commitment to its stockholders and employees, and the retention of outstanding employees is crucial in fulfilling this commitment. From employee’s initial orientation and adaptation to professional and career development, TSMC works proactively to provide employees with good compensation, innovative, and meaningful work, as well as a safe work environment.

Employees’ overall satisfaction with the Company’s efforts are reflected in the 2016 TSMC Core Values Survey, of which 97% of participants agreed that they are willing to commit fully in their work to make TSMC an even more successful company; while 95% of them concurred with the statement that they are willing to contribute their talents to TSMC and grow together with the Company for the next five years.

In 2016, the Company recorded a manageable turnover rate of 4.1%.

Retirement Policy

TSMC’s retirement policy is set according to the Labor Standards Act and Labor Pension Act of the Republic of China. With the Company’s sound financial system, TSMC ensures employees a solid pension contribution and payments, which encourages employees to set long-term career plans and further deepens their commitment to TSMC.