Taiwan’s governance reforms drive sustainable value

Taiwan’s corporate governance regime rests on a layered framework comprising the Company Act, the Securities and Exchange Act, and regulations and rulings issued by the Financial Supervisory Commission, the Taiwan Stock Exchange (TWSE), and Taipei Exchange (TPEx).

The extent to which these requirements apply depends on a company’s status, i.e., whether it is privately held, publicly traded, or TWSE/TPEx-listed. Private companies are governed primarily by the Company Act and its general compliance requirements, including rules on shareholders’ meetings, boards of directors, supervisors, and directors’ duties. Public companies are subject to those same rules plus additional requirements on board procedures, internal controls, and disclosure. TWSE/TPEx-listed companies, in turn, face the most intensive regime, extending to ESG evaluation, sustainability reporting and disclosure, investor engagement, and board accountability.

The reach of this top tier reflects a broader shift in regulatory priorities. In recent years, Taiwan’s policy focus has shifted from traditional concerns such as board organisation, shareholders’ meeting procedures, and disclosure compliance on ESG, sustainable development, information transparency, and long-term corporate value. This shift is also anchored in the Company Act. Article 1 of the Company Act was amended in 2018 not only to require companies to comply with laws and business ethics, but also expressly permit them to undertake actions that promote the public interest in furtherance of their corporate social responsibility. This provision does not create a separate fiduciary duty owed to society or all stakeholders; rather, it provides boards with a legal basis to weigh the public interest, business ethics, and social responsibility when discharging their fiduciary duties.

Board fiduciary duties drive sustainability

Under the Company Act, responsible persons of a company (including its directors and supervisors) must faithfully perform their fiduciary duties in managing the company’s business. This includes, among other things, exercising the care of a good administrator and acting in the company’s best interests rather than pursuing their own or a third party’s. As governance and sustainability rules evolve, boards are increasingly expected to factor sustainability risks, business ethics, stakeholder interests, and long-term value into their oversight and business decisions.

For private companies in Taiwan, sustainability governance generally does not take the form of mandatory ESG reporting or capital market disclosure. It is reflected instead in general compliance with labour, environmental, tax, personal data, consumer protection, and various laws, together with the voluntary weighing of ethics, public interest, reputational risk, and social responsibility in day-to-day operations.

For public and listed companies, the expectations are even higher. Public companies must comply with specific rules governing corporate procedures and internal controls. Listed companies are expected to go further by adopting sustainability policies, systems, or management guidelines and concrete action plans that reflect sustainability trends, the relevance of those trends to their core business, and their operational impact on stakeholders. Such policies and plans are to be approved by the board and reported to the shareholders’ meeting. Directors, for their part, are expected to drive implementation, review results, and pursue continuous improvement, weigh stakeholder interests, embed sustainability into operations and strategy, and ensure timely and accurate disclosure. To support this, listed companies are advised to establish a sustainability governance framework, designate dedicated or part-time units (e.g., an ESG committee), and report regularly to the board.

In short, sustainable development is given effect through institutionalised board oversight, risk identification and management, dedicated units and functional committees, disclosure quality, and stakeholder communication. Further guidance is outlined in the Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies and the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies.

ESG evaluation and disclosure evolution

External evaluation and sustainability disclosure have become essential tools for integrating sustainability into corporate governance and capital market oversight.

From corporate governance evaluation to ESG evaluation. In 2014, Taiwan introduced the Corporate Governance Evaluation as a market-based assessment mechanism for all TWSE and TPEx-listed companies, forming a key part of its corporate governance reform roadmap. This evaluation has served as a policy instrument to encourage companies to enhance board effectiveness, protect shareholder rights, improve information transparency, and strengthen overall corporate governance.

In 2026, the Corporate Governance Evaluation was renamed the ESG Evaluation, reflecting an expanded scope that extends beyond governance to encompass the environmental and social dimensions. Its inaugural indicators include environmental management, human rights due diligence, investor engagement, employee rights, family-friendly workplace policies, sustainability governance, and board accountability.

Sustainability reporting. Disclosure obligations have expanded along the same trajectory. From 2025, all TWSE/TPEx-listed companies must prepare and file annual sustainability reports that disclose material economic, environmental and people-related topics and impacts, ESG risk assessments, and performance indicators. The reports must also explain how their sustainability policies are implemented in actual operations rather than offering only high-level statements. From the 2026 fiscal year, TWSE/TPEx-listed companies must apply the IFRS Sustainability Disclosure Standards in stages according to paid-in capital and disclose sustainability-related financial information in a dedicated chapter of the annual report. This brings sustainability information closer to financial reporting and recognises that information on climate- and sustainability-related risks, governance, strategy, metrics, and targets is material to investors.

Non-listed companies are generally not subject to mandatory sustainability reporting. As ESG carries ever greater weight, however, many will still need to adopt ESG management practices or systems, whether driven by supply chain requirements, the expectations of financial institutions, or environmental and other regulations. Introduced in 2025, article 387-1 of the Company Act mandates that all companies complete labour rights training after their registration. This requirement signifies that the social and compliance pillars of ESG are extending to private companies down to baseline compliance and labour rights awareness.

Taiwan governance reforms integrate ESG

Recent legislative amendments and regulatory policies indicate that Taiwan’s corporate governance reforms have evolved beyond independent directors, functional committees, and procedural compliance. The governance framework is becoming more integrated, in which environmental responsibility, labour rights, information quality, and stakeholder interests bear directly on how a company is run and judged. Governance is increasingly assessed not just by procedural adherence, but by the substance of a company’s sustainability practices and the credibility of its disclosures.

Investors and businesses establishing or investing in Taiwan should note that applicable obligations still depend heavily on the company type and market status, but regardless of that status, sustainability and stakeholder considerations are shifting from voluntary best practices to baseline expectations. Companies that embed ESG principles as fundamental governance elements will be best positioned to thrive as these standards continue to tighten.