Shihlin Electric’s highest governance body is the Board of Directors. In 2014, the shareholders' meeting approved amendments to the Articles of Incorporation, fully implementing a candidate nomination system for the election of directors, including independent directors. This measure enhances transparency in the nomination and review process, safeguards shareholder rights, and strengthens overall corporate governance. To further reinforce governance and promote a well-structured and diversified board composition, the formation of the Board of Directors takes into account the company's operational framework, business development direction, and future strategic trends. A wide range of diversity aspects are also evaluated, including but not limited to: - Basic composition (e.g., nationality, age, tenure) - Managerial capabilities - Cross-cultural leadership - Industry knowledge and professional experience

Organizational Structure

Board and Executive Compensation Policy

Shihlin Electric's director compensation policy is implemented in accordance with Article 235-1 of the Company Act, and is proposed by the Compensation Committee before being approved by the Board of Directors. The Articles of Incorporation stipulate that, in the event of annual profit, up to 4% of the earnings may be allocated as remuneration to the directors. However, if the company has accumulated losses, the deficit must first be covered before any such distribution. The annual compensation package for top governance officers, senior executives, and administrative managers comprises salary, bonuses, and employee profit-sharing. For senior executives, employee bonuses tied to corporate performance generally account for 10% to 30% or more of their total compensation, reflecting a high degree of alignment between company performance and individual remuneration. These compensation decisions, while determined by the Compensation Committee in compliance with legal requirements, are also transparently disclosed in the company’s annual report to ensure stakeholders are well-informed of the strong linkage between executive pay and corporate performance. When setting executive remuneration, the committee also consults with external compensation consultants for professional benchmarking advice.

Compensation Policy, Standards, and Components

According to Article 2 of the Articles of Incorporation, director (including independent director) compensation is based on the company's operating performance and industry benchmarks, and is resolved by the Board of Directors. Per Article 5 of the Regulations Governing the Scope of Duties of Independent Directors, independent directors may receive a fixed monthly remuneration and do not participate in profit distribution. The compensation package for the President and Vice Presidents includes salaries and various bonuses, determined with reference to remuneration levels in peer companies of similar scale and nature.

Compensation Determination Procedures

The compensation components for the President and Vice Presidents are formulated in accordance with current internal policies and regulatory frameworks. These are based on each individual’s level of involvement in the company’s operations and the value of their contributions, while also referencing salary benchmarks from peer companies. The proposed compensation is approved by the Chairman, reviewed by the Compensation Committee, and subsequently submitted to the Board of Directors for final approval and implementation. To accurately reflect the achievement of performance indicators, the Chairman’s performance evaluation is based on annual corporate goals related to operations, governance, and financial outcomes. The evaluation criteria include, but are not limited to: Pre-tax earnings, Corporate governance evaluation results, and Sustainability performance. For the President, performance is assessed based on key responsibilities and objectives, including: Operational safety management, Oversight of financial plan execution, Revenue management, Enhancement of internal controls, Implementation of quality assurance and management, and Advancement of sustainability initiatives.

Incentive Mechanism and Linkage to Sustainability Performance

To encourage senior executives, key professionals, and all employees to focus on long-term, integrated performance and support sustainable business operations, Shihlin Electric has, since 2023, effectively linked the incentive compensation of the Chairman and senior executives to the company’s sustainability strategies and targets.

Conflict of Interest Management

To prevent conflicts of interest among board members, all newly appointed directors of Shihlin Electric are required to sign a Letter of Consent, affirming their commitment to comply with Article 23 of the Company Act, to faithfully execute their duties, and to fulfill their obligations as prudent and diligent managers. In addition, all directors are required to sign a Declaration of Understanding, confirming their awareness of Article 206 of the Company Act, which mandates recusal from voting in cases involving personal interests, as well as the legal consequences of non-compliance. The company’s Corporate Governance Best Practice Principles (Article 32) and Board Meeting Rules (Article 16) also clearly define the director recusal system, which is strictly followed in practice. Furthermore, according to Article 11 of Shihlin Electric’s Ethical Corporate Management Best Practice Principles, the company, along with its directors, managers, employees, appointees, and de facto controllers, must ensure that any donations to political parties or individuals involved in political activities—whether direct or indirect—comply with the Political Donations Act and relevant internal procedures. The purpose and intent of the donation must be clearly identified and must not be used to gain commercial benefits or competitive advantages.

For more information regarding board diversity and performance evaluation, please refer to the Corporate Governance section on the company’s official website.Corporate Governance

Contact：Sustainable Development Division ESG@seec.com.tw