Chapter 1 General Provisions
Article 1 To further improve the compensation management of directors and senior management of Guangdong Chaohongji Industrial Co., Ltd. (hereinafter referred to as the "Company"), establish a scientific and effective incentive and restraint mechanism, fully mobilize the enthusiasm and creativity of directors and senior management, continuously improve the Company's management level and core competitiveness, and promote the healthy, stable, and sustainable development of the Company, this system is formulated in accordance with the "Company Law," "Securities Law," "Corporate Governance Guidelines for Listed Companies," and the "Articles of Association of Guangdong Chaohongji Industrial Co., Ltd." (hereinafter referred to as the "Articles of Association"), as well as other relevant laws, administrative regulations, and normative documents.
Article 2 For the purposes of this system, directors and senior management refer to: (1) Internal non-independent directors: Directors who are engaged in the core governance of the Company and have signed an employment contract or labor contract with the Company, or non-independent directors who also hold other employee positions. (2) External non-independent directors: Non-independent directors who do not hold any other positions in the Company besides their directorship. (3) Independent directors: Directors appointed by the Company in accordance with the "Measures for the Administration of Independent Directors of Listed Companies," who do not have any relationship with the Company or its major shareholders that may hinder their independent and objective judgment. (4) Senior management personnel: The general manager, deputy general managers, secretary of the board of directors, and financial controller of the Company, as well as other senior management personnel stipulated in the "Articles of Association."
Article 3 The compensation management of the Company's directors and senior management shall follow the following basic principles: (1) Performance-oriented principle: Compensation shall be aligned with market development and closely linked to the Company's operating performance and individual performance appraisal results. (2) Competitiveness principle: The compensation level shall be determined reasonably by considering the industry development level, compensation level, and the Company's own operating scale and profitability, balancing compensation competitiveness and cost control to attract and retain core management talent. (3) Long-term development principle: Coordinate short-term and long-term incentives, focus on the synergy between compensation management and the Company's strategic planning and sustainable development goals, and guide directors and senior management to establish a long-term operating philosophy. (4) Principle of balancing incentives and restraints: Establish and improve a mechanism for suspending and clawing back compensation to achieve the parity of rights, responsibilities, and benefits. (5) Open and transparent principle: The formulation of compensation plans, the determination of appraisal results, and the situation of compensation payment shall strictly follow internal review procedures and be disclosed in a timely manner according to regulatory requirements, accepting supervision from shareholders, regulatory authorities, and the public.
Chapter 2 Management Structure
Article 4 The Company's Board of Directors' Compensation Committee, in accordance with the "Implementation Rules of the Board of Directors' Compensation Committee," shall be responsible for appraising directors and senior management personnel and formulating compensation plans, providing professional support for compensation decisions.
Article 5 The compensation plan for the Company's directors shall be reviewed and approved by the shareholders' meeting and disclosed. Any director who is being evaluated or whose remuneration is being discussed by the Board of Directors or the Compensation Committee shall recuse themselves.