UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934
x Filed by the Registrant
¨ Filed by a Party other than the Registrant
Check the appropriate box:
¨ Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
x
Definitive Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material Pursuant to §240.14a-12
China
Automotive Systems, Inc.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
| ¨ | Fee paid previously with preliminary materials. |
| ¨ | Fee computed on table in exhibit required by Item 25(b) per
Exchange Act Rules 14a6(i)(1) and 0-11 |
CHINA AUTOMOTIVE SYSTEMS, INC.
------------------------------------------------------------------------------------------------
Notice of Annual Meeting of Stockholders
To Be Held On August 30, 2023
The Annual Meeting of Stockholders of China Automotive
Systems, Inc. (the “Company”) will be held on August 30, 2023 (Wednesday) at 9 am local time at the Second
Floor Meeting Room, D8 Henglong Building, Optics Valley Software Park, No. 1 Guanshan First Avenue, Wuhan City, Hubei Province, the
People’s Republic of China, and the Company will set up a conference room on August 29, 2023 at 9 pm at Henglong USA Corporation,
2546 Elliott Drive, Troy, Michigan, U.S. for the Company’s US shareholders to participate via WebEx connection as more fully described
in the accompanying proxy statement, to:
| 1. | elect five directors of the Company, to hold office until the 2024 annual meeting of stockholders and
until their successors are elected and qualified; |
| 2. | approve an advisory (non-binding) proposal concerning the Company’s named executive officer compensation
program; |
| 3. | approve an advisory (non-binding) vote concerning the frequency of holding future advisory votes on executive
compensation; and |
| 4. | transact such other business as may properly come before the meeting or any adjournments or postponements
thereof. |
Only stockholders of record at the close of business
on July 10, 2023 (Monday) will be entitled to notice of, and to vote at, such meeting or any adjournments or postponements thereof.
|
BY ORDER OF THE BOARD OF DIRECTORS |
|
|
|
/s/ Chen Hanlin |
|
Chen Hanlin
Chairman |
Hubei, the People’s Republic of China
July 14, 2023
YOUR VOTE IS IMPORTANT!
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE EXECUTE THE PROXY FOLLOWING THE INSTRUCTIONS SET FORTH IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS MAILED TO YOU.
THIS WILL ENSURE THE PRESENCE OF A QUORUM AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO DO SO
EVEN IF YOU HAVE PREVIOUSLY EXECUTED THE PROXY.
CHINA AUTOMOTIVE SYSTEMS, INC.
Henglong Group, D8 Henglong Building
Optics Valley Software Park, No. 1 Guanshan
First Avenue, Wuhan City
Hubei Province (430073), the People’s Republic
of China
(86) 27-8757-0028
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PROXY STATEMENT
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2023 ANNUAL MEETING OF STOCKHOLDERS
China Automotive Systems, Inc. (the “Company”)
is furnishing this proxy statement in connection with the solicitation of proxies by the board of directors of the Company (the “Board
of Directors”) for use at the Annual Meeting of Stockholders to be held on August 30, 2023 (Wednesday) at 9 am at the Second
Floor Meeting Room, D8 Henglong Building, Optics Valley Software Park, No. 1 Guanshan First Avenue, Wuhan City, Hubei Province, the
People’s Republic of China and at any adjournments or postponements thereof (the “Annual Meeting”). The Company
will set up a conference room on August 29, 2023 at 9 pm at Henglong USA Corporation, 2546 Elliott Drive, Troy, Michigan, U.S. for
the Company’s US shareholders to participate at the Annual Meeting via WebEx connection. This proxy statement and the Company’s
annual report will be made available on the internet on or about July 14, 2023 (Friday).
Important Notice Regarding the Availability
of Proxy Materials for the Annual Stockholders Meeting to be Held on August 30, 2023 (Wednesday) - the Company’s Annual Report
for the year ended December 31, 2022 (the “Annual Report”) and this Proxy Statement are available at http://www.caasauto.com.
Only holders of the Company’s common stock
as of the close of business on July 10, 2023 (Monday) (the “Record Date”) are entitled to vote at the Annual Meeting.
Stockholders who hold shares of the Company in “street name” may vote at the Annual Meeting only if they hold a valid proxy
from their broker. As of the Record Date, there were 30,185,702 shares of common stock outstanding.
A majority of the outstanding shares of common
stock entitled to vote at the Annual Meeting must be present in person or by proxy in order for there to be a quorum at the Annual Meeting.
Stockholders of record who are present at the meeting in person or by proxy and who abstain from voting, including brokers holding customers’
shares of record who cause abstentions to be recorded at the meeting, will be included in the number of stockholders present at the meeting
for purposes of determining whether a quorum is present.
Each stockholder of record is entitled to one
vote at the Annual Meeting for each share of common stock held by such stockholder on the Record Date. Stockholders do not have cumulative
voting rights. Stockholders may vote their shares by executing the proxy following the instructions on the notice of internet availability
of proxy materials (“Notice of Internet Availability”) mailed to the stockholders. All proxies received by the Company
that are properly executed and have not been revoked will be voted in accordance with the instructions contained in the proxies. If a
paper copy of the proxy materials is requested by a stockholder and a signed proxy card is received by the Company that does not specify
a vote or an abstention, the shares represented by that proxy card will be voted for (i) the nominees to the Board of Directors listed
on the proxy card and in this proxy statement; (ii) approval of an advisory (non-binding) proposal concerning the Company’s
named executive officer compensation program; and (iii) approval of an advisory (non-binding) vote concerning the frequency of holding
future advisory votes on executive compensation. The Company is not aware, as of the date hereof, of any matters to be voted upon at the
Annual Meeting other than those stated in this proxy statement and the accompanying Notice of Annual Meeting of Stockholders. If any other
matters are properly brought before the Annual Meeting the proxy gives discretionary authority to the persons named as proxies to vote
the shares represented by the proxy in their discretion.
Under Delaware law and the Company’s Certificate
of Incorporation and Bylaws, if a quorum exists at the meeting, the affirmative vote of a plurality of the votes cast at the meeting is
required for the election of directors. A properly executed proxy marked “Withhold authority” with respect to the election
of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes
of determining whether there is a quorum. For each other item, the affirmative vote of the holders of a majority of the shares represented
in person or by proxy and entitled to vote on the item will be required for approval. A properly executed proxy marked “Abstain”
with respect to any such matter will not be voted, although it will be counted for purposes of determining whether there is a quorum.
Accordingly, an abstention will have the effect of a negative vote.
For shares held in “street name” through
a broker or other nominee, the broker or nominee may not be permitted to exercise voting discretion with respect to non-routine items,
which include the say-on-pay, say-on-frequency and director election proposals. Thus, if stockholders do not give their broker or nominee
specific instructions, their shares may not be voted on those matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such “broker non-votes” will, however, be counted in determining whether there is a quorum.
A stockholder of record may revoke a proxy at
any time before it is voted at the Annual Meeting by (a) following the instructions on the website hosting proxy materials and voting
as specified in the Notice of Internet Availability, (b) if a proxy is executed in paper form, delivering another duly executed proxy
bearing a later date, or (c) attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not revoke
a proxy unless the stockholder actually votes in person at the meeting.
The proxy is solicited by the Board of Directors.
The Company will pay all of the costs of soliciting proxies. In addition to solicitation by mail or through the internet, officers, directors
and employees of the Company may solicit proxies personally, or by telephone, without receiving additional compensation. The Company,
if requested, will also pay brokers, banks and other fiduciaries who hold shares of common stock for beneficial owners for their reasonable
out-of-pocket expenses of forwarding these materials to stockholders.
BOARD OF DIRECTORS
The name, age and year in which the term expires
of each member of the Board of Directors is set forth below:
Name | |
Age | |
Position | |
Term Expires on the Date of the Annual Meeting Held in the Year |
Hanlin Chen | |
66 | |
Chairman | |
2023 |
Qizhou Wu | |
59 | |
CEO and Director | |
2023 |
Guangxun Xu | |
72 | |
Director | |
2023 |
Heng Henry Lu | |
57 | |
Director | |
2023 |
Tong Kooi Teo | |
66 | |
Director | |
2023 |
The Board of Directors has determined that the
following directors for fiscal year 2023 are “independent” under the current rules of the Nasdaq Stock Market: Guangxun
Xu, Heng Henry Lu and Tong Kooi Teo.
At the Annual Meeting, the stockholders will vote
on the election of Hanlin Chen, Qizhou Wu, Guangxun Xu, Heng Henry Lu and Tong Kooi Teo as directors to serve for a one-year term until
the annual meeting of stockholders in 2024 and until their successors are elected and qualified. All directors will hold office until
the annual meeting of stockholders at which their terms expire and the election and qualification of their successors.
NOMINEES AND CONTINUING DIRECTORS
The following individuals have been nominated
for election to the Board of Directors or will continue to serve on the Board of Directors after the Annual Meeting.
Hanlin Chen
Hanlin Chen has served as the chairman of the
Board of Directors and an executive officer since March 2003. From 1993 to 1997, Mr. Chen was the general manager of Shashi
Jiulong Power Steering Gears Co., Ltd. Since 1997, he has been the chairman of the Board of Henglong Automotive Parts, Ltd.
Mr. Hanlin Chen is the brother-in-law of
the Company’s senior vice president, Mr. Andy Tse.
As chairman of the Board of Directors, Mr. Chen
oversees the implementation of the Company’s business plan.
The Board of Directors believes that Mr. Chen’s
leadership and extensive knowledge of the Company are essential to the development of the Company’s strategic vision.
Qizhou Wu
Qizhou Wu has served as a director since March 2003
and as the chief executive officer of the Company since September 2007. He served as chief operating officer from 2003 to 2007. He
was the executive general manager of Shashi Jiulong Power Steering Gears Co., Ltd. from 1993 to 1999 and the general manager of Henglong
Automotive Parts Co., Ltd. from 1999 to 2002. Mr. Wu graduated from Tsinghua University in Beijing with a Master’s degree
in automobile engineering.
The Board of Directors believes that Mr. Wu’s
experience and extensive knowledge of the Company are essential to the implementation of the Company’s strategic vision.
Guangxun Xu
Guangxun Xu has served as an independent director
of the Company since December 2009. He is the chairman of both the audit committee and the nominating committee, and a member of
the compensation committee, of the Board of Directors. Mr. Xu has been the Chief Representative of NASDAQ in China and a managing
director of the NASDAQ Stock Market International, Asia for over ten (10) years. With a professional career in the finance field
spanning over thirty (30) years, Mr. Xu’s practice focuses on providing package services on U.S. and U.K. listings, advising
on and arranging for private placements, PIPEs, IPOs, pre-IPO restructuring, M&A, corporate and project finance, corporate governance,
post-IPO IR compliance and risk control.
The Board of Directors believes that Mr. Xu’s
many years of experience in working with public companies and financial markets in Asia provides value to the Board of Directors and the
Company.
Heng Henry Lu
Heng Henry Lu has served as an independent director
of the Company since July 2019. He is a member of the audit committee, the nominating committee and the compensation committee. He
has been an adviser to NBS Group since February 2016. Dr. Lu was a partner of SVC China from 2012 to 2014 and Chief Representative
of William Blair & Company, L.L.C., Shanghai Representative Office from 2006 to 2011. Prior to that, Dr. Lu was with McKinsey &
Company advising global and domestic companies on their growth and financial strategies. Dr. Lu received a Doctor of Philosophy from
Columbia University in 1997 and a Master of Business Administration from University of Chicago Business School in 2000.
The Board of Directors believes that Dr. Lu’s
many years of experience in advising companies in the PRC and abroad provides perspective and global vision to the Company’s development.
Tong Kooi Teo
Tong Kooi Teo has served as an independent director
of the Company since July 2019. He is the chairman of the compensation committee, and a member of the audit committee and the nominating
committee of the Board of Directors. He is the Chief Executive Officer of DPS Corporate Advisory Company Limited, Beijing, China, a member
of Head International Group, China since March 2018. He is a senior and independent non-executive director of Tropicana Corporation
Bhd since March 2021, listed on the Kuala Lumpur Stock Exchange. He is also Non-Executive Director of Guocoland (China) Limited since
February 2018. He was the Managing Director of Guoco Investment (China) Ltd., Hong Kong from 2014 to 2018, after serving as the Group
Managing Director of Guocoland (China) Ltd. from 2012 to 2014. Prior to that, Mr. Teo was the Chief Executive Officer (China and
Vietnam Operations) of WCT Holdings Bhd, Malaysia from 2011 to 2012. He was the Chief Executive Officer of Hong Leong Asia Ltd (HLA),
which is listed on the Singapore Stock Exchange from 2004 to 2010. From 2003 to 2004, Mr. Teo was the Managing Director of Tasek
Corporation Bhd, Malaysia, which was listed on the Kuala Lumpur Stock Exchange. From 1994 to 2002, Mr. Teo was General Manager of
Corporate Banking Division and Chief Operating Officer of Hong Leong Bank Malaysia. From 1989 to 1994, Mr. Teo was with Deutsche
Bank Malaysia where his last held position was Head of Corporate Banking.
The Board of Directors believes that Mr. Teo’s
many years of experience working with companies and banks in Asia and in the PRC and abroad provides perspective and global vision to
the Company’s development.
Other than as noted above, there are no family
relationships among any of the Company’s directors or executive officers.
DIRECTOR NOMINATION
CRITERIA FOR BOARD MEMBERSHIP.
In recommending candidates for appointment or
re-election to the Board of Directors, the nominating committee of the Board of Directors (the “Nominating Committee”)
considers the appropriate balance of experience, skills and characteristics required of the Board of Directors. It seeks to ensure that
a majority of the directors are independent under the rules of the Nasdaq Stock Market, that the members of the Company’s audit
committee of the Board of Directors (the “Audit Committee”) meet the financial literacy and sophistication requirements
under the rules of the Nasdaq Stock Market and that at least one member of the Board of Directors qualifies as an “audit committee
financial expert” under the rules of the Securities and Exchange Commission (the “SEC”). Nominees for director
are recommended on the basis of their depth and breadth of experience, integrity, ability to make independent analytical inquiries, understanding
of the Company’s business environment and willingness to devote adequate time to Board of Directors duties.
|
|
Board Composition |
| |
Hanlin Chen | |
Qizhou Wu | |
Guangxun Xu | |
Heng Henry Lu | |
Tong Kooi Teo |
Gender Identity | |
| |
| |
| |
| |
|
Male | |
X | |
X | |
X | |
X | |
X |
Female | |
| |
| |
| |
| |
|
Non-Binary | |
| |
| |
| |
| |
|
Did Not Disclose Gender |
Demographic Background |
African American or Black |
Alaskan Native or Native American |
Asian | |
X | |
X | |
X | |
X | |
X |
Hispanic or Latinx | |
| |
| |
| |
| |
|
Native Hawaiian or Pacific Islander | |
| |
| |
| |
| |
|
White | |
| |
| |
| |
| |
|
Two or More Races or Ethnicities | |
| |
| |
| |
| |
|
LGBTQ+ | |
| |
| |
| |
| |
|
Did Not Disclose Demographic Background | |
| |
| |
| |
| |
|
PROCESS FOR IDENTIFYING AND EVALUATING NOMINEES.
The Nominating Committee believes the Company
is well served by its current directors. In the ordinary course, absent special circumstances or a material change in the criteria for
membership of the Board of Directors, the Nominating Committee will re-nominate incumbent directors who continue to be qualified for service
and are willing to continue as directors. If an incumbent director is not standing for re-election, or if a vacancy on the Board of Directors
occurs between annual stockholder meetings, the Nominating Committee will seek potential candidates for appointment to the Board of Directors
who meet the criteria for selection as a nominee and have the specific qualities or skills being sought. Director candidates will be selected
based on input from members of the Board of Directors, senior management of the Company and, if the Nominating Committee deems appropriate,
a third-party search firm. The Nominating Committee will evaluate each candidate’s qualifications and check relevant references;
in addition, such candidates will be interviewed by at least one member of the Nominating Committee. Candidates meriting serious consideration
will meet with all members of the Board of Directors. Based on this input, the Nominating Committee will evaluate whether one of the prospective
candidates is qualified to serve as a director and whether the committee should recommend to the Board of Directors that such candidate
be appointed to fill a then current vacancy or presented for the approval of the stockholders, as appropriate.
STOCKHOLDER NOMINEES.
The Nominating Committee will consider suggestions
from stockholders regarding possible director candidates for election at the annual meeting to be held in 2024. Any such nominations should
be submitted to the Nominating Committee, c/o Mrs. Wei Na (secretary to the Board of Directors), and should include the following
information: (a) all information relating to such nominee that is required to be disclosed pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the “Securities Exchange Act”), including such person’s written consent to
being named in the proxy statement as a nominee and to serving as a director if elected; (b) the names and addresses of the stockholders
making the nomination and the number of shares of the Company’s common stock that are owned beneficially and of record by such stockholders;
and (c) appropriate biographical information and a statement as to the qualifications of the nominee, and should be submitted in
the time frame described in the bylaws of the Company and under the caption “Stockholder Proposals for 2023 Annual Meeting”
below. Each director nominated in this Proxy Statement was recommended for election by the Nominating Committee and by the Board of Directors.
BOARD NOMINEES FOR THE 2023 ANNUAL MEETING.
The nominees listed in this proxy statement are
the current five directors standing for re-election.
BOARD LEADERSHIP STRUCTURE
Mr. Hanlin Chen is the chairman of the Board
of Directors and Mr. Qizhou Wu is the chief executive officer and a director of the Company. The Company’s leadership structure
of a separate chairman of the Board of Directors and chief executive officer has historically proven effective for it in the areas of
performance and corporate governance, among others. The Company does not have a lead independent director. The Company, in consideration
of the size of the Board of Directors and the presence of three independent directors who constitute a majority, believes that it is not
necessary to appoint a lead independent director. The Board of Directors has determined that its current structure is in the best interests
of the Company and its stockholders. The Company believes that the independent nature of the audit, compensation and nominating committees
of the Board of Directors also ensures that the Board of Directors maintains a level of independent oversight of management that is appropriate
for the Company. The Board of Directors will review from time to time the appropriateness of its leadership structure and implement any
changes it may deem necessary.
RISK OVERSIGHT
The Board of Directors has the ultimate oversight
responsibility for the risk management process. A fundamental part of risk management is not only understanding the risks the Company
faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company.
In setting the Company’s business strategy, the Board of Directors assesses the various risks being faced by management and determines
what constitutes an appropriate level of risk for the Company. While the ultimate risk oversight rests with the Board of Directors, the
Board of Directors has delegated the responsibility for the management of certain types of risks to its committees. For example, the Audit
Committee focuses on financial risk, including internal controls, and receives financial risk assessment reports from management, and
risks related to the compensation programs are reviewed by the compensation committee of the Board of Directors (the “Compensation
Committee”). The Board of Directors is advised by these committees of significant risks and management’s response via
periodic updates.
DIRECTOR COMPENSATION
Based on the number of years of service to the
Board of Directors, workload and performance, the Board of Directors determines directors’ compensation. The Board of Directors
believes that the compensation of the members of the Board of Directors was appropriate as of December 31, 2022. The independent
directors receive a director fee from the Company for their services as members of the Board of Directors and any committee of the Board
of Directors in the amount of between $8,000 and $14,850 per quarter. The directors are reimbursed for certain expenses in connection
with attending meetings of the Board of Directors and committees of the Board of Directors.
The Company has also granted, and expects to continue
to grant, non-employee directors options to purchase shares of the Company’s common stock. The stockholders of the Company approved
certain director grants at the annual meeting of the stockholders in 2005, which grants were included in the 2004 stock option plan (the
“2004 Stock Option Plan”). At the 2014 annual meeting of stockholders, the stockholders of the Company approved an
amendment to the 2004 Stock Option Plan that extended its term for an additional ten (10) years. Pursuant to such amendment, the
2004 Stock Option Plan will expire on June 27, 2025.
The options granted to non-employee directors that are currently outstanding
or were outstanding during the past three (3) years are as follows:
* |
In 2020, the Company did not issue any options to independent directors. |
* |
On February 3, 2021, the Company issued additional options to purchase 7,500 shares of common stock to each of its then three independent directors. Such stock options were vested immediately upon grant and are exercisable at $6.26 per share over a period of five (5) years. The exercise price represented the fair market value based on the grant date of the stock options. |
* |
In 2022, the Company did not issue any options to independent directors. |
The Company determines each director’s compensation
based on the number of years of service, workload and performance. The management believes that the pay for the members of the Board of
Directors was appropriate as of December 31, 2022. The compensation that directors received for serving on the Board of Directors
for fiscal year 2022 was as follows (figures are in thousands of USD):
Name | |
Fees earned or paid in cash | | |
Option awards (1) | | |
Total | |
Tong Kooi Teo | |
$ | 32 | | |
$ | — | | |
$ | 32 | |
Guangxun Xu | |
$ | 59 | | |
$ | — | | |
$ | 59 | |
Heng Henry Lu | |
$ | 32 | | |
$ | — | | |
$ | 32 | |
(1) The Company did not grant option awards to directors in 2022.
Other than the cash payment based on the number
of a director’s service years, workload and performance, the Company has granted option awards to each director in a few years.
In accordance with ASC Topic 718, the cost of the above-mentioned stock options issued to directors was measured on the grant date based
on their fair value. The fair value is determined using the Black-Scholes option pricing model and certain assumptions.
The cost of the above-mentioned compensation paid
to directors was measured based on investment, operating, technology and consulting services they provided. Except as stated above, no
other directors had received any compensation for their service on the Board of Directors.
BOARD MEETINGS AND COMMITTEES
The Board of Directors has standing audit, compensation
and nominating committees. The Board of Directors met four (4) times during 2022. The Audit Committee met four (4) times, the
Compensation Committee met four (4) times and the Nominating Committee met four (4) times during 2022. Each member of the Board
of Directors attended 75% or more of the aggregate of (i) the total number of Board meetings held during the period of such member’s
service and (ii) the total number of meetings of committees on which such member served, during the period of such member’s
service. The audit, compensation and nominating committees’ charters are available on the Company’s website at www.caasauto.com.
AUDIT COMMITTEE.
The Audit Committee currently consists of Guangxun
Xu (chairman), Heng Henry Lu and Tong Kooi Teo. The Board of Directors has determined that all members of the Audit Committee are independent
directors under the rules of the Nasdaq Stock Market and each of them is able to read and understand fundamental financial statements.
The Board of Directors has determined that Guangxun Xu qualifies as an “audit committee financial expert” as defined by the
rules of the SEC. The purpose of the Audit Committee is to oversee the accounting and financial reporting processes of the Company
and audits of its financial statements. The responsibilities of the Audit Committee include appointing and providing for the compensation
of the independent auditors.
NOMINATING COMMITTEE.
The Nominating Committee currently consists of
Guangxun Xu (chairman), Heng Henry Lu and Tong Kooi Teo, each of whom the Board of Directors has determined is an independent director
under the rules of the Nasdaq Stock Market. The Nominating Committee’s responsibilities include recommending nominees for possible
election to the Board of Directors and providing oversight with respect to corporate governance.
COMPENSATION COMMITTEE.
The Compensation Committee currently consists
of Tong Kooi Teo (chairman), Guangxun Xu and Heng Henry Lu. The Board of Directors has determined that all members of the Compensation
Committee are independent directors under the rules of the Nasdaq Stock Market. The Compensation Committee administers the Company’s
benefit plans, reviews and administers all compensation arrangements for executive officers and establishes and reviews general policies
relating to the compensation and benefits of our officers and employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
For the year ended December 31, 2022, none
of our executive officers had a relationship that would constitute an interlocking relationship with executive officers or directors of
another entity or insider participation in compensation decisions.
COMMUNICATIONS WITH DIRECTORS
Stockholders interested in communicating directly
with our directors may email the chairman Mr. Hanlin Chen at chenhanlin@chl.com.cn. Mr. Chen will review all such correspondence
and will regularly forward to the other members of the Board of Directors copies of all such correspondence that deals with the functions
of the Board of Directors or committees thereof or that he otherwise determines requires their attention. Directors may at any time review
all of the correspondence received that is addressed to members of the Board of Directors and request copies of such correspondence. Concerns
relating to accounting, internal controls or auditing matters will immediately be brought to the attention of the Audit Committee and
handled in accordance with procedures established by the Audit Committee with respect to such matters.
The Company has a policy of encouraging all directors
to attend the annual stockholders meetings. Last year, five (5) directors attended the annual meeting.
CODE OF CONDUCT AND ETHICS
The Company has adopted a code of conduct and
ethics that applies to all directors, officers and employees, including its principal executive officer and principal financial officer.
This code of conduct and ethics was filed as Exhibit 99.1 to the Company’s Annual Report on Form 10- KSB/A for the fiscal
year ended December 31, 2003 filed with the SEC.
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information
known to the Company with respect to the beneficial ownership of the Company’s common stock as of March 30, 2023 by (i) each
person who is known by the Company to own beneficially more than 5% of the Company’s common stock, (ii) each of the Company’s
directors and Named Executive Officers (defined below), and (iii) all executive officers and directors as a group. Except as otherwise
listed below, the address of each person is c/o China Automotive Systems, Inc., D8 Henglong Building, Optics Valley Software Park,
No. 1 Guanshan First Avenue, Wuhan City, Hubei Province, the People’s Republic of China. The percentage ownership is based
on 30,185,702 shares of common stock outstanding on March 30, 2023 (exclusive of 2,152,600 shares of treasury stock).
Name/Title | |
Total Number of Shares | | |
Percentage Ownership | |
Hanlin Chen, Chairman (1) | |
| 17,849,014 | | |
| 59.13 | % |
Qizhou Wu, CEO and Director | |
| 1,325,136 | | |
| 4.39 | % |
Guangxun Xu, Director | |
| — | | |
| — | % |
Tong Kooi Teo, Director | |
| — | | |
| — | % |
Heng Henry Lu, Director | |
| — | | |
| — | % |
Haimian Cai, VP | |
| — | | |
| — | % |
Jie Li, CFO (2) | |
| 91,031 | | |
| 0.30 | % |
Tse Andy, Sr. VP | |
| 400,204 | | |
| 1.33 | % |
Henry Chen, VP | |
| — | | |
| — | % |
All Directors and Executive Officers (9 persons) | |
| 19,665,385 | | |
| 65.15 | % |
| (1) | Includes (i) 13,322,547 shares of common stock beneficially owned by Mr. Hanlin Chen; (ii) 1,502,925
shares of common stock beneficially owned by Ms. Liping Xie, Mr. Hanlin Chen’s wife; and (iii) 3,023,542 shares of
common stock beneficially owned by Wiselink Holdings Limited, a company controlled by Mr. Hanlin Chen. |
| (2) | Includes 50,000 shares held as nominee for Jingzhou Jiulong Machinery and Electronic Manufacturing Co., Ltd.
On October 13, 2014, the Company issued 4,078,000 of its common shares in a private placement to nominee holders of Jingzhou Jiulong
Machinery and Electronic Manufacturing Co., Ltd. for the acquisition of the 19.0% and 20.0% equity interest in Jiulong and Henglong
held by Jingzhou Jiulong Machinery and Electronic Manufacturing Co., Ltd., respectively. All of the nominee holders of Jingzhou Jiulong
Machinery and Electronic Manufacturing Co., Ltd. are unrelated parties except for Mr. Jie Li (CFO). |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following related parties are related through
common ownership with the major stockholders of the Company:
| · | Wiselink Holdings Limited, “Wiselink” |
| · | Xiamen Joylon Co., Ltd., “ Xiamen Joylon ” |
| · | Shanghai Tianxiang Automotive Parts Co., Ltd., “ Shanghai Tianxiang ” |
| · | Jiangling Tongchuang Machining Co., Ltd., “ Jiangling Tongchuang ” |
| · | Shanghai Hongxi Investment Inc, “ Hongxi ” |
| · | Hubei Wiselink Equipment Manufacturing Co., Ltd., “ Hubei Wiselink ” |
| · | Jingzhou Derun Agricultural S&T Development Co., Ltd., “ Jingzhou Derun ” |
| · | Jingzhou Tongying Alloys Materials Co., Ltd., “ Jingzhou Tongying ” |
| · | Wuhan Dida Information S&T Development Co., Ltd., “ Wuhan Dida ” |
| · | Hubei Wanlong Investment Co., Ltd., “ Hubei Wanlong ” |
| · | Jingzhou Yude Machining Co., Ltd., “ Jingzhou Yude ” |
| · | Honghu Changrun Automotive Parts Co., Ltd., “ Honghu Changrun ” |
| · | Jingzhou Henglong Real Estate Co., Ltd., “ Henglong Real Estate ” |
| · | Xiamen Joylon Automotive Parts Co., Ltd., “Xiamen Automotive Parts ” |
| · | Jingzhou Jiulong Material Co., Ltd., “ Jiulong Material ” |
| · | Wuhan Tongkai Automobile Motor Co., Ltd., “ Wuhan Tongkai ” |
| · | Jingzhou Natural Astaxanthin Inc, “Jingzhou Astaxanthin” |
| · | Hubei Asta Biotech Inc., “Hubei Asta” |
| · | Shanghai Yifu Automotive Electronics Technology Co., Ltd., “Shanghai Yifu” |
| · | Suzhou Qingyan Venture Capital Fund L.P., “Suzhou Qingyan” |
| · | Chongqing Qingyan Venture Capital Fund L.P., “Chongqing Qingyan” |
| · | Chongqing Jinghua Automotive Intelligent Manufacturing Technology Research Co., Ltd., “Chongqing
Jinghua” |
| · | Hubei Hongrun Intelligent System Co., Ltd., “Hubei Hongrun” |
| · | Jingzhou WiseDawn Electric Car Co., Ltd., “Jingzhou WiseDawn” |
| · | Hubei Zhirong Automobile Technology Co., Ltd., “Hubei Zhirong” |
| · | Hubei Tongrun Automotive Parts Industry Development Co., Ltd., “Hubei Tongrun” |
| · | Hubei Qingyan Venture Capital Fund L.P, “Hubei Qingyan” |
| · | Hubei Henglongtianyu Pipe system Co., Ltd., “Henglong Tianyu” |
| · | Wuhan Ewinlink Intelligent System Co., Ltd., “Ewinlink” |
| · | Hubei HLTW Automotive Lightweight Co.,Ltd., “Hubei HLTW” |
| · | Hubei Jinlv New Energy Battery Technology Co., Ltd., “Hubei Jinlv” |
| · | Hubei Yiling Intelligent Technology Co., Ltd., “Hubei Yiling” |
| · | Sentient AB |
| · | Suzhou Sentient Automotive Technology Co., Ltd., “Suzhou Sentient” |
| · | Suzhou Qingshan Zhiyuan Venture Capital Fund L.P., “Suzhou Qingshan” |
| · | Beijing Hainachuan HengLong Automotive Steering System Co., Ltd., “ Beijing Henglong ” |
RELATED PARTY TRANSACTIONS.
The Company’s Audit Committee’s charter
provides that one of its responsibilities is to review and approve related party transactions defined as those transactions required to
be disclosed under Item 404 of Regulation S-K of the rules and regulations under the Exchange Act. The Company has a formal written
set of policies and procedures for the review, approval or ratification of related party transactions. Where a related party transaction
is identified, the Audit Committee reviews and, where appropriate, approves the transaction based on whether it believes that the transaction
is at arm’s length and contains terms that are no less favorable than what the Company could have obtained from an unaffiliated
third party.
The Company’s related party transactions
include product sales, material purchases and purchases of equipment and technology. These transactions were consummated at fair market
price and under similar terms as those with the Company's customers and suppliers. On some occasions, the Company’s related party
transactions also include purchase/sale of capital stock of the joint ventures and sale of property, plant and equipment.
Related party transactions during the years ended
December 31, 2022 and 2021, are as shown below (figures are in thousands of USD):
Merchandise Sold to Related Parties
| |
Year Ended December 31, | |
| |
2022 | | |
2021 | |
Hubei Hongrun | |
$ | 32,489 | | |
$ | 25,229 | |
Jingzhou Yude | |
| 8,778 | | |
| 10,784 | |
Xiamen Automotive Parts | |
| 2,468 | | |
| 3,864 | |
Beijing Henglong | |
| — | | |
| 24,604 | |
Other related parties | |
| 547 | | |
| 650 | |
Total | |
$ | 44,282 | | |
$ | 65,131 | |
Rental Income Obtained from Related Parties
| |
Year Ended December 31, | |
| |
2022 | | |
2021 | |
Wuhan Tongkai | |
$ | 166 | | |
$ | 180 | |
Jingzhou Tongying | |
| 152 | | |
| 170 | |
Hubei Hongrun | |
| 137 | | |
| 112 | |
Hubei ASTA | |
| — | | |
| 23 | |
Other related parties | |
| 4 | | |
| 8 | |
Total | |
$ | 459 | | |
$ | 493 | |
Materials Sold to Related Parties
| |
Year Ended December 31, | |
| |
2022 | | |
2021 | |
Honghu Changrun | |
$ | 749 | | |
$ | 1,000 | |
Jingzhou Yude | |
| 728 | | |
| 278 | |
Jiangling Tongchuang | |
| 603 | | |
| 626 | |
Jingzhou Tongying | |
| 547 | | |
| 580 | |
Hubei Hongrun | |
| 20 | | |
| 12 | |
Beijing Henglong | |
| — | | |
| 32 | |
Other related parties | |
| 137 | | |
| 25 | |
Total | |
$ | 2,784 | | |
$ | 2,553 | |
Materials Purchased from Related Parties
| |
Year Ended December 31, | |
| |
2022 | | |
2021 | |
Jingzhou Tongying | |
$ | 12,152 | | |
$ | 10,702 | |
Wuhan Tongkai | |
| 9,974 | | |
| 9,718 | |
Jiangling Tongchuang | |
| 3,238 | | |
| 7,009 | |
Honghu Changrun | |
| 2,467 | | |
| 2,358 | |
Henglong Tianyu | |
| 611 | | |
| 1,014 | |
Hubei Wiselink | |
| 310 | | |
| 481 | |
Hubei Yiling | |
| 30 | | |
| 286 | |
Other related parties | |
| 28 | | |
| 12 | |
Total | |
$ | 28,810 | | |
$ | 31,580 | |
Technology and Services Provided by Related Parties (Recorded
in R&D Expenses)
| |
Year Ended December 31, | |
| |
2022 | | |
2021 | |
Suzhou Sentient | |
$ | 607 | | |
$ | — | |
Sentient AB | |
| 462 | | |
| 935 | |
Hubei Yiling | |
| 234 | | |
| — | |
Total | |
$ | 1,303 | | |
$ | 935 | |
Property, Plant and Equipment Purchased from Related Parties
| |
Year Ended December 31, | |
| |
2022 | | |
2021 | |
Hubei Wiselink | |
$ | 2,336 | | |
$ | 1,200 | |
Hubei Yiling | |
| 48 | | |
| — | |
Total | |
$ | 2,384 | | |
$ | 1,200 | |
Equity Interest Purchase from Related Parties
| |
Year Ended December 31, | |
| |
2022 | | |
2021 | |
Jingzhou Wisedawn | |
$ | 23,618 | | |
| — | |
Loan Transaction to a Related Party
| |
Year Ended December 31, | |
| |
2022 | | |
2021 | |
Hubei Zhirong | |
$ | 146 | | |
| — | |
As of December 31, 2022 and 2021, accounts receivable, accounts
payable and advance payments between the Company and related parties are as shown below (figures are in thousands of USD):
Accounts and Notes Receivable from Related Parties
| |
December 31, | |
| |
2022 | | |
2021 | |
Hubei Hongrun | |
$ | 6,192 | | |
$ | 6,918 | |
Jingzhou Yude | |
| 3,094 | | |
| 5,740 | |
Xiamen Automotive Parts | |
| 1,311 | | |
| 1,533 | |
Xiamen Joylon | |
| 815 | | |
| 890 | |
Other related parties | |
| 367 | | |
| 424 | |
Total accounts and notes receivable - related parties | |
| 11,779 | | |
| 15,505 | |
Less: allowance for doubtful accounts - related parties | |
| (1,763 | ) | |
| (898 | ) |
Accounts and notes receivable, net - related parties | |
$ | 10,016 | | |
$ | 14,607 | |
Accounts and Notes Payable to Related Parties
| |
December 31, | |
| |
2022 | | |
2021 | |
Wuhan Tongkai | |
$ | 7,173 | | |
$ | 4,812 | |
Jingzhou Tongying | |
| 3,827 | | |
| 3,195 | |
Hubei Wiselink | |
| 3,687 | | |
| 2,984 | |
Henglong Tianyu | |
| 1,209 | | |
| 1,602 | |
Honghu Changrun | |
| 692 | | |
| 484 | |
Jiangling Tongchuang | |
| 45 | | |
| 240 | |
Other related parties | |
| 62 | | |
| 147 | |
Total | |
$ | 16,695 | | |
$ | 13,464 | |
Advance Payments for Property, Plant and Equipment to Related
Parties
| |
December 31, | |
| |
2022 | | |
2021 | |
Hubei Wiselink | |
$ | 1,618 | | |
$ | 565 | |
Henglong Real Estate | |
| 224 | | |
| 245 | |
Hubei Hongrun | |
| 42 | | |
| — | |
Total | |
$ | 1,884 | | |
$ | 810 | |
Advance Payments and Others to Related Parties
| |
December 31, | |
| |
2022 | | |
2021 | |
Sentient AB | |
$ | 632 | | |
$ | — | |
Jiangling Tongchuang | |
| 401 | | |
| 324 | |
Hubei Zhirong | |
| 146 | | |
| — | |
Hubei Wiselink | |
| 54 | | |
| — | |
Other related parties | |
| 206 | | |
| 276 | |
Total | |
$ | 1,439 | | |
$ | 600 | |
As of December 31, 2022, Hanlin Chen, our
chairman, owns 59.13% of the common stock of the Company and has the effective power to control the vote on substantially all significant
matters without the approval of other stockholders.
EXECUTIVE COMPENSATION
ELEMENTS OF COMPENSATION.
The Company’s executive compensation consists of the following
elements.
Base Salary
In determining the amount of base salaries for
our named executive officers (“Named Executive Officers”), the Compensation Committee strives to establish base salaries
that are similar to those paid by other companies to executives in similar positions and with similar responsibilities. Base salaries
are adjusted from time to time to realign salaries with market levels after considering individual responsibilities, performance and experience.
The Compensation Committee established a salary structure to determine base salaries and is responsible for initially setting executive
officer compensation in employment arrangements with each individual. The base salary amounts are intended to reflect the Company’s
philosophy that the base salary should attract experienced individuals who will contribute to the success of the Company’s business
goals and represent cash compensation that is commensurate with the compensation of individuals at similarly situated companies.
The Company’s Board of Directors and Compensation
Committee have approved the current salaries for executives: RMB 2.2 million (equivalent to approximately $0.32 million) for the Chairman,
RMB 1.4 million (equivalent to approximately $0.21 million) for the CEO and RMB 0.9 million (equivalent to approximately $0.13 million)
individually for each other officer in 2022.
Performance Bonus
| a. | Grantees: Mr. Hanlin Chen, Mr. Qizhou Wu, Mr. Andy Tse, Mr. Jie Li, and Mr. Yijun Xia. |
| b. | Conditions: based on the Company’s consolidated financial statements, (i) the year over year growth rate of sales for 2022
must be 5% or higher; or (ii) the year over year growth rate of sales for 2022 must be 10% or higher. |
| c. | Bonus: If condition (i) is satisfied, 25% of each officer’s annual salary in 2022. If condition (ii) is satisfied,
50% of each officer’s annual salary in 2022. |
The Company accrued 25% of the annual salary as
performance bonus for each Named Executive Officer in 2022 as the Company reached the above condition (i).
Stock Option Awards
The stock options plan proposed by management,
which aims to incentivize and retain core employees, to meet employees’ benefits, the Company’s long term operating goals
and stockholder benefits, was approved at the Annual Meeting of Stockholders held on June 28, 2005, and extended for ten years
at the Annual Meeting of Stockholders held on September 16, 2014. The maximum common shares available for issuance under the plan
is 2,200,000. The term of the plan was extended to June 27, 2025.
There were no stock options granted to management
in 2022.
Other Compensation
Other than the base salary for the Company’s
Named Executive Officers, the performance bonus and the stock option awards referred to above, the Company does not have any other benefits
and perquisites for its Named Executive Officers. However, the Compensation Committee in its discretion may provide benefits and perquisites
to these executive officers if it deems advisable to do so.
Option Exercises and Stock Vested
During fiscal year 2022, no shares were acquired by the Named Executive
Officers of the Company under the 2004 Stock Option Plan.
ROLE OF EXECUTIVES IN EXECUTIVE COMPENSATION DECISIONS.
The Compensation Committee seeks input from the
Company’s chairman and chief executive officer when discussing the performance of, and compensation levels for, executives other
than the chairman or the chief executive officer. None of our executives participates in deliberations relating to his own compensation.
In particular, the Compensation Committee seeks input from the Company’s chairman and chief executive officer in assessing the performance
of individual executive officers, assessing competitive conditions in the market for retaining key employees and establishing the Company’s
business goals and financial objectives which are used by the Compensation Committee in setting compensation levels.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT.
All of the Company’s executive officers
have executed standard employment agreements with the Company, which are governed by PRC law. Other than the amounts of compensation to
be paid by the Company, the terms and conditions of the employment agreements with the executive officers are substantially the same as
those of the Company’s standard employment agreements with non-executive employees. The Company’s standard employment agreements
are for a fixed period of five (5) years and may be renewed upon notice from the employee and consent of the Company. The Company
may terminate an employment agreement upon thirty days’ notice if an employee is no longer suitable for the job due to medical or
other reasons. An employee may terminate his or her employment agreement without cause upon one month’s notice to the Company. The
compensation stated in the agreement is the base salary and is subject to adjustment on an annual basis.
COMPENSATION OF EXECUTIVE OFFICERS.
The following describes the compensation arrangements
under the employment contracts of our Named Executive Officers.
* |
Hanlin Chen, the Company’s Chairman, has a renewed employment agreement that became effective as of September 25, 2012. The agreement is for an indefinite term pursuant to the PRC labor law. Mr. Chen received an annual salary of approximately $321,000 during the fiscal year ended December 31, 2022. |
* |
Qizhou Wu, the Company’s CEO, has an employment agreement that became effective as of September 25, 2012. The agreement is for an indefinite term pursuant to the PRC labor law. Mr. Wu received an annual salary of approximately $214,000 during the fiscal year ended December 31, 2022. |
* |
Haimian Cai, the Company’s Vice President, has an employment agreement that became effective as of July 8, 2010. The agreement is for an indefinite term pursuant to the local rules and regulations. Mr. Cai received an annual salary of approximately $383,000 during the fiscal year ended December 31, 2022. |
SUMMARY COMPENSATION TABLE.
The compensation that the Company’s CEO
and the two most highly compensated executive officers other than the CEO (collectively, the “Named Executive Officers”)
received for their services for fiscal years 2022 and 2021 were as follows (figures are in thousands of USD):
Name and Principal Position | |
Year | | |
Salary (1) | | |
Bonus (2) | | |
Option Awards (3) | | |
Total | |
Hanlin Chen (Chairman) | |
| 2022 | | |
$ | 321 | | |
$ | 80 | | |
$ | — | | |
$ | 401 | |
| |
| 2021 | | |
$ | 330 | | |
$ | 165 | | |
$ | — | | |
$ | 495 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Qizhou Wu (CEO) | |
| 2022 | | |
$ | 214 | | |
$ | 53 | | |
$ | — | | |
$ | 267 | |
| |
| 2021 | | |
$ | 220 | | |
$ | 110 | | |
$ | — | | |
$ | 330 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Jie Li (CFO) | |
| 2022 | | |
$ | 128 | | |
$ | 32 | | |
$ | — | | |
$ | 160 | |
| |
| 2021 | | |
$ | 132 | | |
$ | 66 | | |
$ | — | | |
$ | 198 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Haimian Cai (Vice President) | |
| 2022 | | |
$ | 383 | | |
$ | — | | |
$ | — | | |
$ | 383 | |
| |
| 2021 | | |
$ | 356 | | |
$ | — | | |
$ | — | | |
$ | 356 | |
| (1) | Salary – Please refer to Base Salary disclosed under “Elements of compensation”
section above for further details. |
| (2) | Bonus – Please refer to Performance Bonus disclosed under “Elements of compensation”
section above for further details. |
| (3) | Option Awards – Please refer to Stock Option Awards disclosed under “Elements of compensation”
section above for further details. |
For detailed information on option exercises and
stock vested, please see Note 17 to the consolidated financial statements of the Company in the Annual Report on Form 10-K for the
year ended December 31, 2022.
Pay Versus Performance.
In August 2022, the SEC released the final
version of its pay versus performance disclosure rules as mandated under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, and other official guidance issued thereunder, and which became effective starting with fiscal year ended December 31, 2022.
The final rules were codified under Item 402(v) of Regulation S-K (along with other official guidance issued, “PvP disclosure
rules”) and require the Company to provide the following tabular and narrative disclosures.
In accordance with the PvP disclosure rules, the below sets forth the
following for the previous two years (i) the total compensation set forth in the Summary Compensation Table (“SCT”) for
the individuals serving as Chief Executive Officer (“CEO” or “PEO”) and the non-PEO Named Executive Officers (“NEOs”);
(ii) the total and average “compensation actually paid” by the Company (“CAP”) to the PEO and the non-PEO
NEOs as a group, respectively; (iii) the Company’s cumulative total shareholder return (“Cumulative TSR”); and
(iv) net income.
Fiscal
Year
(a)(1) | | |
SCT Total
for PEO (b) | | |
Compensation
Actually Paid to
PEO (c)(2) | | |
Average SCT
Total for non-
PEO NEOs (d)(3) | | |
Average Compensation
Actually Paid to non-
PEO NEOs (e)(2)(3) | | |
Value of Initial Fixed $100
Investment Based on: Total
Shareholder Return (f)(4) | | |
Net Income (thousands) (g) | |
2022 | | |
$ | 267,000 | | |
$ | 267,000 | | |
$ | 314,667 | | |
$ | 314,667 | | |
$ | (7 | ) | |
$ | 22,343 | |
2021 | | |
$ | 330,000 | | |
$ | 330,000 | | |
$ | 349,667 | | |
$ | 349,667 | | |
$ | (57 | ) | |
$ | 10,726 | |
| (1) | During the past two fiscal years, Mr. Wu served as PEO and Mr. Chen, Mr. Li and Mr. Cai
served as non-PEO NEOs. |
| (2) | Represents the CAP for our PEO and the average CAP for our non-PEO NEOs as a group, computed in accordance
with the PvP disclosure rules. The dollar amounts do not reflect the amounts of compensation ultimately earned or realized by our PEOs
or non-PEO NEOs during the covered years. |
CAP is determined by taking the “Total”
column amount from the SCT for each covered fiscal year and subtracting the values reported in the “Change in Actuarial Prevent
Value”, “Stock Awards,” and “Option Awards” columns, and adding back amounts relating to pension services
costs, if applicable, and the value and changes in value of unvested incentive equity awards. Since the Company does not maintain a pension
plan for any of its NEOs, has not awarded any new incentive equity awards in the past two fiscal years to any of its NEOs, and none of
its NEOs have any unvested incentive equity awards as of December 31, 2020, no adjustments were necessary to the “Total”
column amount from the SCT in order to determine CAP for each NEO. Thus, CAP and average CAP for the PEO and non-PEO NEOs, respectively,
is identical to the “Total” and average “Total” column amount from the SCT for each covered fiscal year.
| (3) | Amounts reflected in these columns represent the average “Total” compensation from the SCT
and CAP for the non-PEO NEOs as a group. |
| (4) | Amounts reflected in these columns represent the Company’s Cumulative TSR for each measurement period
from December 31, 2020 through December 31, 2022. Dividends are assumed to be reinvested. The resulting amounts assume that
$100 was invested on December 31, 2020 in our common stock. |
All information provided above under the “Pay
Versus Performance” heading will not be deemed to be incorporated by reference into any filing of the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective
of any general incorporation language in any such filing, except to the extent the Company specifically incorporates such information
by reference.
REPORT OF THE AUDIT COMMITTEE
Under the guidance of a written charter adopted
by the Board of Directors, the purpose of the Audit Committee is to oversee the accounting and financial reporting processes of the Company
and audits of its financial statements. The responsibilities of the Audit Committee include appointing and providing for the compensation
of the independent auditors to conduct the annual audit of our accounts, reviewing the scope and results of the independent audits, reviewing
and evaluating internal accounting policies and approving all professional services to be provided to the Company by its independent auditors.
Each of the members of the Audit Committee meets the independence requirements of the Nasdaq Stock Market.
Management has primary responsibility for the
system of internal controls and the financial reporting process. The independent auditors have the responsibility to express an opinion
on the financial statements based on an audit conducted in accordance with generally accepted auditing standards.
In this context and in connection with the audited
financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, the Audit
Committee:
* |
reviewed and discussed the audited financial statements as of and for the year ended December 31, 2022 with the Company’s management and PwC, the Company’s independent auditors; |
* |
discussed with the Company’s independent auditors the matters required to be discussed by Statement of Auditing Standards No. 61, Communication with Audit Committees, as amended by Statement of Auditing Standards No. 90, Audit Committee Communications; |
* |
reviewed the written disclosures and the letter from PwC required by the Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, discussed with the auditors their independence and concluded that the non-audit services performed by PwC are compatible with maintaining their independence; |
* |
based on the foregoing reviews and discussions, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC; and |
* |
instructed the independent auditors that the Audit Committee expects to be advised if there are any subjects that require special attention. |
|
AUDIT COMMITTEE |
|
Guangxun Xu (chairman), Heng Henry Lu and Tong Kooi Teo |
AUDIT COMMITTEE’S PRE-APPROVAL POLICY.
During the fiscal years ended December 31,
2022 and 2021, the Audit Committee of the Board of Directors adopted policies and procedures for the pre-approval of all audit and non-audit
services to be provided by the Company’s independent auditor and for the prohibition of certain services from being provided by
the independent auditor. The Company may not engage the Company’s independent auditor to render any audit or non-audit service unless
the service is approved in advance by the Audit Committee or the engagement to render the service is entered into pursuant to the Audit
Committee’s pre-approval policies and procedures. On an annual basis, the Audit Committee may pre-approve services that are expected
to be provided to the Company by the independent auditor during the fiscal year. At the time such pre-approval is granted, the Audit Committee
specifies the pre-approved services and establishes a monetary limit with respect to each particular pre-approved service, which limit
may not be exceeded without obtaining further pre-approval under the policy. For any pre-approval, the Audit Committee considers whether
such services are consistent with the rules of the Securities and Exchange Commission on auditor independence.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table sets forth the aggregate fees
for professional audit services rendered by PricewaterhouseCoopers Zhong Tian LLP for the audit of the Company’s annual financial
statements and other services provided in the fiscal years 2022 and 2021. The Audit Committee has approved all of the following fees (figures
are in thousands of USD):
| |
Fiscal Year Ended | |
| |
2022 | | |
2021 | |
Audit Fees | |
$ | 731 | | |
$ | 768 | |
PROPOSAL 1 — ELECTION OF DIRECTORS
At the Annual Meeting, the stockholders will vote
on the election of five directors to serve for a one-year term until the 2024 annual meeting of stockholders and until their successors
are elected and qualified. The Board of Directors has unanimously approved the nomination of Hanlin Chen, Qizhou Wu, Guangxun Xu, Heng
Henry Lu and Tong Kooi Teo for election to the Board of Directors. The nominees have indicated that they are willing and able to serve
as directors. If any of these individuals becomes unable or unwilling to serve, the accompanying proxy may be voted for the election of
such other person as shall be designated by the Board of Directors. The directors will be elected by a plurality of the votes cast, in
person or by proxy, at the Annual Meeting, assuming a quorum is present. Stockholders do not have cumulative voting rights in the election
of directors.
The Board of Directors recommends a vote “For”
the election of Hanlin Chen, Qizhou Wu, Guangxun Xu, Heng Henry Lu and Tong Kooi Teo as directors.
Unless otherwise instructed, it is the intention
of the persons named in the proxy to vote shares represented by properly executed proxy for the election of Hanlin Chen, Qizhou Wu, Guangxun
Xu, Heng Henry Lu and Tong Kooi Teo.
PROPOSAL 2 — ADVISORY (NON-BINDING) PROPOSAL
CONCERNING THE
COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION
PROGRAM
The Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (the “Dodd-Frank Act”) enables the Company’s stockholders to vote to approve, on an advisory
(non-binding) basis, the compensation of the named executive officers as disclosed in this proxy statement in accordance with the SEC’s
rules, commonly referred to as a “Say-on-Pay.” At the 2011 annual meeting of stockholders, the Board of Directors proposed
and the Company’s stockholders approved, on an advisory basis, a frequency of every two years for advisory votes on the compensation
of our Named Executive Officers. In accordance with this vote, this year the Board of Directors is again implementing an advisory vote
on the compensation of our Named Executive Officers.
As described under the “Executive Compensation
- Compensation Discussion and Analysis” section of this proxy statement, the Company’s executive compensation program is designed
to attract, motivate and retain our Named Executive Officers who are critical to the Company’s success. The Company believes that
the various elements of its executive compensation program work together to promote its goal of ensuring that total compensation should
be related to both the Company’s performance and individual performance.
Stockholders are urged to read the “Executive
Compensation - Compensation Discussion and Analysis” section of this proxy statement, which discusses how the Company’s executive
compensation policies implement its compensation philosophy. The “Executive Compensation - Compensation of Executive Officers”
section and the “Executive Compensation - Summary Compensation Table” section of this proxy statement contain narrative discussion
and tabular information about the compensation of our Named Executive Officers, including information about fiscal year 2022 compensation
of the Company’s Named Executive Officers. The Compensation Committee and the Board of Directors believe that these policies are
effective in implementing the Company’s compensation philosophy and in achieving its goals.
You are invited to review the compensation of
the Named Executive Officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, including
the “Executive Compensation - Compensation Discussion and Analysis” section and the other related tables and disclosures,
and to vote to approve, on an advisory (non-binding) basis, the compensation of our Named Executive Officers through the adoption of the
following resolution at the Annual Meeting:
“Resolved, that the compensation paid to
the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion
and Analysis, compensation tables and narrative discussion, is hereby approved.”
The Say-on-Pay vote is advisory and, therefore,
not binding on the Company, the Compensation Committee or the Board of Directors. However, the Company’s Board of Directors and
its Compensation Committee value the opinions of the stockholders and, to the extent there is any significant vote against the Named Executive
Officer compensation as disclosed in this proxy statement, the Company will consider the stockholders’ concerns and the Compensation
Committee will evaluate whether any actions are necessary to address those concerns.
The Board of Directors recommends a vote “For”
approval of the advisory (non-binding) proposal concerning the Company’s named executive officer compensation program.
PROPOSAL 3 --- ADVISORY (NON-BINDING) VOTE
CONCERNING THE FREQUENCY OF
HOLDING FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
At the Annual Meeting, the stockholders will be
asked to cast a (non-binding) vote concerning the frequency of holding future advisory votes on executive compensation.
In connection with Proposal 2, the Dodd-Frank
Act also requires that the Company include in this proxy statement a separate advisory (non-binding) stockholder vote on how frequently
the Company should seek a Say-on-Pay vote. By voting on this Proposal 3, stockholders may indicate whether they would prefer an advisory
vote on Named Executive Officer compensation every one, two or three years. Stockholders also may abstain from casting a vote on this
proposal.
At the 2011 annual meeting of stockholders, the
Board of Directors made no recommendation on how stockholders should vote and stockholders approved, on an advisory basis, a frequency
of every two years for advisory votes on the compensation of Named Executive Officers. In accordance with this vote, the board of directors
has provided for an advisory vote on the compensation of Named Executive Officers every two years since 2011. At this year’s Annual
Meeting, stockholders again will have the opportunity to vote, on an advisory basis, on the frequency of advisory votes on the compensation
of our Named Executive Officers.
The selection regarding the frequency of the stockholder
vote on executive compensation receiving the highest number of votes shall be deemed approved. However, because this vote is advisory
and not binding on the Board of Directors or the Company in any way, the Board of Directors may decide that it is in the best interests
of the stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved
by the stockholders.
The Board of Directors recommends a vote for
a frequency of every “Two Years” for future advisory votes on compensation of Named Executive Officers.
INCORPORATION BY REFERENCE
The SEC allows the Company to “incorporate
by reference” information into this proxy statement, which means that the Company can disclose important information to you by referring
you to other documents that we have filed separately with the SEC and made available to you with the copy of this proxy statement. The
information incorporated by reference is deemed to be part of this proxy statement. This proxy statement incorporates by reference the
financial statements of the Company as contained in the Company’s Annual Report on Form 10-K for the year ended December 31,
2022 filed by the Company on March 30, 2023, which is made available together with this proxy statement on the website specified
above to all stockholders in connection with the Annual Meeting.
OTHER MATTERS
As of the time of preparation of this proxy statement,
neither the Board of Directors nor management intends to bring before the meeting any business other than the matters referred to in the
Notice of Annual Meeting and this proxy statement. If any other business should properly come before the meeting, or any adjournment thereof,
the persons named in the proxy will vote on such matters according to their best judgment.
STOCKHOLDER PROPOSALS FOR 2023 ANNUAL MEETING
Under the rules of the SEC, stockholders
who wish to submit proposals for inclusion in the proxy statement of the Board of Directors for the 2024 Annual Meeting of Stockholders
must submit such proposals so as to be received by the Company at China Automotive Systems, Inc., D8 Optics Valley Software Park,
No. 1 Guanshan First Avenue, Wuhan City, Hubei Province, The People’s Republic of China on or before May 3, 2023.
|
By Order of the Board of Directors |
|
|
|
/s/ Chen Hanlin |
|
Chen Hanlin
Chairman |
Hubei, People’s Republic of China
July 14, 2023
YOUR VOTE IS IMPORTANT!
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE EXECUTE THE PROXY FOLLOWING THE INSTRUCTIONS SET FORTH IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS MAILED TO YOU.
THIS WILL ENSURE THE PRESENCE OF A QUORUM AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO DO SO
EVEN IF YOU HAVE PREVIOUSLY EXECUTED THE PROXY.
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