As the revised corporate law, which expands the duty of care for directors, marks its first anniversary, a recent survey indicates significant changes in the overall corporate management environment.
On July 12, the Korea Chamber of Commerce and Industry (KCCI) released findings from a survey of 300 listed companies, revealing that 84.3% of respondents reported changes in their board operations since the law's revision.
Specifically, 47.0% of companies indicated they have established or strengthened internal review processes, such as pre-review by legal and compliance teams. Additionally, 45.7% expanded consultations with external legal and accounting experts, while 43.7% detailed board meeting minutes to include individual directors' opinions. Other changes included the introduction or enhancement of pre-distribution and review procedures for agenda items (39.7%) and the formation of special committees (14.0%).
When asked about the impact of these changes on corporate management, 39.6% of companies noted positive effects, such as increased accountability in decision-making and improved transparency in governance. Conversely, 22.4% reported increased compliance costs and delays in decision-making as burdens on their operations.
The corporate law has undergone three revisions since last year. The first revision, which expanded the duty of care for directors, took effect immediately, while the increase in the proportion of independent directors is set to be implemented by the end of July this year, and the mandatory electronic shareholder meetings will take effect in January next year.
Furthermore, the second revision mandates the implementation of cumulative voting and the separate election of audit committee members (from one to two) for listed companies with assets exceeding 2 trillion won, which will take effect in September this year. The third revision, which mandates the cancellation of treasury shares, has already been implemented.
Concerns about increased litigation burdens have also been confirmed. More than half (53.7%) of listed companies reported heightened fears of shareholder derivative lawsuits and damage claims following the expansion of the duty of care for directors, while only 6.0% indicated a decrease in such concerns.
Many companies are currently working on compliance with upcoming regulations. Ahead of the mandatory electronic shareholder meetings and the increase in the proportion of independent directors, a significant number of companies are in the process of establishing systems and reviewing candidates.
Among listed companies with assets exceeding 2 trillion won, only 16.0% reported that they have completed the establishment of systems and operational frameworks for holding electronic shareholder meetings.
For listed companies with assets between 100 billion and 2 trillion won, which must meet the new independent director appointment ratio requirement (from 1/4 to 1/3) by the end of July next year, 52.8% are currently working on candidate selection.
Regarding the mandatory cancellation of treasury shares, 64.9% of companies holding shares subject to mandatory cancellation reported that they are still in the process of responding, while 35.1% stated they have completed approval for cancellation or plans for retention and disposal.
Companies have expressed the urgent need for detailed policy support from the government and relevant agencies to ensure the new corporate law framework is effectively implemented. The most frequently cited area needing improvement was the specificity of guidelines regarding directors' duty of care in relation to union demands for profit distribution (37.3%). Other suggestions included the codification of management decision-making principles (20.3%) and support for legal and compliance training for on-site practitioners (12.7%).
Choi Eun-rak, head of the KCCI's research division, stated, "Over the past year since the corporate law revision, companies have been changing their board operations and striving for compliance. For the system to take root effectively, it is essential not only for companies to make efforts but also for there to be concrete guidelines reflecting real-world cases and policy support that alleviates practical burdens."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.