Almost half of the outside directors of South Korea's top 50 conglomerates are set to expire in the first half of the year amidst changes in corporate law aimed at enhancing shareholder rights.
In South Korea, with the implementation of the revised corporate law set for September—which includes concentrated voting systems and separate elections for audit committee members—it has been revealed that 44% of the outside directors in the country's top 50 conglomerates will see their terms expire by June of this year. As the regular shareholders' meeting approaches in March, there are expectations that this could be a turning point to prevent 'tactics' to evade strengthening shareholder rights, especially among general shareholders.
A report from corporate analysis firm Korea CXO Research Institute indicates that as of now, there are a total of 1,235 outside directors whose terms are set to expire. Among these, 543 directors are scheduled to leave their positions by June, which constitutes 44% of the total. Additionally, among companies with total assets of over 2 trillion won, who are required to have their outside directors serve for a maximum of six years, around 103 individuals will also depart from their positions after March, meaning that many of these directors might be replaced during this summer's transition period.
The recent amendments to the corporate law emphasize the duty of the directors to act in good faith and ensure greater independence, particularly for companies with larger asset bases. The amended law specifies that large corporations must separately elect at least two members of the audit committee at the shareholders' meeting to ensure they are independent, thereby reducing the influence of major shareholders. However, companies are still able to employ strategies—such as altering their articles to increase the number of committee members—potentially undermining these legal requirements and limiting shareholders' voting powers despite the new regulations.
