More outside directors reflects shift

The ratio of outside directors among the board members of 46 major business groups in Korea edged up in 2012, the antitrust watchdog said yesterday, pointing to a slight improvement in the overall corporate governance structure.

According to a report by the Fair Trade Commission (FTC) on 46 business groups and their 238 listed subsidiaries, the number of outside directors came to 772 as of April, which accounted for 48.5 percent of the total board members. It is up from 47.5 percent tallied a year earlier.

KT&G came first with the highest outside director ratio of 86.7 percent, followed by Korea Investment Holdings with 71.4 percent and Kumho Asiana Group with 58.8 percent. SeAH, Tongyang and Woongjin were among the lowest with 27.8 percent, 34.9 percent and 35.1 percent, respectively, the report showed.

Their attendance rate for board meetings also increased to 90.6 percent this year, from 87.8 percent a year earlier, according to the report.

Of the total 5,692 items discussed during the meetings over the past year until April, 36 cases or 0.63 percent failed to be approved as initially submitted due to objection by outside directors. The ratio is also up from 0.35 percent reported a year earlier.

“We estimate that the governance structure of large business groups has improved from last year,” the FTC said. “Operation of the [outside director] system also improved given the increase in the number of disapproved cases and higher attendance rates of outside directors in board meetings.”

The watchdog noted, however, that it is still difficult to say that the system is effectively providing checks and balances as the ratio of cases where outside directors influenced the decision-making process remains significantly low.

The report comes as demand for reform of large conglomerates’ corporate governance and shareholding structure is rising ahead of the Dec. 19 presidential election.

Major candidates are showing strong interest in resolving what they see as “unfair” business practices by large conglomerates, which have been at the center of the ongoing debate over economic democratization.

The FTC said it will publicize related information on systems put in place to serve as a check and balance on the management of large conglomerates, believing that it will make them feel pressured and eventually push them to revamp themselves.

Yonhap