Graft act affects firms’ outside director choicesMore than 30 percent of 400 listed companies are planning to appoint former government officials as outside directors before the so-called Kim Young-ran act takes effect, according to an analysis by a private economic research institute on Monday.
According to a report by Daishin Economic Research Institute, many of the listed companies have plans to hire former ministers or vice ministers as outside directors at upcoming shareholder meetings.
For the first time the institute started analyzing the agendas of shareholder meetings of the 400 major businesses on the stock market in order to help market observers understand business decisions of the companies that might affect the financial industry and the economy.
As of March 4, 126 companies have convened annual general shareholder meetings, the institute said. The names of the companies were not made public.
Of the companies, 86 put new nominations of outside directors on their agenda, it showed. About 12 percent of candidates were former ministers and vice ministers.
Following them, former prosecutors and judges accounted for 10.5 percent, officials of the Fair Trade Commission and Financial Supervisory Service claimed 5.8 percent, while 3.5 percent were from the National Tax Service and 2.3 percent were from the Blue House.
The recent passage of a tough anti-graft bill at the National Assembly triggered complaints from businesses saying the legislation will affect corporate activities and further depress the already flagging Korean economy.
The so-called Kim Young-ran bill aims to sever the dark connections between the private and public sectors by subjecting a wide range of occupations - from civil servants and legislators to teachers at private schools and journalists - to criminal punishment for receiving money or favors worth more than 1 million won ($912). For a meal, the ceiling has been set at 30,000 won.
As companies think it will be hard to rely on the connections of former public servants after the act goes into effect, many of them are going to nominate former officials from major government branches.
“Although it is difficult to say that the number of businesses trying to hire former government officials increased compared to the past, it is certain that the passage of the bill had an impact,” said Ahn Sang-hee, a researcher at the institute. “Theoretically, the role of outside directors is to keep management under check for better decisions, but in Korea, the role is more focused on friendly relations with the government.”
The report also found that the average salary of outside directors stood at 53 million won in 2014, up 9.3 percent from the previous year.
According to another report by the Korea Federation of Banks on Sunday, salaries of outside directors at major financial institutions hovered above 50 million won last year.
KB Financial Group paid about 86 million won or more to its outside directors, the most among similar institutions. The directors of the nation’s largest institution were blamed for an unprecedented boardroom feud over changing the computer system of the group’s subsidiary bank KB Kookmin Bank in 2014, which led to the ousting of its group chairman and bank president. Public opinion about outside directors has turned sour since.
Hyundai Motor, Hyundai Mobis, Kia Motors and Samsung Electro-Mechanics were found reappointing current directors who have previously made wrong decisions in important projects, the report said.
BY SONG SU-HYUN [email@example.com]