Financial regulators to boost incentives for joining corporate reform program

Financial Services Commission Vice Chairman Kim So-young speaks in a conference on Korea’s corporate value-up program in Yeouido, western Seoul, on April 2, 2024. [YONHAP]

Financial authorities will provide additional incentives to companies participating in the government’s corporate reform program to boost the country’s stock market.

The Financial Services Commission (FSC) said on Tuesday it would exempt companies participating in the “corporate value-up program” from the auditor designation system to induce voluntary efforts.

The auditor designation system, adopted in 2018, enables the financial authorities to designate an auditor for three years if a company has designated an auditor of its own will for six consecutive years. The system's goal is to strengthen audit inspections and was introduced following the discovery of accounting fraud at Daewoo Shipbuilding & Marine Engineering in 2017.

Other incentives include exempting listed companies from annual fees to the stock bourse and the commissions they pay when issuing additional shares, changing corporate names or converting bonds into common stocks.

The financial regulators plan to create an award for the program in May next year. It will be given to companies that establish and publicly announce their plans to improve their profitability, said the FSC.

“Accounting and dividends connect companies with investors and are also closely related to corporate governance,” said FSC Vice Chairman Kim So-young. “So they are also important factors for the corporate value-up program, which requires harmony between a company’s finance and non-finance elements and shareholder return policies."

The financial authorities said it would provide tax benefits and enable inclusion to the “Korea Value-up Index” to listed companies with proven profitability records or those likely to boost their corporate value and corporate governance, including improved shareholder returns.

The program was introduced in February to resolve the country’s chronic undervaluation of stock prices. However, it has since been criticized for not incentivizing companies to participate.

BY JIN MIN-JI [jin.minji@joongang.co.kr]