[Provided by the Korea Chamber of Commerce and Industry]
[Provided by the Korea Chamber of Commerce and Industry]

Eight in 10 listed companies changed how their boards operate in the year since an amended commercial law expanding directors' duty of loyalty took effect, reflecting a broad shift in the corporate governance environment.

A survey of 300 listed companies — 50 with assets of 2 trillion won ($1.33 billion) or more and 250 below that threshold — conducted by the Korea Chamber of Commerce and Industry found that 84.3 percent of respondents said their board operations had changed since the commercial law amendment. The results were released Sunday.

The most common change, cited by 47.0 percent of respondents, was the creation or strengthening of internal review procedures led by legal and compliance teams. That was followed by expanded use of outside expert counsel (45.7 percent), more detailed board meeting minutes (43.7 percent) and stronger pre-agenda review procedures (39.7 percent).

Companies acknowledged positive effects from the reform but said the management burden had grown.

Some 39.6 percent of respondents said the amendment had a positive impact, including greater accountability in decision-making and improved governance transparency. But 22.4 percent said the burden had increased, citing higher compliance costs and delays in decision-making.

Concerns about litigation also rose. A majority — 53.7 percent — said worries about shareholder derivative suits and damage claims had increased since the expanded duty of loyalty took effect. An additional 21.7 percent said heightened legal scrutiny had led to delays, suspensions or cancellations of major decisions such as investments or business restructuring.

Among those affected decisions, matters related to new investments — including new businesses and mergers and acquisitions — accounted for the largest share at 30.8 percent.

Many companies are still preparing for follow-on measures set to take effect next January, including mandatory electronic shareholder meetings and a higher required ratio of independent directors.

Among companies subject to the mandatory electronic shareholder meeting requirement, only 16.0 percent had completed building the necessary systems. Among those required to raise their share of independent directors, 52.8 percent said they were still in the process of selecting candidates.

Companies said the new commercial law framework needs policy-level supplements to take hold, including specific guidelines on directors' duty of loyalty and codification of the business judgment rule.

Choi Eun-rak, head of the KCCI's research division, said companies had worked hard to comply with the new rules by changing how their boards operate. "Specific guidelines that reflect real-world cases and policy support to ease the practical burden are needed," he said.


mp1256@heraldcorp.com