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This year, 3 out of 10 new outside directors at the top 10 groups were lawyers and law school professors. In the case of LG, four out of eight new outside directors this year are professors at the Law School. This is because the role of lawyers in the board of directors is increasing as corporate-related regulations such as the Severe Accident Punishment Act and compliance management become more important.
The number of outside directors from entrepreneurs is also on the rise. Among the new outside directors, the number of entrepreneurs increased from 7 to 12 in one year. In advanced capital markets such as the United States, entrepreneurs occupy the majority of outside directors.
On the other hand, the number of high-ranking officials such as the vice minister and outside directors from the National Tax Service, Fair Trade Commission, and Financial Services Commission is decreasing. None of the new outside directors appointed this year have retired from the Fair Trade Commission, the Financial Services Commission, or the Board of Audit and Inspection. There was only one person from the IRS.
Park Young-seok, a professor at Sogang University Business School, said, “As ESG (environmental, responsible, transparent management) and compliance management are strengthened, the participation of legal experts in the board of directors is increasing. Management advice, etc. is possible.”
◆ 30% of new faces of outside directors are legal experts
According to Maeil Business News on the 20th, there are 78 new outside directors in the top 10 groups who have been or are expected to be appointed at the March shareholders’ meeting of corporations with a settlement of accounts in December.
40 (51%) new outside directors are professors. 11 students from business and economics, 9 from law school, and 9 from engineering school. A year ago, there were 15 business people, 7 engineering students, and 5 law students.
After professors, lawyers and businessmen (including financial companies) were 15 (18%) and 12 (15%), respectively. Last year, there were only four lawyers. There were two people each from the prosecution and the court.
Among the 15 lawyers, former prosecutors were Kim Hyun-woong (Hotel Shilla), former Attorney General Kim Jun-gyu (Samsung Card), Cho Sang-cheol, former chief of Seoul High Prosecutors’ Office (Lotte Shopping), Kwon Ik-hwan, former chief of Seoul Southern District Prosecutors’ Office (Hanwha Corporation), and Kim Hee-kwan, former legal trainee There are five people including the director (Shinsegae Construction). Former Judge Hye-ri Choi (Samsung Securities, Lotte Hi-Mart), Gyeong-chun Lee, former Chief of the Seoul Rehabilitation Court (Lotte Holdings), Nak-song Seong, former president of the Judicial Research and Training Institute (Lotte Fine Chemicals), and former Judge Ji-soo Lee (Hyundai Heavy Industries Holdings) are from courts. Hwang Deok-nam, an outside director of Lotte Confectionery, served as the Blue House legal secretary in the Roh Moo-hyun government. Including law school professors (9), there are 24 outside directors with legal expertise. This is about 30% of the total number of new outside directors.
Kim Soo-yeon, a research fellow at Law Firm Gwangjang, said, “With the recent spread of ESG management, companies are reinforcing legal experts on the board of directors as they strive for compliance management, which is the basis of ESG.” The role of lawyers in the board of directors is growing,” he explained.
The number of entrepreneurs nearly doubled from last year.
In the four major groups, outside directors who are financial experts stand out. Samsung Electronics has appointed or plans to appoint Kim Jun-seong, former managing director of the Singapore Investment Agency, Hyundai Motor Securities, former SC First Bank executive Lee Jong-sil, and SK Innovation, former Citibank Korea President Park Jin-hoe as outside directors. In Lotte, Kim Hae-kyung, former CEO of KB Credit Information (Lotte Holdings), Shim Soo-ok, former vice president of Samsung Electronics (Lotte Shopping), and Cho Woon-haeng, former CEO of Woori Financial Group (Lotte Chemical) are new outside directors.
POSCO also has three new outside directors from entrepreneurs. Former LG Chem CEO Jin-nyeong Yoo is POSCO Holdings, Corning Korea CEO Hahn Hahn-hee is POSCO International, and former CEO of SK Hynix Kwon Oh-cheol is an outside director of POSCO Chemical.
At Hanwha Investment & Securities, Yeo-jeong Moon, managing director of IMM Investment, is a new outside director, and Hyo-eun Moon, CEO of Art Ventures and Seong-rak Lee, former CEO of Shinhan Life Insurance, respectively, for GS and GS Retail, are new outside directors.
The number of outside directors from high-ranking officials, such as the vice-minister and prosecutors, is declining. The number of former ministers decreased from 7 to 5, and the number of deputy ministers decreased from 4 to 1 in one year. There was only one person from the IRS. Last year, there were 4 people from the National Tax Service and 2 from the Board of Audit and Inspection. Among the new directors this year, none from the Board of Audit and Inspection, the Fair Trade Commission, the Financial Supervisory Service or the Financial Supervisory Service. Accounting experts were counted as two.
This trend can also be seen in the outside directors of the top 10 listed companies, including new outside directors. 373 outside directors were analyzed. There are 196 professors, 45 lawyers, and 55 business and finance people. These positions have increased compared to last year. On the other hand, the number of high-ranking officials and outside directors from the National Tax Service, the Fair Trade Commission and the Board of Audit and Inspection decreased.
◆ Hyundai Motor, LG, and Hyundai Heavy Group, ‘0’ from bureaucrats
There are also characteristics of each group.
In Samsung, 7 out of 17 new outside directors are high-ranking officials or politicians. Former Minister of Strategy and Finance Park Jae-wan, former Deputy Prime Minister of Economy Yoo Il-ho, former Minister of Planning and Budget Jang Byung-wan, former Minister of Justice Kim Hyun-woong, former Prosecutor General Kim Jun-kyu, former Deputy Legislative Director of the National Assembly Secretariat Jeong Jin-gu, and former National Assemblyman Choi Jae-cheon. Last year, all seven new directors served as deputy ministers or members of the National Assembly. The preference for senior positions is declining compared to the previous year.
In Samsung Electronics, both new outside directors are expert groups. Han Hwa-jin, chair professor at the National Institute of Science and Technology Human Resources Development, and Kim Jun-seong, former managing director of the Singapore Investment Agency, were appointed as outside directors on the 16th. There are 6 professors.
At Hyundai Motor Group, eight out of ten new outside directors are professors. As a car-focused group, there are four professors at the College of Engineering. SK’s new outside directors are three professors, one former bank president, and one former regional tax office chief. In LG, all eight new outside directors are professors, and five are women.
In Lotte, women and entrepreneurs are strong. 5 out of 12 are women, and 4 are entrepreneurs. Former Samsung Electronics Vice President Shim Soo-ok and former KB Credit Information CEO Kim Hae-kyung, who are female entrepreneurs, will be appointed as outside directors of Lotte Shopping and Lotte Holdings, respectively, at the end of this month. Last year, there were no entrepreneurs. Lotte explained that it focused on professionalism, independence, and diversity when appointing outside directors.
In POSCO, outside directors who served as CEOs stand out. Former LG Chem CEO Jin-nyeong Yoo (Posco Holdings), Corning Korea CEO Hahn-hee Hae (Posco International), former SK Hynix CEO Kwon Oh-cheol, and Yale Accounting Firm Chairman Yoon Hyun-cheol (POSCO Chemicals) will join the outside board of directors of POSCO.
Hanwha has three professors, one investment company executive, and one lawyer. Kwon Ik-hwan, a former head of the Southern District Prosecutors’ Office, completed the ESG leadership course sponsored by the Maekyung and Environment Foundation, and acquired ESG expertise.
In Hyundai Heavy Industries Group, five out of six new outside directors are women. There are various professions, such as lawyers, professors, and former members of the National Assembly.
Among the top 10 groups, Hyundai Motor Group, LG Group, and Hyundai Heavy Industries Group did not have any former bureaucrats. SK, POSCO, Hanwha, GS, and Shinsegae had only one high-ranking official each.
◆ Mandatory for female registered executives from August
As female registered executives become compulsory from August, the number of capable female outside directors is also increasing. The target of mandatory female registered executives is stock-listed corporations with total assets of 2 trillion won or more.
A total of 74 female outside directors of listed companies in the 10 largest groups were made. About 20% of all outside directors, up 8 percentage points from last year. The number of newly appointed female outside directors this year is 32 (41% of the total).
Female non-executive directors are evaluated as having expertise rather than a windshield from the company. It is particularly strong in ESG.
Han Hwa-jin, an outside director of Samsung Electronics, served as the Blue House environmental secretary, and Kim Hyun-jin, an outside director of SK Discovery, served as a member of the Presidential Green Growth Committee. Jeong-hyeon Choi, an outside director of Samsung Engineering, is a professor of environmental engineering at Ewha Womans University, and Hyun-joo Lee, an outside director of LG Chem, is a professor of biochemical engineering at KAIST. Samsung Electro-Mechanics Independent Director Yoon-Jeong Lee is a member of the Korea Bar Association’s ESG Expansion Promotion TF, and Hye-Ri Choi, an Independent Director at Samsung Securities and Lotte Hi-Mart, is a former standing member of the National Human Rights Commission of Korea.
If we look at the classification of female outside directors by occupational group, there are 19 professors, 6 lawyers, 6 businessmen, and 1 former member of the National Assembly. Professor majors include law school 7 students, engineering 5 students, and business administration 2 students.
Last year, professors accounted for about 70% (31) of new female outside directors.
Hyo-seop Lee, head of the Financial Investment Division at the Korea Capital Market Research Institute, said, “International institutional investors such as BlackRock are using gender diversity in their board of directors as a criterion for evaluating investment target companies. It will be of great help to reduce the investment and expand the base of investment.”
Independent directors are registered directors who do not engage in general duties and do not have any grounds for disqualification from outside directors, and were introduced in 1998. The appointment of outside directors is a matter of a general resolution at the general meeting of shareholders, and selection of outside directors is made from among the candidates announced at the time of the notice of the convening of the general meeting of shareholders. A listed company with assets of 2 trillion won or more must establish an outside director candidate recommendation committee. Listed companies must have at least a quarter of the total number of directors as outside directors. Listed corporations with assets of KRW 2 trillion or more must have three or more outside directors, but a majority of the total number of directors.
Recently, there are also criticisms about the transparency of outside director recommendation. The argument is that, in the case of re-appointment of outside directors, it is necessary to prevent ‘self-recommendation’ in which outside directors belonging to the Outside Director Candidate Recommendation Committee within the BOD recommend themselves. In the top 10 groups, Hanwha Systems and others are restricting the voting rights of outside director candidates (re-appointed) belonging to the resignation committee. Ahn Sang-hee, head of the Responsible Investment Center at ESG Research Center, said, “It is considered positive in terms of shareholder rights and interests to limit the voting rights of an outside director belonging to the executive committee when he or she becomes a director again.” limiting their voting rights,” he explained. Ahn said, “If self-recommendation of outside directors is restricted, it is necessary to disclose such information.”
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