Outside directors at Korean firms overrepresented by academics, ex-bureaucrats: survey
Headquarter of Korea Chamber of Commerce / Courtesy of the Korea Chamber of Commerce
Outside directors at Korean companies are disproportionately represented by those with a background in academia and the government, a survey showed Wednesday, raising concerns over a lack of board-level business expertise compared with global competitors.
According to the survey conducted by the Korea Chamber of Commerce and Industry (KCCI) last year on 160 corporate outside directors, 36 percent said they came from academia, while 14 percent had a background in the government.
The survey showed only 15 percent had executive business backgrounds, which was in stark contrast with companies in the United States and Japan.
At S&P 500 companies in the United States, 72 percent of outside directors had business experience, while that figure stood at 52 percent among Nikkei 225 firms in Japan.
The KCCI attributed the trend in Korea to local regulations under the Fair Trade Act, which classifies a company owned by an outside director as an affiliate of a large business group unless exempted.
Industry watchers say this rule effectively deters entrepreneurs from joining boards of listed companies.
When asked about areas of policy changes regarding board operations, 45 percent called for improved guidelines to enhance director qualifications, while 28.8 percent noted the need for discussions on expanding the liability of outside directors.
"In a time of intensifying global uncertainty and industrial competition, outside directors must be seen not merely as watchdogs but as strategic decision-making partners," a KCCI official said.