Korea tightens corporate governance disclosure rules to strengthen shareholder protections
Financial Services Commission offices inside Government Complex Seoul / Korea Times photo by Hong In-ki
All companies listed on the benchmark KOSPI will face tougher disclosure requirements on boardroom changes and major corporate transactions under new rules designed to give shareholders greater oversight of corporate governance, financial authorities said Thursday.
The changes, announced by the Financial Services Commission and the Korea Exchange, expand the information companies must provide in their annual corporate governance reports. The move comes after the reporting requirement was extended to all 826 KOSPI-listed companies this year.
One focus is on preventing companies from circumventing the revised Commercial Act that is designed to give minority shareholders a greater say in board appointments.
Under the law, listed companies with assets of at least 2 trillion won ($1.49 billion) must incorporate cumulative voting, which allows shareholders to pool their votes behind a particular director candidate, improving the chances of minority shareholders electing a representative to the board.
Some companies, however, have sought to avoid the rule by shrinking their boards or changing directors’ terms. Under the new guidelines, they will have to explain why they are making such changes and whether those moves could affect shareholders’ ability to practice cumulative voting.
Firms planning to list a subsidiary separately or raise capital through a rights offering will also have to spell out how they have engaged with shareholders, given concerns that such transactions could dilute existing shareholders’ stakes.
The disclosures must cover key details of the proposed transactions, including whether new shares will be sold to outside investors, the size and discount rate of an offering and how the proceeds will be used.
The revised guidelines also give shareholders more time to weigh in on dividend policies. Companies will have to disclose their year-end dividend plans and amounts at least six weeks before their annual general meeting — the deadline for shareholders to submit proposals.
Until now, firms typically announced annual meetings just two weeks beforehand and published their business reports a week before the meetings, leaving limited time for shareholders to review dividend information and exercise their rights.