The Financial Services Commission (FSC) has toughened the governance disclosure rule for listed companies.
From next year onwards, every listed company with assets exceeding two trillion won (US$1.8 billion) is obliged to disclose its corporate governance report, which is currently a voluntary disclosure item. The measure is to intended to enhance managerial transparency and market discipline.
The FSC revised its posting regulations for Korea Exchange on Dec. 19. The new rule will be applied to the 189 KOSPI companies, equivalent to 25% of the total listed companies. The FSC is going to consider applying it to every KOSPI-listed company in 2021.
According to the FSC, the disclosed report should contain whether the company observes key corporate governance principles and reasons in the event of non-compliance. Also to be disclosed are details regarding shareholder right protection by means of divided shareholder meetings, electronic voting introduction, the independence of the board of directors, fair director appointment, and the professionality of internal and external audit mechanisms. The FSC is going to provide detailed guidelines in the near future.
Every report must be disclosed within two months from the deadline of business report submission. Companies closing their books in December this year have to submit their reports by May 2019. A penalty point is given in the event of non-disclosure or false disclosure.
The FSC is going to encourage the disclosed information to be better utilized for shareholder activities. It is planning to make shareholder meetings and shareholders’ voting rights more effective by making electronic voting more convenient and encouraging companies to divide the meetings.
In addition, the FSC is planning to eliminate legal uncertainties related to the stewardship code while improving systems related to mass stock ownership report.
Last year, 39 financial and 31 non-financial companies participated in the current voluntary governance disclosure. The numbers increased to 40 and 55 this year. Some of those companies provided insufficient information regarding the 10 key principles of corporate governance.