Management Participation without Assuming Responsibility
The Korea Fair Trade Commission announced on Dec. 9 that it recently looked into 56 conglomerates, those include 49 led by owners, the 49 conglomerates have 1,801 subsidiaries, and at least one owner family member is registered as a director in 321 out of the 1,801 subsidiaries. It added that director registration in a main subsidiary, a holding company, and a company subject to private profit-taking regulations accounted for 41.7 percent, 84.6 percent and 56.6 percent, respectively. Registration of an owner as a director accounted for 7.4 percent.
Out of the 56, 47 conglomerates were looked into both last year and this year. In the 47 business groups, the ratio of registration of an owner family member as a director fell 3.8 percentage points to 17.9 percent and the ratio of registration of an owner as a director fell from 8 percent to 7.2 percent. For example, a new owner took control in LG and Hanjin and an owner stepped down in Kolon and Kumho Asiana.
When it comes to 21 groups analyzed for the fifth consecutive year, owner and family member registrations accounted for 4.7 percent and 14.3 percent, down 0.7 and 4.1 percentage points, respectively. The owners of 19 groups, including Hanwha, Hyundai Heavy Industries, Shinsegae, CJ, Daelim, Mirae Asset, Hyosung, Kumho Asiana, Kolon, Hankook Tire, Dongkuk Steel and Naver, were registered as a director in no subsidiary at all. In 10 out of the 19, the owners’ children and grandchildren were not registered as directors. The commission said that director registration is preferable in terms of responsible management if owners and their family members exercise influence and participate in management activities.
Boards in the conglomerates were close to rubber stamps. From May 2018 to May this year, the boards handled 6,722 agenda items and only 24 were refused by outside directors and the like. Especially, items related to large-scale internal transactions, 755 in total, were not refused at all. When it comes to measures for enhancing minority shareholders’ rights, only electronic voting showed an increase in the number of cases. 86 out of 250 listed companies adopted electronic voting and voting rights were exercised by electronic voting in 72 cases.
During the period, local institutional investors exercised voting rights at 235 listed companies’ shareholder meetings. The investors’ voting right exercise-to-shareholding ratio was 78.4 percent and 92.7 percent was exercised in favor. In 54 business groups, the former ratio edged up from 77.9 percent to 78.7 percent with the ratio of dissenting votes falling from 9.5 percent to 7.1 percent.