Outside Directors and Compliance Committees Increasingly Participating in Management

A growing number of boards of directors and compliance committees are increasing their participation in corporate decision-making processes. This is a significant change in conventional practices and means that the management transparency of South Korean companies is improving.

On Sep. 29, SKC held a board meeting and directors voted down the company’s plan to set up a joint venture with U.K.-based silicon anode material manufacturer Nexeon. The board has seven members and the four outside directors of the board led the rejection. According to insiders, they pointed out the necessity of additional risk analysis, although they are in favor of the company’s plan to strengthen its battery material business unit.

In SK Inc., outside directors voted down its investment-related report simplification plan in July last year. At that time, they pointed out that prudence in investment is as important as quick investment decision-making.

Samsung Group’s efforts for management transparency enhancement are being led by its compliance committee, which has one internal and six external members. “We will examine and carry out follow-up measures regarding the three main agenda issues of corporate succession, communication with society, and communication with workers,” it said on Sep. 30, adding, “Samsung Group’s governance structure will be improved based on external consulting.”

With this trend spreading, more rational decision-making is expected to take root in industries. “Outside directors with expertise and professionalism are increasing their participation in management as advisors and supervisors,” said an industry source, adding, “They are contributing to corporate strategy making as a channel of communication with the outside.”