South Korea: Big firms still favor ex-officials as outside directors
Published on Wed, 2012-10-24 13:02
Affiliates of South Korea's top 10 conglomerates still prefer former government officials and ex-policymakers as outside directors, reported Yonhap news agency. The Citizens' Coalition for Economic Justice (CCEJ, national focal point of Social Watch), says that "enhancing independence will reduce the chance of these posts being used for lobbying since companies will not be as able to influence outside directors as they could in the past."
A total of 330 people served as outside directors at the 93 affiliates of the leading conglomerates as of end-June this year, down from 337 a year earlier, according to the data compiled by local research firm Chaebol.com.
Of the 77 outside directors newly hired, 29, or 37.7 percent, were former government officials, retired judges, prosecutors and senior policymakers, and those who worked for the tax office, the financial watchdog and corporate watchdog, the data showed.
Upon retirement, a bulk of ranking government officials is scouted by companies, which wish to use their influence to build up favorable business ties. The deep-rooted practice has often been criticized for leading to an unjust business culture.
But local companies have continued to frequently appoint former policymakers and members of the judiciary to sit on their boards and offer generous retainer fees that can be construed as a form of lobbying.
Such outside directors have been also under fire for failing in their duties by providing neutral opinions on how to run a company and prevent the misuse of management authority that can hurt investors and employees.
Experts said more transparency should be put in place for the appointment of an outside director, which could raise independence of outside directors so they can perform their roles in a more effective manner.
"Enhancing independence will reduce the chance of these posts being used for lobbying since companies will not be as able to influence outside directors as they could in the past," said Lee Ki-ung, member of the CCEJ.
Also, guidelines that can disqualify a prospective outside director from being appointed, and establishing other safety nets can better prevent the system from being used as a lobbying tool, experts said.
A bill to force tycoons to disclose their incomes
Top executives of South Korean listed companies including chaebol chiefs may have to disclose their income under a recently submitted bill as the political drive for “economic democratization” gains momentum, reported The Korea Herald.
CCEJ’s Lee said the wage disclosure would help strengthen shareholder rights and allow social feedback, realizing economic democratization.
Rep. Rhee Mok-hee of the Democratic United Party and nine other lawmakers submitted the bill that requires listed firms to make public the compensation of each board member and the standards by which the wage was calculated.
Presently, listed companies only state the total payroll for board directors in their business reports.
Hyundai Motor, for instance, said it paid a total of 8.4 billion won to four board directors including chairman Chung Mong-koo in last year’s report.
Samsung Electronics said it paid 32.69 billion won to three board directors last year, but since chairman Lee Kun-hee is not a board director, his paycheck wasn’t even included.