Hub of major Korean corporations in central Seoul. (Image courtesy of Yonhap)
SEOUL, July 23 (Korea Bizwire) — Despite decades of reforms aimed at strengthening corporate governance, a new analysis reveals that South Korea’s outside directors—soon to be renamed “independent directors”—overwhelmingly rubber-stamped board proposals in 2023, with only a handful showing independent judgment.
According to data from the Financial Supervisory Service released Sunday, 122 listed affiliates of the nation’s top 11 conglomerates—each with a controlling shareholder—held a total of 1,222 board meetings last year and approved 3,575 resolutions.
Outside directors voted against just six proposals, casting a total of 18 opposing votes—15 of which aligned with management’s own dissenting stance. Only three instances of true dissent were recorded, and two of those were from the same individual.
Just one director abstained from a vote throughout the year. In total, only 3 out of 449 outside directors—just 0.67%—expressed an independent opinion during board proceedings.
The findings reinforce long-standing concerns that South Korea’s outside directors often serve as nominal checks on corporate power while lacking real independence. Despite the original intent to serve as a bulwark against abuse of power by controlling shareholders and executives, many outside directors are former bureaucrats, academics, or figures with personal ties to company leadership—frequently selected based on school or regional connections.
“The excessively high approval rate, even allowing for pre-meeting coordination, signals a lack of true independence,” said Kang Jung-min, a researcher at the Economic Reform Research Institute. “Even with stricter eligibility rules, personal or inter-group ties are difficult to screen out.”
A revised Commercial Act passed by the Cabinet this year aims to improve governance by renaming “outside directors” as “independent directors” and raising their required board representation from one-fourth to one-third. However, experts warn that without stronger safeguards for both independence and expertise, the reforms may have limited impact.
“It’s not just about independence—we also have to ask whether directors have the expertise to assess complex business matters,” said one academic, who spoke on condition of anonymity. “They may agree with management not out of alignment, but simply due to lack of capacity to disagree.”
He added, “Renaming them independent directors doesn’t guarantee true independence. Korea needs to look at how foreign boards, often composed of seasoned executives rather than politically connected academics, operate differently.”
The data has reignited debate over whether South Korea’s corporate boards serve as effective checks on power—or merely ceremonial bodies dominated by insiders in suits.
M. H. Lee (mhlee@koreabizwire.com)
