SEOUL, Dec. 27 (Korea Bizwire) — Outside directors at South Korea’s major conglomerates play an insignificant role in corporate decisions, with their agenda disapproval rate remaining very low, a government report showed Wednesday.
Of the 4,361 motions forwarded for approval by the board of 169 listed companies in the one-year period from April 2016, only 17 were rejected, altered or pigeonholed, according to the report from the Fair Trade Commission (FTC).
The number accounts for a mere 0.39 percent of the total, and only four agenda items were voted down.
The companies belong to 26 conglomerates, which are subject to tight restrictions on mutual investment among subsidiaries. The corporate watchdog compiles the annual report on their governance in a bid to help stem excessive concentration of economic power at those corporate behemoths.
The low disapproval rate is widely seen as indicating that independent directors at those family-controlled conglomerates just rubber-stamp key decisions to serve the interests of the largest shareholders or management rather than small investors.
The percentage of outside directors at the companies inched up to 50.6 percent during the period from 50.2 percent a year earlier, when the figure topped the 50 percent mark for the first time.
South Korea adopted the outside director system in 1992 to keep chief executives or large shareholders from making unilateral decisions that run against a company’s interests. But outside directors have been under flak for inaction.
According to the report, the percentage of conglomerate owners or immediate kin who are listed as board at affiliates stood at 17.4 percent this year, down from 17.8 percent the previous year. The watchdog said that this number has been falling steadily after it reached 27.2 percent in 2012.
Heads of conglomerates tend to avoid holding board of director titles because this entails legal responsibility if something goes wrong. They instead have preferred holding the office of chairman or chairwoman, which is not a formal or legally binding position but still gives them immense managerial power.
The number of companies with an electronic voting system rose to 39 this year from 27 a year earlier. But that of firms using the cumulative voting system fell to seven from eight.
Electronic voting allows minor investors who are not able to attend shareholder meetings to exercise their voting rights via the Internet, while cumulative voting permits small shareholders to transfer rights to a member of the board of directors. The systems are intended to rein in power abuses by controlling stockholders and top managers.
The report also showed that 94.2 percent of South Korean institutions investors vote for key board agendas, compared with 89.1 percent for their foreign counterparts.