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SOUTH KOREA (Key characteristics influencing South Korean corporate…
SOUTH KOREA
Korean Committee on Corporate Governance was established in March 1999
Code of Best Practice 1999
Applied to listed companies and other public companies but it is also advised
that non-public companies follow the Code where practicable
Purpose:
Maximize corporate value by enhancing transparency and efficiency of corporations for the future
Sections
Audit systems
Large firms must have an annual accounting audit by an external firm
Companies should should establish an audit committee composed of at least three board members
Audit committee remits includes evaluating the internal control system, evaluating the external auditors, reviewing the accuracy of the company’s financial reports and reviewing
management’s operations
External audit shall be performed by those independent from stakeholders in the corporation
Stakeholders
The rights of stakeholders, and appropriate means of redress for
infringement of their rights, shall be protected
Board of Directors
Make the corporation’s key management policy decisions and
shall supervise the activities of directors and management
Perform their duties faithfully in the best interests of the corporation and its shareholders
Perform their social responsibilities and consider the
interests of various stakeholders
Outside directors who are ‘capable of performing their duties independently from the management, controlling shareholders and the corporation’
Appointed in a transparent process and sufficient information should be disclosed about the director appointment nominees to enable shareholders to vote in an informed way.
Management monitoring by the market
Corporations shall actively disclose matters of material importance to the decision-making
of shareholders, creditors, and other interested parties
Shareholders
Basic rights
Equal treatment
Responsibilities to exercise their voting
rights
Updated in 2003
Key characteristics influencing South Korean corporate governance
Legal system
Common law
Predominant ownership structure
Controlling shareholder (family, corporate
cross-holdings)
Main business form
Public limited company
Board structure
Unitary
Important aspect
Influence of Chaebols