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COOPERATE GOVERNANCE IN SOUTH KOREA (The purpose of the Code is (to…
COOPERATE GOVERNANCE IN SOUTH KOREA
The Korean Committee on Corporate Governance reported six months later in September 1999, with a Code of Best Practice (hereinafter ’the Code’).
The purpose of the Code is
to maximize corporate value by enhancing transparency and efficiency of corporations for the future
to attract and retain both domestic and foreign investment
The Code has five sections relating to shareholders, the board of directors, audit systems, stakeholders, and management monitoring by the market, which are looked at in more detail now.
Shareholders
To attend and vote at general shareholder meetings
To receive relevant information in a timely way\
Shall be treated equitably
Board of directors
Setting corporate goals and the strategies to achieve them
Approving business plans and budgets
Supervising risk management activities and associated controls
Ensuring appropriate information disclosure
Audit systems
composed of at least three board members, of which at least two-thirds, including the audit committee chair, should be outside directors; at least one member should have professional auditing knowledge
The audit committee remit includes
evaluating the internal control system
evaluating the external auditors
reviewing the accuracy of the company’s financial reports
reviewing management’s operations
Stakeholder
Companies need to take account of their social responsibilities and environmental protection
Stakeholders may monitor management as appropriate
There is no provision for employee representation
Management monitoring by the market
Corporations shall actively disclose matters of material importance to the decision-making of shareholders, creditors, and other interested parties
The company should explain in its annual report any differences between its corporate governance and the recommendations laid down in the Code
If there is a minimum of 20 per cent foreign ownership, then companies should make disclosures in both Korean and English languages for audit reports and ‘material timely disclosures’
Companies disclose detailed information on the share ownership status of controlling shareholders