Outside directors play small role in conglomerates: antitrust watchdog

SEJONG, Dec. 9 (Yonhap) -- Outside directors of South Korea's major conglomerates have played a small role in corporate decisions, with their agenda disapproval rate remaining very low, the nation's antitrust watchdog said Monday.

Of the 6,722 motions forwarded for approval by the boards of 250 listed companies in the one-year period from May 2018, only 24 were rejected, altered or pigeonholed, according to the Fair Trade Commission (FTC).

The number accounts for a mere 0.36 percent of the total, the FTC said in a statement.

The companies belong to 56 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 51.3 percent during the period from 50.7 percent a year earlier.

South Korea adopted the outside director system in 1992 to keep chief executives or major shareholders from making unilateral decisions that run against a company's interests. But outside directors have been under flak for inaction.

According to the FTC, the percentage of conglomerate owners or immediate kin who are listed on the boards of affiliates stood at 17.8 percent this year.

The watchdog said this number has been falling steadily since 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 86 this year from 39 a year earlier, the FTC said.

Electronic voting allows minor investors who are not able to attend shareholder meetings to exercise their voting rights via the internet, while cumulative voting allows 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.

kdh@yna.co.kr
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