What’s the use of outside directors?
Throughout last year, boards of Korea’s major listed companies dealt with 6,350 agenda items and outside directors voted for them in 99.66 percent of cases, a local consultancy said on March 27.
CEO Score looked into 251 subsidiaries of the country’s 57 top conglomerates including Samsung, Hyundai Motor, SK and LG groups to come up with the figure, which is higher than 99.62 percent of 2017.
Only 14 motions failed to get the approval of the board last year.
At this climate, CEO Score chief Park Ju-gun questioned the raison d’etre of so many outside directors, who have been criticized as rubber stamps more often than not.
“Many claim that Korean companies designate outside directors in order not to violate the relevant laws. Such complaints are understandable because outside directors’ roles seem to be very limited,” said Park who founded the corporate tracker.
“Out of 57 business groups, only 11 saw their board meetings not approve their agenda items. The remaining 46 groups got green lights for all motions they forwarded to the board.”
Included in the 11 outfits are Samsung, SK, Lotte, Posco, KT, KT&G, and Daewoo Shipbuilding & Marine Engineering.
Korea introduced the outside director system in 1992 to prevent chief executives and large shareholders from making decisions, which may hurt a firm’s interests. However, they have come under fire for failing to do so.
Park added that a few conglomerates like E-Land and SM presented many motions to the board aimed at securing funds for their affiliates. He said that their financial status seems to be unstable.