Concerning vocal minority shareholders, South Korea’s Financial Services Commission introduces revised corporate governance disclosure guidelines. It aims at strengthening shareholder protections and the area of corporate divestment, said IFR Asia.
Corporate governance disclosure is to support companies to voluntarily self-disclose their compliance with the corporate governance’ principles. This is to expect further explanations in case of non-compliance. The disclosure promotes more transparency in corporate management, elaborated FSC South Korea. Initiated in 2017, the mandatory filing has been expanded to Kospi-listed firms in 2022.
Several controversies led to this initiative. Minority shareholders’ vocal groups opposed large group spin-offs and subsequent IPO of the divested units. Therefore, firms included in the Kospi index with total assets of $814m or more should lay out a policy to protect minority shareholders from spin-offs. 265 companies are on the market regulator’s corporate state rules; they must make it clear by May 31.
While seeking for improvements, the authorities plan to start with a measure that guides the companies and their shareholders to resort to autonomous mediation. Following a split off, merger, transfer and the like, companies need to describe their shareholder protection companies when structural changes occur. In other words, with this regulation, companies will give more explanation to their details to transparently control their activities.
The shareholders protections also include mergers or business transfers. This means allowing the minority shareholders to give opinions and rights to oppose a change in ownership structure. In order to maintain better decisions, companies must provide paper information to shareholders as well.
Furthermore, internal transactions with affiliated companies, CEO succession policies, and audit committee policies, become the duty the regulators must uphold. To make it happen properly, KRX together with Korea Corporate Governance Service will perennially inspect the compliance with the revised guidelines.
