New rules reshape corporate boards

[Anchor]

In less than two months, the Commercial Act has been amended twice, leading to significant changes in the board of directors of larger companies, from the election of directors to the meeting methods.

What impact this will have on corporate management activities has been investigated by reporter Park Chan.

[Report]

JB Financial Group, based on Jeonbuk Bank.

A rare event occurred at last year's shareholders' meeting.

A private equity fund with a 14% stake broke through the odds and succeeded in getting two directors onto the board.

This was thanks to the cumulative voting system.

[Lee Chang-hwan/CEO of Align Partners: "JB Financial Group is not actively normalizing shareholder returns, so I hope to participate in the board to discuss this properly..."]

Let’s assume two shareholders with ownership rates of 60% and 40% are electing three directors.

In a regular vote, all directors would be elected according to the preferences of the largest shareholder, but if a minority shareholder uses cumulative voting in one round, they could elect one director as they wish.

This cumulative voting system will be mandatory for listed companies with assets exceeding 2 trillion won.

The 'duty of loyalty to shareholders' requires directors to treat all shareholders fairly.

The 'mandatory electronic shareholders' meeting' helps shareholders exercise their rights online.

The 'cumulative voting system' expands the rights of minority shareholders in electing directors.

Including the '3% rule,' which limits the rights of major shareholders when electing audit committee members, these rules have also been newly established or strengthened all at once.

[Kim Jun-ho/Head of Corporate System Team, The Federation of Korean Industries: "With difficulties expected in domestic manufacturing due to U.S. tariffs, it is likely that swift decision-making for large-scale investments will not be easily made due to management disputes and other issues."]

The board of directors, which acted merely as a rubber stamp, has contributed to the emergence of a 'strong Commercial Act.'

Since it has not effectively prevented the pursuit of private interests by the founding family, tighter regulations are deemed necessary.

[Lee Chang-min/Professor at Hanyang University Business School: "There has been a strong tendency for friendly individuals close to the controlling shareholders to enter as outside directors, which has hindered the board's primary function of oversight."]

The amended Commercial Act will come into effect as soon as it is promulgated, and at the latest by 2027.

This is KBS News, Park Chan.