Samil PwC: Compliance Rate with Key Corporate Governance Indicators Rises for Listed Companies... Should Not Remain a Simple Checklist

With mandatory disclosure set to be implemented for all listed companies starting next year, there has been a suggestion that companies should utilize corporate governance reports to achieve genuine optimization of their governance structures.

On August 20, Samil PwC Governance Center announced the publication of the 30th issue of its "Governance Focus," which covers this topic. The report analyzes the trends of compliance with the "Key Corporate Governance Indicators" included in corporate governance reports over the past five years, highlighting notable changes and implications.

In Korea, corporate governance reports were first introduced in 2017, and mandatory disclosure was implemented in 2019 for KOSPI-listed companies with assets of 2 trillion won or more. In 2022, the threshold was lowered to 1 trillion won, and last year, to 500 billion won. From next year, all KOSPI-listed companies will be required to disclose. This report analyzed 496 non-financial companies with assets of 500 billion won or more that are subject to mandatory disclosure.

According to the report, the compliance rate for the 15 key indicators among the target companies rose from an average of 50% last year to 55% this year. By indicator, the compliance rate for "providing predictability regarding cash dividends" showed the largest year-on-year increase, rising by 25 percentage points. The report estimated that recent institutional changes to protect shareholder rights, such as value-up programs, have had an impact.

In contrast, the compliance rate for "adoption of cumulative voting" remained low at 3%, unchanged from the previous year. Currently, discussions are underway to amend the Commercial Act to make cumulative voting mandatory. The report also pointed out five key indicators where the compliance gap widened significantly depending on company size, emphasizing that differentiated approaches to effective corporate governance are needed based on company scale.

The report stated, "Disclosure of corporate governance reports was made mandatory to enhance the transparency of corporate governance, but there are still many cases where it remains 'disclosure for the sake of disclosure.' With all listed companies required to disclose from next year, there needs to be a growing awareness that compliance with key indicators should not be just a checklist, but should be linked to companies' strategic decision-making."

In addition, the report includes "Nine Questions to Review Board Operations," which provides concrete measures to assess and improve the efficiency and effectiveness of boards of directors. Further details of the report can be found on the Samil PwC Governance Center website.

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