"6-Year Term Limit for Outside Directors May Actually Harm Minority Shareholders"

On the 15th, Jung Wooyong, Vice Chairman of the Korea Listed Companies Association, revealed this during a phone call with Asia Economy.

Jung Woo-yong, Vice Chairman of the Korea Listed Companies Association

[Asia Economy Reporter Kum Boryeong] "Although it is implemented under the pretext of protecting minority shareholders, it can ultimately backfire and cause damage."

On the 15th, Jung Wooyong, Vice Chairman of the Korea Listed Companies Association, stated this during a phone interview with Asia Economy regarding the enforcement of the six-year term limit for outside directors.

The Ministry of Justice announced yesterday that the Office for Government Policy Coordination completed the review of the amendment to the Enforcement Decree of the Commercial Act, which includes the establishment of a term limit for outside directors, on the 10th. The amendment stipulates that if an outside director has served more than six years at the same listed company or more than nine years in total at the listed company and its affiliates, they cannot serve as an outside director.

As a result, starting from the shareholders' meeting in March this year, outside directors who have served more than six years will not be eligible for reappointment and must be replaced. Vice Chairman Jung said, "Companies that need to change outside directors have only about a month to prepare, which is insufficient." According to the Korea Listed Companies Association, 566 listed companies must appoint new outside directors in March this year, totaling 718 new appointments. Among these, 494 companies (87.3%) and 615 individuals (85.7%) are from mid-sized and small businesses.

In particular, there is a severe shortage of personnel. Vice Chairman Jung explained, "Most outside directors nowadays are experts. Since each company has different characteristics, outside directors must be found to match those characteristics. You cannot just appoint anyone like lawyers or professors as outside directors." He added, "Outside directors play a crucial role in important company decisions and must also bear responsibility for those decisions. Because of this, there is a growing tendency to avoid serving as outside directors."

He believes that if outside directors cannot be found, the damage will be directly borne by the companies and shareholders. Vice Chairman Jung emphasized, "If outside directors are not appointed, it does not end there; the company may be designated as a management target due to failing governance requirements or face delisting." He continued, "Although becoming a management target or delisting is an extreme case, if such a situation occurs, minority shareholders suffer the most." He added, "We need to reconsider whether this amendment is realistic and effective."

Listed companies also expressed dissatisfaction. Vice Chairman Jung said, "This morning, I heard opinions from several chief financial officers (CFOs) of listed companies regarding this amendment. They all said, 'The current outside directors are performing well, and from the company's perspective, it would be better if they served longer, so we don't understand why this is prohibited.'" He pointed out, "Only a very small number of outside directors hold their positions due to personal connections with company owners. The biggest problem is that this is being overly generalized."

This content was produced with the assistance of AI translation services.