Outside Directors of the Three Major Telecom Companies Face Largest Overhaul in 10 Years... Will They Shed the 'Rubber Stamp' Label?

40% Replacement Amid 6-Year Term Limits and Telecom Issues
Candidates Include AI, Finance, and Accounting Experts... Focus on Oversight Role

[Asia Economy Reporter Seulgina Jo] This year, the turnover rate of outside directors at the three major mobile carriers has reached the highest level in the past decade, sparking both "expectations" and "concerns." It is a positive sign that each company has included experts in artificial intelligence (AI), finance, and accounting on their lists. However, considering the precedent where boards have acted as rubber stamps, it remains uncertain whether proper checks and balances will be implemented.

◆About 40% of Outside Directors Replaced= According to the Financial Supervisory Service and industry sources on the 16th, SK Telecom will appoint 2 new outside directors out of 5 at the regular shareholders' meeting scheduled for the 26th. KT, which is preparing for a new leadership system, will replace 4 outside directors, half of its total outside directors. LG Uplus also plans to appoint a new outside director whose term has ended.

The replacement rate among the three companies is 41%, the highest since listed companies began separately reporting new outside director appointments on the electronic disclosure system in 2009. Previously, KT replaced as many as 5 outside directors when Chairman Hwang Chang-gyu took office in 2014, but the total for the three companies was less than this year.

At SK Telecom, the terms of Chairman Lee Jae-hoon (former president of Korea University of Technology and Education), appointed in March 2014, and Director Ahn Jae-hyun (KAIST professor) expire this year. KT’s Chairman Kim Jong-gu (former Minister of Justice) and Director Jang Seok-kwon (Hanyang University Business School professor) have reached the 6-year term limit. LG Uplus inevitably has to replace Director Park Sang-soo (Kyung Hee University Business School emeritus professor), who was appointed in 2013 and reappointed in 2017.

Additionally, KT’s CEO Koo Hyun-mo’s management reform will further increase the scale of outside director turnover beyond the original plan.

◆Examining the New Directors= SK Telecom’s list of new outside director candidates clearly indicates the company’s future direction. Kim Yong-hak, honorary professor at Yonsei University, is known as a partner in SK Group Chairman Chey Tae-won’s “social value” management. SK Telecom also proposed amendments to its articles of incorporation reflecting the group’s unique management philosophy “SKMS,” which emphasizes social value, as an agenda item for this shareholders’ meeting. Alongside Professor Kim, Kim Jun-mo, associate professor in the Department of Electrical Engineering at KAIST, was nominated as an outside director candidate; he is an AI technology expert, a key company-wide task for SK Telecom. This appointment is seen as focusing on both management philosophy and new growth engines.

KT nominated former Lotte Rental President Pyoh Yeon-myung, who competed with CEO Koo at the time of his appointment, Professor Kang Choong-gu of Korea University’s Department of Electrical Engineering, Professor Park Chan-hee of Chung-Ang University’s Business School, and Associate Professor Yeo Eun-jung of Chung-Ang University’s Business School (Finance) as new outside director candidates. A KT official said, “By appointing outside directors with expertise in telecommunications and finance, we are showing our intention to strengthen future new growth engines,” adding, “It also means we intend to enhance the board’s monitoring and oversight functions.”

LG Uplus’s outside director candidate Lee Jae-ho, auditor at KD Investment, is a “financial expert” who has served as CFO of NCSoft, CEO of NCWest, and CFO of Coway. This appointment fills the gap left by Director Park’s retirement and is interpreted as a message to accelerate profitability improvement and internal stability. LG Uplus’s debt surged by more than 3 trillion won last year due to large-scale 5G investments, exceeding 10 trillion won. Its debt ratio (144.1%) as of the end of last year far exceeds that of SK Telecom (70.8%) and KT (118.5%).

◆Will They Shed the Rubber Stamp Label?= The key issue is whether the outside directors will properly fulfill their original roles of enhancing corporate governance transparency and management expertise. The outside directors of the three telecom companies have long been criticized as rubber stamps.

According to minutes of board meetings submitted to the Financial Supervisory Service over the past three years (2017?2019), the three telecom companies convened a total of 92 board meetings and handled 346 agenda items. During this process, only 1 amended proposal at SK Telecom (2018) and 6 at KT (3 in 2018 and 3 in 2019) were approved instead of the original proposals. The remaining 97.98% of agenda items were passed as originally proposed.

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