Exchange: "Governance Disclosure Improves Corporate Governance"

The mandatory disclosure system for corporate governance reports has been shown to have a positive impact on improving the governance of listed companies.

According to the Korea Exchange on the 1st, an analysis comparing the corporate governance of 155 companies listed on the KOSPI before and after the disclosure obligation with the status in 2017 showed that the average compliance rate for 21 governance items gradually improved from 16.1% in 2017 to 45.3% last year and 47.5% this year.

Among the 21 governance items, 20 showed improvement, but the level of improvement varied depending on the characteristics of each item. High improvement effects were observed in management-related items such as internal control, audit committee training, and regular meetings with external auditors. In the case of internal control policies, the greatest improvement effect was seen as the guidelines clearly presented related regulations and detailed policies.

Additionally, the level of improvement was high for audit committee training to enhance expertise and holding meetings with external auditors.

Four items, including proxy voting solicitation, already had a compliance rate exceeding 60% before the obligation and reached a satisfactory level through further improvement after the disclosure obligation. Four items, such as evaluation and utilization of outside directors and separation of CEO and board chairperson roles, improved by 5.7 to 14.4 times in the first year of mandatory disclosure, but the compliance rate increase slowed somewhat in the second year.

Ten items, including the dispersion of regular shareholder meetings, showed both low levels of improvement and compliance rates, indicating a need for focused efforts by the Exchange and listed companies to achieve substantial governance improvements. In particular, succession policies, written voting, and cumulative voting systems, which can directly affect management rights, showed significantly low compliance rates.

The effect of corporate governance improvement due to mandatory governance disclosure was also confirmed in ESG rating improvements. ESG evaluation results by the Governance Research Institute for 157 KOSPI-listed companies in 2017, 2019, and 2020 showed a continuous increase in the number and proportion of companies with improved governance and integrated ESG ratings after the mandatory disclosure of governance reports. Governance increased from 58 companies in 2017-2019 to 75 companies in 2020. ESG increased from 49 companies to 72 companies.

An official from the Exchange stated, "We plan to further supplement the governance report disclosure guidelines and strengthen report inspections to induce substantial improvements in the governance of listed companies."

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