SK Corp. Expands Board of Directors' Authority... Strengthens CEO Evaluation and Continuous Oversight Functions

Board of Directors Can Replace CEO...New CEO Candidate Recommendation
Establishment of Personnel Committee and ESG Committee
Personnel Committee Expands CEO Evaluation...Recommends CEO Candidates
ESG Committee Strengthens Related Investments
Expresses Commitment to Governance Innovation, Advancing Beyond Existing Board-Centered Structure

[Asia Economy Reporter Hwang Yoon-joo] SK Inc. is expanding the board of directors' deliberation authority over key management areas such as CEO evaluation and mid-to-long-term strategy formulation. Specifically, the company will broadly share the three core management elements?personnel, strategy, and audit?with the board, significantly enhancing the board's substantive participation level, independence, and expertise as the highest decision-making body. The strategy aims to further improve governance and complete ESG (Environmental, Social, and Governance) management.

◆ Establishment of Personnel Committee and ESG Committee…Significant Expansion of Board Authority over Core Management Activities= SK Inc. announced that it will approve and officially implement the governance innovation strategy "Governance Story" at the shareholders' meeting on the 29th and the board meeting on the 30th.

Accordingly, SK Inc. will establish a "Personnel Committee" and an "ESG Committee" under the board of directors. Each committee will be responsible for core management activities such as ▲nominating CEO and outside director candidates and evaluating the CEO ▲deliberating on inside director remuneration ▲reviewing mid-to-long-term growth strategies.

Specifically, SK Inc.'s Personnel Committee will consist of one inside director and two outside directors. Its most notable function is to handle CEO appointment and inside director remuneration deliberation. When appointing a new CEO, the Personnel Committee comprehensively considers company opinions to finalize the CEO candidate, after which the board and shareholders' meeting decide on the final appointment. The Personnel Committee also holds the authority to submit replacement proposals to the board during the CEO's term to maintain continuous oversight.

Another key role of the newly established Personnel Committee is to pre-review individual remuneration amounts for inside directors. By adding a procedure where the Personnel Committee first reviews individual remuneration amounts before the board finalizes them?after the shareholders' meeting sets the total remuneration limit?the company expects to establish a more rational and transparent decision-making structure.

The ESG Committee is established to strengthen the board's verification function regarding major company decisions. The ESG Committee analyzes strategies related to environmental, social values, and governance to ensure the company achieves sustainable long-term growth. The investment proposal review function previously performed by the Governance Committee will also be transferred to the ESG Committee. Henceforth, the company's management strategies and significant investment matters must undergo ESG Committee verification. The ESG Committee comprises one inside director and all five outside directors.

Last year, SK Inc. expanded the board's investment approval threshold to 1% or more of equity capital (previously 1.5%). As of last year, the equity capital was KRW 14.8315 trillion, meaning any investment exceeding KRW 148.3 billion required board deliberation. Applying this to investments made since 2017, the number of investment proposals requiring board approval increased by approximately 25%. Going forward, the ESG Committee is expected to conduct in-depth reviews of investment proposals by adding ESG perspectives to existing evaluation criteria.

To clearly codify this board-centered responsible management practice, SK Inc. plans to establish a corporate governance charter basis in its articles of incorporation and continuously develop it. In 2018, SK Inc. enacted a governance charter outlining the company's duties and roles to establish sound governance, including shareholder rights and the roles of the board and audit bodies.

◆ Beyond Official Activities, Education and Reporting Overload Create a 'Working Board'…Implementation of Board Evaluation System= Including the two newly established committees, SK Inc.'s board will have a total of four committees: the Audit Committee, Governance Committee, Personnel Committee, and ESG Committee.

Both the Audit Committee and Governance Committee consist solely of outside directors, with each outside director participating in at least two committees. Outside directors must handle at least 4 to 5 official activities monthly, including regular board and committee meetings and specialized training by business sector. They also bear significant workload by frequently reviewing company reports and communicating with various stakeholders.

Recently, SK Inc.'s proposal to change its English company name sparked intense debate. After two days of extended board meetings and discussions, the decision was finalized. During this process, directors reviewed numerous overseas cases and various materials to examine the alignment between SK Inc.'s identity as an investment-specialized company and the English name, ultimately selecting "SK Inc." as the candidate name.

SK Inc. also places special emphasis on strengthening directors' expertise. It operates workshops for outside directors on major management issues and has implemented a board evaluation system since 2018. This system involves external assessments of the board's functions, composition, and operations to identify areas for improvement.

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