Final Advice from Chairman Kim Ji-hyung: "Compliance Monitoring Requires Management's Will and Determination" (Comprehensive)

Samsung Compliance Committee Holds Forum with Experts to Discuss Measures to Enhance Compliance Effectiveness
Recently Met with Lee Jae-yong to Explain Committee Activities... "Commitment to Compliance Management Present"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Hye-young] On the 18th, the Samsung Compliance Committee held a forum titled ‘Current Status and Improvement Measures of Compliance (Legal Compliance Monitoring and Internal Control) in Large Corporations’ with experts from various fields to explore ways to establish an effective compliance monitoring system. Experts commonly expressed the opinion that compliance must be promoted based on the strong will of the CEO or the group head. There were also repeated remarks that governance improvement should precede in order to restore corporate trust and achieve sound management.

Kim Ji-hyung, chairman of the Samsung Compliance Committee who has led it for the past two years, revealed that he recently met with Samsung Electronics Vice Chairman Lee Jae-yong and confirmed his commitment to compliance management.

At the forum, Chairman Kim emphasized, "Compliance (legal compliance monitoring and control) should be pursued as a corporate philosophy and value, not as a mere formality, and must be driven by the firm will of the CEO," adding, "The will and determination of management are the starting point for compliance management." He pointed out, "Compliance can no longer be a ‘mere formality’ for companies," and stressed that "the belief and cause behind why compliance is necessary must be clear." He further insisted that by establishing a roadmap for each period and implementing measures in a cycle of prevention, response, and recovery, the compliance culture should be spread, its foundation strengthened, and sustainability ensured.

"Ethics and Compliance of CEOs and Group Heads Must Be Addressed"

Professor Lee Bong-ui of Seoul National University Law School, who gave the first part of the forum’s keynote presentation, also cited the will of the corporate CEO and group head as the most important factor in compliance. Referring to the current status and issues of compliance operations in large corporations including Samsung, Professor Lee pointed out, "Ethics and compliance management should encompass the ethics and compliance of the CEO (including the group head) beyond the level of employees at the affiliate level or higher."

Regarding the restructuring of Samsung’s governance, one of the major tasks of the second Compliance Committee, Professor Lee stated, while acknowledging that "there is no definitive answer to the most desirable governance structure, and no corporate group is legally obligated to improve governance in a specific form," he predicted, "Public opinion is likely to interpret changes in Samsung Group’s governance as linked to the consolidation of current control rights and the succession to the fourth generation."

He emphasized the need to develop into ‘active compliance’ that responds to political and social demands, and suggested, "Above all, the will of the group head is important. The Compliance Committee must not become a placebo, and care is needed to prevent serious side effects from the ‘vaccine.’"

[Image source=Yonhap News]

In the subsequent discussion, Professor Jeong Jun-hyuk of Seoul National University Law School said, "Considering that most corporate-related illegal acts in Korea occur in the context of controlling shareholders’ private interests and succession of management rights, in-depth discussions on compliance systems at the controlling shareholder and corporate group levels are necessary."

Park Jong-geun, Head of Ethics Management at Siemens Korea, referred to the situation when Siemens was involved in a corruption scandal in the past and introduced the company’s specific remedial measures and compliance-related systems and frameworks established thereafter.

"Governance Improvement Needed to Enhance Compliance Effectiveness"

Kang Sung-bu, CEO of KCGI, who presented on ‘Corporate Compliance through Stakeholders (shareholders, investors, etc.),’ proposed redesigning the system to include shareholders and investors across all areas of compliance for the long-term survival and growth of companies and ESG (environment, social, governance) improvement.

Kang also argued for the necessity of governance improvement to enhance compliance effectiveness. He emphasized, "Governance improvement is needed so that compliance principles can be realized for stakeholders such as shareholders through board-centered management."

In related discussions, Shin Jin-young, President of the Korea Capital Market Institute, pointed out that Korea’s governance and compliance are centered on controlling shareholders, explaining that this situation sometimes causes the ‘Korea discount.’ He analyzed, "Given the reality of Korean companies, comprehensive compliance implementation considering stakeholders at the corporate group level is necessary, and compliance enforcement on controlling shareholders at the top of governance is a priority task."

Park Kyung-seo, Director of the Corporate Governance Research Institute (AICG) at Korea University Business School, cited controlling shareholder management, monopoly of management rights, and limitations of internal and external board regulations as the background for compliance failures in domestic companies. Regarding corporate group compliance systems, he said, "It is necessary to subdivide and differentiate matters according to whether they relate to controlling shareholders and at the level of individual companies or corporate groups."

Kim Ji-hyung, Who Met Lee Jae-yong: "There Is a Commitment to Compliance Management"

Chairman Kim revealed that he recently met with Vice Chairman Lee and explained the activities of the Compliance Committee. Speaking to reporters at the forum, Kim said, "I recently met him as a farewell since my term is about to end," adding, "I expressed that if there were any difficulties because of me, I hope he understands, and he said, ‘Thank you for your hard work.’" Regarding Lee’s commitment to corporate group compliance, Kim evaluated, "I do not doubt it," and said, "From what I feel, he is doing a lot in that regard."

Launched in February 2020, the Samsung Compliance Committee will conclude its first term led by former Supreme Court Justice Kim Ji-hyung at the end of this month. Lawyer Lee Chan-hee, who has served as president of the Korean Bar Association, will take over as the new chairman and begin the second term next month.

Lee Chan-hee, the next chairman who appeared at the forum, said, "The Compliance Committee will strive to maintain independence and objectivity while presenting a compliance management model for various companies in our society," and added, "We plan to announce our position on the tasks of the second Compliance Committee soon."

The Samsung Compliance Committee was launched following the order from the retrial court in the Lee Jae-yong political scandal case to establish an internal compliance monitoring system at Samsung. The committee is an independent organization that is not subject to Samsung’s instructions in appearance, with seven major affiliates including Samsung Electronics, Samsung C&T, Samsung SDI, Samsung Electro-Mechanics, Samsung SDS, Samsung Life Insurance, and Samsung Fire & Marine Insurance participating as signatories.

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