Revised Childcare Act Imminent... Listed Companies 'Recruiting Female Executives'

Starting This August, the Revised Law Will Enforce the 'Mandatory Quota for Female Executives'
Experts Say "Positive for Diversifying Board Competence and Reducing ESG Risks"

[Asia Economy Reporter Myunghwan Lee] Ahead of the enforcement of the revised Capital Market Act in August, listed companies are making efforts to appoint female executives. According to the revised law, companies with total assets exceeding 2 trillion won cannot form a board of directors composed of only one gender. Experts advise that a board composition ensuring gender diversity is positive for diversifying capabilities and reducing ESG (Environmental, Social, and Governance) risks.

According to the Korea ESG Institute on the 6th, among the 167 companies subject to the revised law, 136 companies, accounting for 81%, secured gender diversity on their boards. Among them, 78 female director candidates from 72 companies were all appointed during their shareholders' meetings. The number of female director candidates increased by 50% compared to last year's 52. LG Display, LG Innotek, Shinsegae, and HiteJinro appointed female outside directors for the first time.

Despite the imminent enforcement of the revised law, the proportion of female executives in domestic listed companies remains low. According to the Ministry of Gender Equality and Family, as of the first quarter of last year, the proportion of female executives among 2,246 listed corporations that submitted business reports was 5.2%. This is an increase of 0.7 percentage points from 4.5% the previous year. When distinguishing between inside and outside directors, among 7,564 inside directors, 4.6% (348) were female, and among 5,804 outside directors, 5.2% (300) were female.

However, when comparing the proportion of female executives in Korea with major overseas countries, the low ratio is more pronounced. The proportion of female executives on the boards of domestic companies included in the Morgan Stanley Capital International Advanced Country Index (MSCI ACWI) is 8.7%. This is significantly lower compared to France (45.3%), Germany (34.1%), and the United States (29.7%). It is also lower than neighboring countries such as China (13.8%) and Japan (12.6%).

Professional institutions analyze that a board composition ensuring gender diversity is positive for diversifying capabilities and reducing ESG risks. Yoonseok Cho, a researcher at the Korea ESG Institute, said, "Increasing female directors may lead to diversification of board capabilities," adding, "Enhancing capability diversity within the board can lead to improved board practices regarding ESG issues from a risk management perspective." Hyojung Choi, a researcher at KB Securities, also analyzed, "Expanding gender and capability diversity plays a complementary role in problem-solving and decision-making processes of companies, leading to better outcomes."

There was also advice that not only the proportion of female executives on boards but comprehensive diversity should be secured. Researcher Cho advised, "It is necessary to simultaneously enhance diversity not only in gender but also in industrial experience and areas of expertise," adding, "Efforts to pursue comprehensive diversity beyond merely increasing the proportion of female directors are needed."

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