Samsung Strengthens Board-Centered Responsible Management Ahead of Chairman Lee Jae-yong's 1st Anniversary (Comprehensive)

On the eve of Lee Jae-yong's first anniversary as chairman of Samsung Electronics, Samsung announced the introduction of a senior outside director system to strengthen board-centered responsible management. This institutional change reflects Chairman Lee's intention, who has consistently emphasized the importance of 'board-centered responsible management.' Starting with Samsung SDI and Samsung SDS, other Samsung affiliates where outside directors do not currently chair the board, such as Samsung Biologics, Samsung Heavy Industries, Samsung Engineering, Hotel Shilla, S-1, Cheil Worldwide, will also sequentially consider adopting the senior outside director system.

[Image source=Yonhap News]

On the 26th, Samsung announced that Samsung SDI and Samsung SDS held board meetings and decided to introduce the 'senior outside director' system. Professor Kwon Oh-kyung of Hanyang University’s Department of Convergence Electronics Engineering and Professor Shin Hyun-han of Yonsei University’s Business School will each serve as senior outside directors. The senior outside director system refers to a system where, if the CEO or an inside director chairs the board, a senior outside director representing the outside directors is elected to ensure appropriate balance and checks.

The senior outside director has the authority to convene and preside over the 'outside directors' board' meetings and may request reports from management on major issues. Additionally, they discuss matters related to overall board operations and act as a mediator to facilitate smooth communication between the board chair, management, and outside directors. In short, this strengthens the independence and status of the board, enabling board-centered responsible management.

Samsung plans to expand the introduction of the senior outside director system to other Samsung affiliates where outside directors do not currently chair the board, besides Samsung SDI and Samsung SDS. This includes places where the CEO or inside directors chair the board, such as Samsung Biologics, Samsung Heavy Industries, Samsung Engineering, Hotel Shilla, S-1, and Cheil Worldwide. Eight companies, including Samsung Electronics, Samsung Electro-Mechanics, Samsung Life Insurance, Samsung Fire & Marine Insurance, Samsung Securities, Samsung Card, Samsung Asset Management, and Samsung C&T, already have outside directors chairing their boards and are therefore not subject to the introduction of the senior outside director system.

In the case of Samsung Electronics, the board resolved in March 2018 to separate the CEO and board chair positions, and in February 2020, an outside director was appointed as chair. Furthermore, since April 2017, the existing CSR committee has been expanded and reorganized into a Sustainability Management Committee composed entirely of outside directors. The Outside Director Recommendation Committee, also composed entirely of outside directors, reviews candidates with the necessary experience, expertise, and diversity for the board and recommends new outside director candidates.

The senior outside director system is not currently mandatory under Korean commercial law for non-financial companies. However, Samsung’s proactive adoption and planned expansion of the system demonstrate a strong commitment to board-centered responsible management. The company aims to reorganize its governance structure to enhance management transparency and expand communication with society. Chairman Lee stated at the Compliance Committee meeting in October last year, "We will actively participate in fair and transparent compliance management and ESG management."

Regarding Samsung’s introduction of the senior outside director system, a Samsung official explained, "By introducing this senior outside director system in addition to the existing appointment of outside directors as board chairs, Samsung can apply two ‘standard models’ for establishing ‘board-centered responsible management’ and reorganizing the governance system to its major affiliates."

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