Kang Sung-bu, CEO: "To Enhance K-Value Up, Director Liability Regulations Must Protect Minority Shareholders"

Leading Activist Kang Sung-bu, KCGI CEO, Actively Supports K-Value Up
Prioritizes 'Board Duty of Loyalty' to Shareholders as Top Task
Time Needed for Commercial Act Amendments and Precedent Changes... Calls for Exchange Guideline Revisions

Kang Sung-bu, CEO of KCGI and a leading figure in domestic shareholder activism, expressed strong support for the government's policy to resolve the Korea Discount (undervaluation of the Korean stock market), emphasizing social awareness and institutional changes related to the "duty of loyalty of directors" (Article 382-3 of the Commercial Act) as the top priority. This aligns with President Yoon Seok-yeol's remarks last month at the opening ceremony of the securities and derivatives markets, where he stated, "We will also pursue amendments to the Commercial Act to ensure that boards of directors responsibly reflect the interests of minority shareholders in their decision-making processes."

While Kang, who has long advocated for amendments to the Commercial Act or changes in precedents to strengthen the duty of good faith of directors toward shareholders, has taken a step back to mention the need to revise soft norms such as the Korea Exchange’s Corporate Governance Report guidelines. Since amendments to the Commercial Act or changes in precedents are expected to involve significant social conflict and time, he has called for a transitional revision of soft norms.

Soft norms refer to standards or principles declared by public or private institutions. Although they are not backed by state sanctions like laws, they serve as measures reflecting changes in societal or national perceptions and viewpoints of the era based on consensus among members. Many people regard them as policy judgments of the state, generating expectations that at some point in the future, they will be formally legislated or absorbed into the scope of government authority.

Kang stated, "Under the current Commercial Act, directors must faithfully perform their duties 'for the company,' and there are no provisions regarding duties to shareholders. This means that even if directors make wrongful decisions that harm shareholders, they are granted immunity, which is the biggest concern for foreign investors investing in Korean companies." He emphasized, "To protect investors, institutional changes and awareness improvements must be made so that directors also faithfully fulfill their duties to shareholders based on the principle of good faith." He advised, "If legal amendments are difficult immediately, gradual improvements can be sought through changes in soft norms."

He also referred to a recent proposal by Ahn Hyo-seop, Head of Governance at the Korea ESG Institute, titled "Governance Improvement Measures through Revision of the Corporate Governance Report Guidelines." Ahn suggested that the Korea Exchange revise its Corporate Governance Report guidelines to specify directors' responsibilities for protecting minority shareholders and the board's accountability to shareholders. Ahn noted that aligning the domestic Corporate Governance Report guidelines with international standards in line with the government's corporate value-up program policy direction is expected to contribute to resolving the Korea Discount issue.

Meanwhile, the government is preparing specific measures for the corporate value-up program, aiming to announce them by the end of this month. The corporate value-up program was first mentioned at last month’s public discussion on livelihood chaired by President Yoon and has so far only outlined a general direction. Kim Ju-hyun, Chairman of the Financial Services Commission, stated at a meeting with CEOs of securities firms last month that the program would include ▲ comparative disclosure of key investment indicators (PBR, ROE, etc.) of listed companies by market capitalization and industry ▲ recommendations for listed companies to announce corporate value improvement plans ▲ development of an index composed of companies excelling in corporate value improvement and introduction of exchange-traded funds (ETFs). He promised to announce detailed contents within this month.

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