Kim Dong-su, Head of Kim & Chang ESG Research Institute, "In the Era of Technological Hegemony, Owner Leadership is Needed... Strengthening Director Independence"

Growing Uncertainty Calls for Strong Decision-Making System
Increased Director Independence... Samsung's 'Senior Outside Director' Viewed Positively

Kim Dong-su, head of the ESG (Environmental, Social, and Governance) Management Research Institute under Kim & Chang Law Firm, stated that strong ownership is necessary in the management processes of major Korean companies. Kim is an ESG expert who led the development of the Dow Jones Sustainability Index (DJSI Korea) announced by S&P Global, the world's largest financial information provider. Since establishing the Kim & Chang ESG Management Research Institute in 2022, he has been working with domestic and international experts on ESG vision and mid-to-long-term strategy formulation, ESG operational system establishment, and business model development.

His emphasis on the necessity of strong ownership is deeply related to the entry into the 'technology hegemony' era. This is because increased management uncertainty requires a strong decision-making system. As a measure to check the owner's arbitrary actions, he called for a system that enhances the independence of directors.

Kim Dong-su, Head of ESG Management Research Institute at Kim & Chang Law Office. Photo by Yoon Dong-joo doso7@

In a recent interview with Asia Economy, Kim said, "As we enter the era of technology hegemony, we are moving into a stage that requires bold investment, decision-making, and long-term commitment." He added, "There is general agreement that when management uncertainty is high, competition is fierce, and long-term investment decisions are necessary, the commitment of owners is important." Commitment here means a strong will to invest human and physical resources over the long term.

Kim emphasized that in the Korean economic system, which is centered on export-oriented large corporations such as semiconductors, electric vehicles, and batteries that require astronomical facility investment costs, reducing risks through strong leadership is essential. He stated that the negative aspects that may arise from owner management are better addressed by strengthening the independence of outside directors to enhance the board's oversight and monitoring functions.

Kim suggested extending the tenure of outside directors and revitalizing a private-sector-led outside director market (Board of Director Market). According to surveys by global rating agencies such as Sustainalytics, S&P Global, and MSCI (Morgan Stanley Capital International), outside directors with tenures of 11 to 15 years show the highest performance. However, in Korea, the Commercial Act limits the term to six years, making it difficult to achieve such performance, according to Kim.

Some point out the issue of a lack of diversity among outside directors. He argued that a kind of outside director market, which pools candidates not yet recruited by companies, is necessary. This is a system of outside director free agents (FA), which is active in Europe and North America. Kim said, "Taking the airline industry as an example, unlike foreign countries, Korea has a small number of airlines, making it difficult to increase outside directors who are professional managers or engineers from airlines." He added, "Expanding board diversity will enhance board independence."

Regarding the senior outside director system introduced by Samsung at the end of last year, he positively evaluated it as a system that enhances board independence. He noted that companies where inside directors serve as board chairs tend to have a higher demand for senior outside directors. A senior outside director acts like an independent 'supervisor' from the management. When an inside director is the board chair, conflicts of interest are likely to arise, making whistleblowers like senior outside directors necessary.

Kim said, "The basic theory of joint-stock companies and our Commercial Act guarantee that shareholders have the right to appoint and dismiss directors, and the board has the right to appoint and dismiss management." He added, "Senior outside directors are important figures who enhance the independence of the board by participating in management on behalf of shareholders." He continued, "Typically, corporate boards are composed of an odd number of members to speed up decision-making, but when the number is even, opinions can be tied, leading to deadlock." He said, "In such cases, senior outside directors can play a decisive role in enhancing the board's decision-making power."

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