LG Moves Away from Owner-Centric Boards... Korean Business Community Embraces Outside Directors as Board Chairs

Transitioning from Owner and Executive-Centric to Outside Director Leadership
LG Group’s Holding Company and Affiliates Adopt New Governance
Trend Spreads Across Korean Business Community Beyond Select Firms

LG Group is embarking on a governance restructuring by appointing outside directors (independent directors) as chairpersons of the boards of directors at each affiliate. This move is aimed at moving away from a decision-making structure centered on the owner and management, in order to strengthen board-centered management and enhance oversight and monitoring functions over the management team. As global companies increasingly regard board independence as a core competitive strength, many in the business community see this as a sign that Korean conglomerates are entering a full-fledged transition toward a “transparent management” system.

According to the business community on March 24, LG Corp. will hold a board meeting on March 26 to discuss the agenda of appointing an outside director as the new chairperson of the board. Koo Kwangmo, Chairman of LG Group, who has served as chair of the board, will step down from the position after eight years. Since being appointed as CEO and Chairman at the extraordinary general meeting of shareholders in June 2018, Chairman Koo has concurrently served as chair of the board. An industry official explained, “An outside director is being appointed as chair of the board to establish transparency in governance.”

This year, LG Group is promoting the appointment of outside directors as board chairs at 11 major listed affiliates, including LG Corp. itself. On March 23, LG Electronics also appointed Kang Sujin, an outside director and professor at the Korea University School of Law, as its first board chair from among the outside directors at a board meeting held after the annual general meeting. Last month, major affiliates such as LG Chem, LG Display, LG Energy Solution, and HS Ad also appointed outside directors as board chairs one after another. LG Innotek and LG HelloVision had already appointed outside directors as board chairs in 2022.

The board of directors is an organization that supervises a company’s management strategy and decision-making, and provides oversight and advice to top management. When an outside director serves as board chair, the separation between management and the board becomes clearer, which strengthens the board’s oversight function and increases objectivity and transparency in decision-making.

Kim Changtae, Executive Vice President and Chief Financial Officer (CFO) of LG Electronics, is answering shareholders' questions at the 24th Annual General Meeting held on the 23rd at LG Twin Towers in Yeouido, Seoul. LG Electronics.

Recently, a new trend has emerged in the business world, with outside directors who are former bureaucrats or professional managers such as CEOs and executives from other companies being appointed as board chairs. Last year, in the financial sector, Shinhan Life and KB Insurance separated the roles of inside director and board chair, appointing outside directors as chairs. In the same year, SK Inc., the holding company of SK Group, elected Kim Sunhee, an outside director and Vice Chairman and CEO of Maeil Dairies, as board chair, while Kakao appointed Ham Chunsung, President of PH&Company, as board chair.

Park Jongcheol, head of Uri Management Research Institute, commented, “It appears that Korean companies are following global standards, such as those in the United States,” and added, “In the future, the market may assess corporate value more positively.” However, he also noted, “Unlike the owner or inside directors who actually run the company, most outside directors are former bureaucrats, so they may require additional training in areas related to company management.”

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