Korea Institute of Corporate Governance and Sustainability (KCGS) rated domestic companies*’ environmental (E), social (S), and governance (G) performance and published their ratings for 2023.2023.10.27 Read the notice
- In line with the international trend of mandating the appointment of women directors, Korea also made it mandatory by revising the Financial Investment Services and Capital Markets Act (FSCMA) for listed firms with KRW2 trillion or more in total assets to appoint at least one woman director and the grace period of the new requirement ended recently.
- Also, there is a growing demand for the appointment of women directors from capital markets as evidenced by new guidelines published by global institutional investors, local and global proxy advisors, etc. to consider gender diversity on boards when exercising voting rights.
- Against this backdrop, KCGS intends to look at the trend of women director appointments at domestic listed firms over the past five years and examine the circumstances related to women directors in detail, focusing on the firms subject to the revised FSCMA.
- During the analysis period, there was a steady increase in the appointment of women directors at domestic listed firms in general, and the firms subject to the revised FSCMA showed an even larger increase.
- By the end of the 2023 annual general meetings, ten companies out of those subject to the FSCMA did not appoint any woman director. Investors need to continuously monitor whether or not the companies appoint women directors in the future.
Korea Institute of Corporate Governance and Sustainability (KCGS) rated domestic companies*’ environmental (E), social (S), and governance (G) performance and published their ratings for 2023.2023.10.27
- It is desirable that an audit committee reviews quarterly financial statements as well as annual financial statements, a statutory requirement under the Commercial Act, for increased reliability and integrity of disclosed financial information.
- KCGS ESG Code of Best Practices recommends that the audit committee review the quarterly reporting process. Regulators of some countries recommend or mandate audit committees’ review of quarterly financial statements.
- Research into FY2022 activities of the audit committees of KOSPI 100 firms, however, shows that about half of the firms did not go through the review process of quarterly financial statements.
- Audit committees are advised to be more active in reviewing quarterly financial statements. Institutional investors should monitor whether audit committees actively perform auditing activities, including quarterly reviews.
□ Korea Institute of Corporate Governance and Sustainability (KCGS) announced the list of companies in the scope of the institute’s ESG (environmental, social, governance, and FI governance) evaluation in 2023.
□ In 2023, KCGS is set to assess a total of 1,049 companies - 9 more than in 2022, which include 791 KOSPI-listed, 196 KOSDAQ-listed, and 62 non-listed (financial) firms.
ㅇ Environmental and social ratings will be assigned to 987 listed firms (791 on KOSPI and 196 on KOSDAQ).
ㅇ Governance ratings will be given to 932 listed firms that are not in the financial sector (745 on KOSPI and 187 on KOSDAQ) and 117 financial companies (55 listed and 62 non-listed) based on the respective rating models.
ㅇ For 2022 ratings, a total of 1,040 companies were assessed, including 777 on KOSPI, 205 on KOSDAQ, and 58 non-listed (financial) companies.
□ Korea Institute of Corporate Governance and Sustainability (KCGS) reviewed 2,484 proposals tabled at the annual general meetings of 368 companies in the first quarter of 2023.
□ Out of the 2,484 agenda items, KCGS recommended negative votes against 364 (14.7%), and the overall ratio of the adverse voting recommendations is down by 2.7%p relative to the previous year (17.4%).
□ With the growing interest in and demands for general meetings of shareholders, the exercise of voting rights, shareholder return, and ESG management, among others, a diversity of positive changes were observed.
o The ratios of negative voting recommendations for dividend payouts and the appointment of directors declined. Proposals to amend the articles of incorporation aiming to increase dividend predictability were presented, while shareholder proposals were invigorated.
□ However, there are still cases that are not considered appropriate for enhancing shareholder value. Investors thus need to exercise due caution.
o There is an increase in the proposals to appoint outside directors with a faithfulness concern and auditors serving long consecutive terms. A new case that enables excessive severance pay has also been identified.
※ (Attachment) Detailed Proxy Research Outcome of Q1 2023 AGMs
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