Korean conglomerates backtracking on responsible governance commitment

South Korea's big businesses are backtracking on their responsible governance obligations, a report by the country's antitrust watchdog showed Wednesday.

According to the Fair Trade Commission, the percentage of owners or immediate kin who are listed as members of the board at affiliates of large family-run conglomerates stood at 21.7 percent, down 1.1 percentage point from the year before.

The regulator said that this number has been falling steadily for some time, having stood at 27.2 percent in 2012.

The findings were based on analysis of 1,356 companies belonging to 40 of the country's largest business groups called chaebol. 

"There has been a steady decline of owners and family members stepping down from their board positions in recent years," an FTC source said. He hinted that the decision to make public the salaries of board members may be playing a part, although other factors like the rise in mergers and acquisitions needs to be onsidered.  

Heads of chaebol have often avoided holding board of director titles because this entails taking legal responsibility if something goes wrong. They instead have preferred holding the office of chairman or chairwomen that is not a formal or legally binding position but still allows them to exercise managerial power.

Among chaebol groups, Hanjin, which has Korean Air Lines Co. nd Hanjin Shipping Co. under its wings, had six family member removed from board position of its affiliates, while SK and Hanwha were down by two, each.

Besides the drop in the number of owners and their kin sitting on the board, the FTC's report showed the role of outside directors who can check the power of management were on the wane.

Of the 5,448 motions forwarded for approval by the board from May 2014 to April of this year, only 13 have been rejected or altered. This translates into a rejection rate of 0.24 percent, down from 0.26 percent tallied a year earlier. 

Moreover, the number of conglomerates that had outside directors dipped from 49.8 percent of the total in 2014 to 49.5 percent this year. Participation rate of directors was down 0.5 percentage point compared to the year before to 92.1 percent.

The FTC said that the latest findings showed that conditions regarding responsible governance have not moved forward as expected and that the exact role of outside directors still needs clarification. (Yonhap)