1 in 3 new chaebol auditors is ex-government official

One in 3 outside auditors at major conglomerates and their subsidiaries are former government officials, thought to be used mainly as lobbyists for those companies rather than being independent monitors of management.

Data by the Korea Exchange and the Financial Supervisory Service showed that more than 30 percent of 81 outside auditors selected or expected to be appointed as auditors this year at 66 listed subsidiaries and affiliates of Korea’s top 10 conglomerates were former high-ranking government officials. 

Outside audit members work in a very similar way to outside directors, whose primary responsibility is to keep a close watch on management to see whether companies are operating fairly and transparently, as well as in the interest of shareholders.

Most of those who are former government officials used to work for agencies such as the National Tax Service and the Fair Trade Commission. Some auditors are also former prosecutors.

Professors accounted for more than 43 percent of outside auditors, followed by executives in the financial industry or other industries.

There were nine ex-public servants of the Ministry of Public Administration and Security, seven from the National Tax Service, and five who were judges.

Other auditors include a police officer and executives from companies that supplied industrial goods to the top 10 conglomerates and their subsidiaries.

LG Electronics, Korea’s second-largest consumer electronics company, is expected to reappoint former Labor Minister Kim Dae-hwan as a member of its audit committee.

Meanwhile, Samsung Electronics, Korea’s biggest tech manufacturing company, has selected Song Kwang-soo as its outside director. Song was Roh Moo-hyun administration’s first prosecutor general who had run-ins with the former president over a campaign fund scandal and judicial reform plans.

Song currently serves as an adviser for Kim&Chang, Korea’s biggest law firm which represented Apple in a legal battle against Samsung Electronics over smartphone designs and patents. His appointment was met with little opposition from minority shareholders at a meeting last week.

Also, Hyundai Glovis, a logistics affiliate of Hyundai Motor, has reappointed SK Ma, CEO of Hyop Woon Group, which had business relations worth some 3 billion won ($2.7 million) with Glovis over the last three years, as its auditor.

By Park Hyong-ki (hkp@heraldcorp.com)