FSC ramps up benefits to bolster corporate value-up drive

Financial regulators are ramping up efforts to encourage local companies to participate in the government's initiative to bolster South Korea's market valuation.

The Financial Services Commission announced a series of new incentives on Tuesday for companies improving their governance structures, including exemptions from the government's stringent auditor designation system.

Under the current regulations, listed companies appointing auditors voluntarily for six consecutive years must have auditors designated by the Securities and Futures Commission under the FSC for the following three years.

Introduced in 2018 after significant accounting fraud at Daewoo Shipbuilding & Marine Engineering, this measure has faced criticism for potentially over-regulating firms with robust internal audit mechanisms that effectively oversee and manage operations.

In response, the FSC intends to establish an internal committee dedicated to evaluating corporate governance structures and identifying firms eligible for temporary exemption from the auditor designation requirement.

Companies recognized in the government's "value-up program" will receive favorable scores, improving their standing in the evaluation process.

In February, the government introduced the "Corporate Value-Up Program" to address the undervaluation of Korean firms in the stock market. Under this program, outstanding companies that create and implement plans to boost their value will be acknowledged, starting in May next year.

Recipients of the "value-up award" will gain additional points during governance evaluations, and the award will mitigate potential penalties in future audit actions, the FSC noted.

Additionally, companies acknowledged for enhancing their values will also have their annual fees to the Korea Exchange waived, along with fees for additional or modified listings, such as capital increases or converting convertible bonds into stocks. The Korea Exchange will also delay sanctions and penalties for misleading disclosures to these companies.

Tuesday's announcement came during the FSC Vice Chairman Kim So-young's meeting in Seoul with local financial regulators and the accounting sector to discuss strategies for boosting corporate valuation. Including the aforementioned measures, a total of eight new accounting-related benefits were unveiled.

Kim stressed further efforts from the industry during the meeting. "Fostering a culture of enhancing corporate value and advancing the capital market cannot be accomplished with just one or two measures. ... The government, related organizations, companies, and investors must all work together and commit to long-term efforts.”