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ESG management

ESG becomes name of the game on Korean corporate boards

By Jan 20, 2021 (Gmt+09:00)

Samsung Electronics 2020 AGM
Samsung Electronics 2020 AGM

South Korea’s big companies, such as Samsung, Hyundai and LG, are increasingly embracing environmental, social and governance (ESG) standards as a key yardstick for management to meet growing calls for transparency.

Their board of directors, the top decision-making body, have often been filled with retired bureaucrats or academics regardless of expertise, but conglomerates are now moving to replace them with ESG experts.

Some companies are even dividing the roles of the chair of the board and the chief executive to enhance corporate governance.

According to industry sources on Jan. 20, Kakao Corp., the country’s mobile platform giant, has decided to launch an ESG committee under its board to set company strategy for sustainable growth and review transparent management.

Brian Kim, Kakao founder and chairman of its board, will head the newly established committee, they said.

KB Securities Co. also set up an ESG committee last month, following a similar move in March 2020 by its parent, KB Financial Group.

Samsung, Korea’s largest conglomerate, has aggressively prioritized ESG as a key criterion in assessing each division's business performance.

Samsung Electronics Co.’s device solution department spearheaded sustainability campaigns by focusing on eco-friendly businesses.

NAME CHANGE TO SHOW ESG COMMITMENT

The electronics giant is also considering adding ESG to the name of its governance committee to show its determination to prioritize ESG standards.

Meanwhile, Samsung Electro-Mechanics Co. last month filled its compensation committee seats with only outside directors to maintain objectivity and transparency in determining executive pay levels.

Korean Air Lines Co., in the process of acquiring crosstown rival Asiana Airlines Inc., in August last year empowered its governance committee to oversee implementations of ESG projects and management. The committee’s name has been changed to the ESG committee, and its members, including the chairman, are all outside directors.

LG Group, which currently doesn’t have an ESG-related subcommittee under its board, is seriously considering establishing one for each of its major affiliates.

ESG becomes name of the game on Korean corporate boards

CORPORATE ESG MOVE IN LINE WITH GOVT EFFORTS

The corporate move to strengthen governance and management transparency comes as the government forces large companies to disclose their ESG activities.

The Financial Services Commission said last week that big companies listed on the Korea Exchange will be required to disclose their ESG activities from 2025.

Kospi-listed companies with total assets valued at 2 trillion won ($1.81 billion) and more will be asked to make public their EGS activity information. The mandatory public disclosure will be extended to all companies listed on the main bourse from 2030.

Analysts say Korea’s major companies will replace many outgoing board directors with ESG experts in March when they hold board meetings and annual general meetings to review their yearly performance.

Write to Jeong-Soo Hwang at hjs@hankyung.com

In-Soo Nam edited this article.

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