Changing Structures in Korean Corporate Governance; a review of recent legislation affecting Boards of Directors

Since the financial crisis of 1997, the Korean Commercial Code has been dramatically reformed to address several problems in the Korean corporate governance structure. The main purpose of legal reform in Korea has been to restrain small groups of controlling shareholders who exercise practical power over the corporate management. Especially in 1998, 1999, 2000, the Korean Company Law has been considerably revised to restrain controlling shareholders’ practical power. To name just a few: such matters as the Liability of Shadow Directors, the Introduction of Outside Directors, Committees in Board of Directors, Adopting Accumulative Voting, etc., have been newly inserted. The legal reform in Korea is coming to a close with the enforcement of the Korean Securities Class Action that was strongly opposed by the Federation of Korean Industries in January 2005. However, view of the general public is that changes to the antiquated management ruling system by controlling shareholders have not been successfully implemented. The process of legal reform is therefore likely to continue beyond the next presidential election.