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| From left are Prime Minister candidate Han Duck-soo, Minister of Trade, Industry and Energy Lee Chang-yang, Minister of Interior and Safety Lee Sang-min and Environment Minister Han Hwa-jin |
By Kim Hyun-bin
A number of companies are facing a shortage of outside directors, as many abruptly resigned to join President Yoon Suk-yeol's Cabinet or run in the June 1 local elections, according to industry officials, Monday.
Firms are required to hire a certain number of outside directors in accordance with the law, which is why they are scrambling to find the best candidates on short notice to replace the ones that joined the new administration. Many believe there will be a considerable number of people who will also resign before and after the local elections, making the competition fiercer to recruit talented outside directors.
"Korea's outside director pool is small compared to those of developed countries and consists mostly of professors, lawyers and government officials, and it's difficult to find experts that are knowledgeable in corporate affairs," Song Min-kyung, a senior research fellow at the Korea Corporate Governance Service, said. "Companies should try to expand the pool of candidates that are from the industry and even ones who retired."
Ahn Duk-geun, the new head of trade negotiations at the Ministry of Trade, Industry and Energy recently resigned as the outside director for LG Energy Solutions (LGES) to comply with the Act on Prevention of Conflicts of Interest for Public Officials.
"LG Energy Solutions plans to appoint an outside director that is in the best interest of the company and shareholders," an LGES official said.
It's not just Ahn, but more recently, more outside directors have resigned from their positions to be appointed to high-ranking public positions, including: Prime Minister nominee Han Duck-soo (S-Oil), Environment Minister Han Hwa-jin (Samsung Electronics), Minister of Trade, Industry and Energy Lee Chang-yang (LG Display), Minister of Interior and Safety Security Lee Sang-min (AK Holdings).
According to the Commercial Act, at least a quarter of the total number of directors in any general listed company, and a majority (at least three) of the total number of directors in a listed company with assets of 2 trillion won or more, must be outside directors.
If this requirement is not met, outside directors must be appointed at the first general shareholders' meeting after the vacancy or vacancies occur.
In order to meet these requirements, Shinsegae International recently hired Park Man-seong, an advisor to the Yulchon law firm, as an outside director, and decided formally to appoint him at an extraordinary general meeting (EGM) to be held on May 26.
AK Holdings also plans to hold an EGM on May 28 to appoint Cho So-young, a professor at Pusan ??National University Law School, as an outside director and audit committee member. Hyosung Chemical and Hansol Chemical, who are in a similar situation, hurriedly started searching for a replacement.
Considering that the current estimated number of members of the presidential office is close to 200, industry observers are predicting that more outside directors may continue to resign. The upcoming local election in June is also expected to be a factor, as around 4,100 public officials' seats are up for grabs.
