Samil PwC Governance Center Head Chang On-gyun speaks during a recent interview with The Korea Times at Samil PwC headquarters in Seoul. Courtesy of Samil PwC

Enhancing the independent role of the board of directors and audit committee within a company is paramount in improving corporate governance, the head of the Samil PwC Governance Center said.

During a recent interview with The Korea Times, Chang On-gyun, who leads the Samil PwC Governance Center, explained that the strengthened board of directors and audit committee can exercise effective oversight over actions by controlling shareholders and management, thus successfully curbing attempts to undermine the interests of the overall company and minority shareholders.

"In Korea, where ownership and management tend not to be separated properly, it is challenging for the board of directors and the audit committee to effectively monitor and inhibit attempts by controlling shareholders and management that could erode the company's interests as well as the benefits of ordinary shareholders excessively," Chang said during the interview.

The governance center head noted that the introduction of outside directors and audit committees into the country's corporate system in the wake of the Asian financial crisis in 1997 still remains largely formalistic in operations.

"I think one of the key reasons behind this perfunctory operation of the independent directors and audit committees system within a company is Korea's prevailing corporate governance, which is biased towards the interests of controlling shareholders in Korean companies," Chang said.

He added that the fact that the system was introduced suddenly into the domestic corporate environment amid the external pressure of the financial crisis, without taking sufficient consideration of Korea's unique cultural and economic characteristics, has also contributed to its malfunction.

He thus believes that it is necessary to continue carrying out a meticulous analysis of the current corporate system and seek institutional mechanisms under which a sound corporate governance structure can take firm root.

"It seems necessary to establish a proper legal framework through legislation that can appropriately reflect the opinions of minority shareholders regarding whether management is dedicating itself to the core business for long-term corporate value enhancement," Chang said.

In addition, Chang thinks controlling shareholders as well as corporate management should pay close attention and respond properly to the demands led by shareholder activism. It gets more relevance, given the ongoing government-led Corporate Value-up Program initiative, which aims to increase the shareholder value of company stocks.

In that regard, Chang also advises companies to communicate clearly and transparently with shareholders about their shareholder rights' protection policies.

Vision to improve corporate governance

Being a CPA licensed in both Korea and the U.S., Chang joined Samil PwC in 1994, and has also worked at PwC New York from 1999 to 2001. He has built an extensive career over the past three decades in the areas of accounting advisory, auditing, internal control advice, IPO support and more. He became head of the Samil PwC Governance Center in December 2022.

As the chief of the governance center, Chang hopes to contribute to the improvement of corporate governance in Korean companies. The center has been providing direction for companies to help them improve their corporate governance via various programs.

The center holds seminars, conducts large-scale surveys and releases various publications on themes related to corporate governance. It also is active online, utilizing platforms like YouTube and KakaoTalk channels to reach further audiences. With such activities, the center anticipates that meaningful results and insights can be generated, thereby contributing to enhancing the roles of the board of directors and audit committees of companies.