The Korea Listed Companies Association said on the 12th that it prepared the "Guidelines on major decision-making by directors of listed companies" and distributed them to member companies.
The association launched an expert working group last Sept., led by attorney Ko Chang-hyeon and including professors, attorneys, and corporate experts, to ease legal risks tied to directors' business judgments as amendments to the Commercial Act expand directors' duty of loyalty and to support board operations in line with the intent of the amended act.
The association operated the working group for about four months to focus on key issues and, based on the results, enacted the guidelines. The guidelines were enacted to present practically applicable criteria so directors of listed companies can refer to them to make reasonable judgments in major decision-making processes.
The association classified directors' major decision items into four types from the perspectives of fair treatment of all shareholders' interests and protection of total shareholder interests, and organized matters directors should consider by procedure, including board minutes, disclosures, external expert advice, and special committees.
It also detailed matters directors need to review, such as the necessity and legitimacy of the transaction, conflicts of interest among shareholders, fairness of transaction terms, and the impact on the company. In addition, it included as an appendix case studies from major countries that adopted similar legal regimes earlier (the United States, Japan, the United Kingdom, Germany, and France).
Kim Chun, head of Policy Division 1 at the association, said, "We hope directors of listed companies will use the standards and direction presented in these guidelines to help strengthen procedural fairness in their decision-making processes."
Meanwhile, the association will continue to monitor on-site applications of the guidelines and plans to improve and supplement them based on future operating results.