In the first half of this year, KT handled the most board agenda items among the three major telecom companies. Given that outside directors make up 80% of KT's board, the industry interprets this as meaning that outside directors were closely involved in the company's management. KT built a board structure centered on outside directors to reduce the side effects of sudden shifts in management policy and organization whenever a chief executive officer (CEO) changes, but some are concerned that excessive authority could restrict the CEO's management activities.
◇ KT has the most board involvement in management among the three telecom companies
On the 20th, a comparison by ChosunBiz of the semiannual reports of SK Telecom, KT, and LG Uplus found that KT handled the most board agenda items in the first half with 46. That was more than three times LG Uplus (15), and more than 30% higher than SK Telecom (35), where board agenda processing increased due to a hacking incident that surfaced in April.
The reason KT's board handled the most agenda items among the three telecom companies is said to be KT's board operating rules, which subdivide matters requiring resolutions. According to the telecom industry, KT has broken down board resolution items into more than 40 categories. A telecom industry official said, "In the case of SK Telecom or LG Uplus, matters requiring board resolutions are classified into around a dozen broad categories, but KT has regulated them very tightly to limit the CEO's sole authority."
KT also requires board approval for most investment and finance matters. Specifically, board approval is mandatory when spending 15 billion won or more. Representative cases include selling equity holdings in other companies worth 15 billion won or more, providing guarantees or collateral of 15 billion won or more, or acquiring or disposing of land or buildings exceeding 15 billion won. Even donations of 1 billion won or more cannot be decided by the CEO alone and must be approved by the board. This contrasts with SK Telecom, where investment and finance agenda items of 1.5% or more of equity capital go to the board, and LG Uplus, where investments of 50 billion won or more require board review.
◇ KT's board is uniquely influenced by outside directors
Among the three telecom companies, KT's board has an unusually high proportion of outside directors. The Commercial Act requires only three or more outside directors, but KT has eight, the most among the three. Compared with SK Telecom (five) and LG Uplus (four), it is about double. By contrast, there are only two internal directors. This is the backdrop to talk that "outside directors control KT." In particular, concerns grew after a board rule passed recently that mandates prior board approval for internal organizational reshuffles and senior (division head) executive appointments at KT. This is because outside directors can now intervene even in organizational management and personnel authority that are the CEO's exclusive domain.
There was also a move in June 2023 to weaken the CEO and strengthen the board. At that time, KT's board abolished the system that prioritized review for an incumbent CEO's renewal. It required the incumbent CEO to undergo the same screening process as new candidates. A telecom industry official said, "Even if a new CEO takes office after the shareholders' meeting in March next year, no organizational reshuffle can be pushed through if the outside directors on the board oppose it. The CEO likely will not be able to properly exercise appointment authority," adding, "If outside directors oppose each business agenda item at the board, the CEO's management activities could effectively be neutralized."
In fact, compared with the boards of SK Telecom and LG Uplus, KT's board has relatively frequently revised agenda items or passed them conditionally. In the first half of this year, LG Uplus passed all items as originally proposed, and SK Telecom at its June 25 board meeting revised and passed only one item (a program on responsibility and commitments regarding a cyber intrusion incident). By contrast, KT at its Mar. 10 board meeting conditionally approved amendments to the articles of incorporation and the CEO compensation payment plan, and at a June 17 meeting opposed the original draft of the "amendments to board-related rules" and passed a revised version. Notably, on Nov. 12 last year, there was also a case where the agenda item "promoting internal transactions between KT and KT Cloud" was deferred due to unanimous opposition from all outside directors.
Ryu Jong-gi, adjunct professor at Sogang University's College of Knowledge Convergence Media, said, "It is desirable, in terms of checking the CEO, that outside directors do not merely rubber-stamp but actively offer opinions. However, it is true that outside directors' expertise in telecommunications is lacking," adding, "In KT's case, it seems necessary to restore the balance of power that has tilted toward a board centered on outside directors." He added, "Rather than simply replacing existing outside directors, it is also necessary to seek fundamental measures such as reducing the number of outside directors or increasing internal directors."
Meanwhile, in March next year, the terms of four outside directors — Choi Yang-hee, Yoon Jong-soo, Ahn Young-gyun, and Cho Seung-ah — among the eight outside directors are set to expire.