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Newsletter | April 2015, Issue 1
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BANKING
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Best Practice Guideline for Corporate Governance of Financial Companies Goes Into Effect
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On December 24, 2014, the Financial Services Commission (the “FSC”) finalized and announced the Best Practice Guideline for Corporate Governance of Financial Companies (the “Guideline”), key points of which are summarized below.
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Companies Subject to the Guideline
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Financial holding companies
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Banks
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The following institutions with assets of KRW 2 trillion or more: insurers, financial investment business companies (as for the financial investment business companies, even if assets are less than KRW 2 trillion, the Guideline applies if working capital including from pooled investments and discretionary investment management are KRW 20 trillion or more in the aggregate), savings banks, and credit finance business companies
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Local branches of foreign financial institutions are not subject to the guideline
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Board of Directors
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Expressly authorized to be responsible for risk management, internal control, supervision of conflict of interests (between the company and its directors/major shareholders), and corporate governance policies and principles for CEO succession
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Required to have an outside director recommendation committee, audit committee, compensation committee, and risk management committee (majority must consist of outside directors; however, in case of audit committee at least 2/3 must consist of outside directors)
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Bank holding companies and banks required to have officer recommendation committee
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Outside Directors
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Initial term of office: Two years for banks and bank holding companies; three years for other financial companies (no more than five years consecutively)
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Outside directors’ activities to be evaluated annually; evaluation by independent institution or organization at least once every two years recommended
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Publicly disclose (i) material information on candidate for outside director such as his/her work experience and (ii) details of activities and compensation of each outside director (in corporate governance annual report)
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CEO Succession Program
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Establish comprehensive CEO succession program at each financial institution
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Disclose internal regulations on CEO succession, candidate management status, and details of CEO succession through corporate governance annual report
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Corporate Governance Annual Reports
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Prepare corporate governance annual reports setting forth internal regulations on corporate governance and activities undertaken during past year
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Corporate governance annual reports to be publicly disclosed at least 20 days prior to general meeting of shareholders
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Back to Main Page
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