On May 2, 2024, the Financial Services Commission, the Korea Exchange (“KRX”), the Korea Capital Market Institute and other institutions held a second seminar on the Corporate Value-up Support Plan taking into account the policy discussions to date. At the seminar, the draft guidelines for the Corporate Value-up Plans were unveiled and various stakeholders were invited to voice their opinions on them (Link).
 
After the opinion gathering, on May 24, 2024, the KRX finalized and announced the Guidelines for Corporate Value-up Plans (the “Guidelines”) and the manual to the Guidelines reflecting the opinions of various market participants, including institutional investors in and out of Korea, listed companies and the Corporate Value-up Advisory Group. The Guidelines took effect as of May 27, 2024. Below are the key items that must be disclosed under the Guidelines (Link).
 

The following items have been supplemented to the list of key information above in the course of the KRX’s opinion gathering.
 

• The Guidelines emphasize that it is also possible to “enhance the corporate value through investments” by adding indicators related to “R&D investments” in addition to the existing indicators (such as the growth rate of sales and profits) and adding them to the “growth potential” items in the table above showing key examples of financial indicators.
   

• The Guidelines explain that it is possible to “establish various plans such as the strengthening of certain business segments, expansion of R&D investments, investment in human and physical capital, restructuring of the business portfolio, shareholder returns, including cancellation of treasury stock and dividend payouts and divestment of underperforming assets,” emphasizing that companies can establish their own tailored plans based on their characteristics and growth phase.
   

• With respect to “independence of auditors” as one of the governance-related indicators (i.e., non-financial indicators for assessment of the current status), the Guidelines diversify examples by adding “independence of the internal audit support organization” and “disclosure of details of major activities of the internal audit organization.”
   

After May 27, 2024, the date on which the Guidelines take effect, listed companies that are ready to disclose their Corporate Value-up Plans can first start to make disclosures. Companies currently preparing a plan can make disclosures by giving a prior notice on their future disclosure schedule. Since this year is the first year to implement the disclosure of Corporate Value-up Plans, disclosures can be made from the time when the plan is prepared after the announcement of the Guidelines. Starting from 2025, it is recommended that disclosures are made once a year in the first half of the year after the financial statements are finalized, key indicators are calculated and business reports are distributed.
 
In order to support listed companies’ voluntary disclosures, the KRX plans to provide (i) disclosure-related training, adding value-up courses in the mandatory disclosure-related training courses run by the Korea Listed Companies Association and the KOSDAQ Listed Companies Association, (ii) one-on-one customized consulting for small and medium-sized listed companies and English translation services for disclosures, and (iii) information on the Corporate Value-up Program for listed companies’ internal and outside directors.
 
Even if the disclosure of Corporate Value-up Plans is voluntary in principle, the KRX encourages disclosures through various programs to facilitate active participation by companies. Also, each institutional investor’s stewardship code will be revised to take into account Corporate Value-up Plan disclosures for the exercise of voting rights and shareholder rights of institutional investors. Therefore, companies for which the exercise of voting rights by institutional investors such as the National Pension Service is important may need to actively disclose Corporate Value-up Plans.
 
To this end, a multifaceted and multidimensional analysis of the business status should be conducted. Based on such analysis, key indicators, out of various financial and non-financial indicators, that align with the company’s mid to long-term goals to improve corporate value should be selected and assessed. Furthermore, companies should set specific plans to achieve the mid to long-term goals regarding such key indicators.
 
In particular, it is important for companies to conduct a prior review of practical procedures and requirements for investments by business division, expansion of R&D investments, restructuring of the business portfolio, shareholder returns through cancellation of treasury stock and dividend payouts, and divestment of underperforming assets. Moreover, it is necessary to pay attention to regulations on unfair trade practices under the Financial Investment Services and Capital Markets Act, such as those on unfaithful disclosures or fraudulent unfair trading.
 
In addition, the Guidelines present a way to link the company’s executives compensation scheme to the Corporate Value-up Program to utilize it as an incentive. Therefore, if executives’ compensation is not proportional to the company’s performance under the Corporate Value-up Program, for instance, to the increase in corporate value and stock prices, issues may arise as to whether executives’ compensation is appropriate.

[Korean Version]