The mandatory disclosure system for corporate governance reports (“Corporate Governance Reports”) was introduced in 2019 for companies listed on the KOSPI market with total consolidated assets of KRW 2 trillion or more and expanded in 2022 to include companies listed on the KOSPI market with total consolidated assets of KRW 1 trillion or more. The system will be further expanded this year to include companies listed on the KOSPI market with total consolidated assets of KRW 500 billion or more. Moreover, regulations concerning disclosure of Corporate Governance Reports, including the form of the required Corporate Governance Report, the scope of information required to be disclosed, as well as the number and details of key indicators, have become stricter. Companies must now thoroughly disclose detailed information regarding their compliance with 15 key governance indicators (Link).
In this context, on February 14, 2025, the Korea Exchange (the “KRX”) gave advance notice of critical inspection items of such Corporate Governance Reports prepared by companies listed on the KOSPI market. The notice is aimed at improving the thoroughness of these reports and strengthening their connection with the government’s corporate value enhancement policies, including the Corporate Value-Up Program. Companies should take note of these developments when preparing their Corporate Governance Reports for disclosure.
Based on the analysis of inspection results over the past three years, the KRX has selected ten critical inspection items out of the 15 key indicators. These include four items related to key indicators, five related to detailed principles, and one related to corporate value enhancement plans. The KRX plans to review the accuracy and thoroughness of reports, based on the standards set forth in the Guidelines for Disclosure of Corporate Governance Reports. Particularly with respect to the items related to detailed principles, the KRX will closely examine whether companies have provided all necessary information (thoroughness of content), and the basis for determining compliance or non-compliance, including the reasons for any non-compliance, along with plans going forward (thoroughness of explanations).
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1. Items Related to Key Indicators |
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④ Provision of predictability of cash dividends ⑦ Establishment and operation of internal control policies, including risk management policies ⑫ Establishment of an independent internal audit team (internal audit support team) ⑭ Quarterly meetings between the internal audit team and the external auditor |
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2. Items Related to Detailed Principles |
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1-④ Provision of predictability of cash dividends 2-③ Establishment of shareholder protection policies concerning changes in ownership and business structure 3-③ Development and operation of internal control policies, including risk management policies 9-① Establishment of an independent internal audit support team 10-② Quarterly meetings between the internal audit team and the external auditor |
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3. Other Item |
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Matters concerning corporate value enhancement plans |
The key inspection details for each critical inspection item are as follows:
Key Inspection Details for Each Critical Inspection Item
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Provision of predictability of cash dividends |
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Establishment of shareholder protection policies concerning changes in ownership and business structure |
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Development and operation of internal control policies, including risk management policies |
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Establishment of an independent internal audit team |
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Quarterly meetings between the internal audit team and the external auditor |
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Corporate value enhancement plans |
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For your reference, the KRX has announced that the compliance rates of listed companies with respect to the 15 key indicators are as follows:
Key Indicator Compliance Rates by Asset Size
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Key Indicators |
Total |
KRW 2 Trillion or More (A) |
KRW 1 Trillion or More |
KRW 500 Billion or More (B) |
Difference (A-B) |
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① Issuance of notice of convocation of the general meeting of shareholders at least four weeks in advance |
29.8% |
45.7% |
19.2% |
15.4% |
30.3%p |
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② Implementation of electronic voting |
77.0% |
86.2% |
76.7% |
63.6% |
22.6%p |
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③ Convocation of the general meeting of shareholders on days others than peak days |
65.5% |
76.7% |
65.8% |
49.0% |
27.7%p |
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④ Provision of predictability of cash dividends* |
15.0% |
19.5% |
13.3% |
9.8% |
9.7%p |
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⑤ Notification of the dividend policy and dividend execution plan at least once a year |
39.3% |
63.3% |
25.8% |
15.4% |
47.9%p |
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⑥ Establishment and implementation of a CEO succession policy |
32.1% |
52.9% |
20.8% |
11.2% |
41.7%p |
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⑦ Establishment and implementation of internal control policies, including risk management policies |
71.9% |
88.1% |
65.0% |
53.8% |
34.3%p |
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⑧ Whether the executive director is the chair of the board of directors |
13.1% |
21.0% |
8.3% |
5.6% |
15.4%p |
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⑨ Adoption of a cumulative voting system |
3.0% |
4.8% |
0.8% |
2.1% |
2.7%p |
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⑩ Establishment of policies to prevent the appointment of unqualified executives |
54.5% |
76.2% |
41.7% |
33.6% |
42.6%p |
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⑪ Composition of the board of directors not solely one gender* |
50.1% |
79.0% |
25.8% |
28.0% |
51.0%p |
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⑫ Establishment of an independent internal audit team (internal audit support team) |
43.1% |
46.2% |
42.5% |
39.2% |
7.0%p |
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⑬ Accounting or finance expert on the internal audit team |
86.3% |
97.6% |
84.2% |
71.3% |
26.3%p |
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⑭ Quarterly meetings between the internal audit team and the external auditor |
53.5% |
81.0% |
44.2% |
21.0% |
60.0%p |
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⑮ Establishment of procedures for internal auditors to access the material management-related information |
97.0% |
100.0% |
97.5% |
92.3% |
7.7%p |
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Average |
48.7% |
62.5% |
42.1% |
34.1% |
28.4%p |
*Indicators newly included in October 2023
The KRX announced that it will promptly review Corporate Governance Reports after the June 2, 2025 submission deadline, and, if necessary, impose follow-up measures such as requiring corrections. The KRX also plans to provide preparation guidelines for key inspection items and conduct training sessions for practitioners in order to support listed companies in preparing thorough reports.
As a result of the foregoing, it is expected that, during the process of preparation and disclosure of Corporate Governance Reports this year, market stakeholders, including proxy advisory firms, institutional investors, and minority shareholders, etc., may show a great deal of interest in (i) the KRX’s critical inspection items, including: the provision of predictability of cash dividends; the establishment and implementation of internal control policies, including risk management policies; the establishment of an independent internal audit team (internal audit support team); quarterly meetings between the internal audit team and the external auditor, and (ii) disclosure of corporate value enhancement plans and implementation of shareholder communication. Listed companies should also be aware of the difficult positions in which they may find themselves in trying to explain at future IR and shareholder meetings any failure to fully comply with such indicators, to adequately explain the reasons for non-compliance or to put forward improvement plans. The indicators for providing predictability of cash dividends and establishing an independent audit team (such as an audit department or internal control department) will also require that improvements be made to companies’ articles of incorporation, internal regulations, and corporate organization, necessitating that companies allocate ample time for preparation and review.
