The mandatory disclosure regime for corporate governance reports (“Corporate Governance Reports”) requires listed companies to disclose information regarding their corporate governance. These Corporate Governance Reports aim to improve corporate governance in the operation of the boards of directors and general meetings of shareholders, as well as in corporate restructuring transactions such as mergers and spin-offs. The importance of the Corporate Governance Reports continues to be emphasized in investor relations with shareholders, especially with regard to institutional investors of listed companies and the general meetings of shareholders.
As we have noted in our prior newsletter, as of 2026, the scope of companies obligated to provide Corporate Governance Reports has been expanded to cover all companies listed on the KOSPI market (Link). Furthermore, the Korea Exchange (“KRX”) issued an advance notice of critical inspection items for Corporate Governance Reports to be provided in 2026. Such critical inspection items are of fundamental importance from a corporate governance standpoint, as they address sensitive strategic and financial matters, including measures to protect shareholder interest in the conduct of general meeting of shareholders and in corporate restructuring transactions.
Out of the 15 key indicators, the KRX has selected a total of 9 critical inspection items, comprising 4 items related to key indicators and 5 items related to detailed principles. The KRX intends to closely review: (i) the adequacy and completeness of the information disclosed; (ii) the basis for determining compliance with disclosure obligations; and (iii) in cases of non-compliance, whether sufficient explanations and improvement plans have been provided.
A summary of key review points for each critical inspection item is set forth below:
[Summary of Key Review Points for the Critical Inspection Items]
|
Critical Inspection Item |
Key Inspection Details |
|
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4-week advance notice of the general meeting of shareholders |
[Key Indicator (1); Detailed Principle 1-(1)] |
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Efforts to convene the general meeting of shareholders on an “off-peak” day |
[Key Indicator (3); Detailed Principle 1-(2)] |
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Efforts to provide predictability of cash dividends |
[Key Indicator (4); Detailed Principle 1-(4)] |
|
|
Establishment of shareholder protection policies concerning changes in the ownership and business structure |
[Detailed Principle 2-(3)] |
|
|
Quarterly meetings between the internal audit team and the external auditor |
[Key Indicator (14); Detailed Principle 10-(2)] |
|
The KRX announced that it would promptly review the Corporate Governance Reports following the June 1, 2026 submission deadline and, where necessary, take follow-up measures such as requiring corrections. To support listed companies in preparing thorough and compliant Corporate Governance Reports, the KRX also plans to provide preparation guidelines for each critical inspection item through its electronic disclosure submission system and to offer one-on-one consulting services, including training sessions for practitioners of listed companies.
In addition, as of December 2025, significant changes have been announced to “Principles Concerning the Responsibilities of Institutional Investors Acting as Custodians of Their Clients’ Assets” (the “Stewardship Code”). The Stewardship Code is observed by 249 institutional investors, including the 4 major pension fund operators (i.e., National Pension Service, Government Employees Pension Service, Teachers’ Pension and Korea Post) and 63 asset management firms. Listed companies should therefore pay close attention to these changes in connection with investor relations activities targeting major institutional investors and in conducting general meetings of shareholders.
The Stewardship Code Development Committee, the Korea Institute of Corporate Governance and Sustainability, and relevant ministries and agencies (i.e., Financial Services Commission, Ministry of Health and Welfare, Ministry of Education, Korea Post, and Financial Supervisory Service) have continued discussions on the need to amend and supplement the Stewardship Code, which was first introduced in 2016 - particularly regarding institutional investors’ exercise of shareholder rights. As a result, these organizations have developed and announced a number of measures to strengthen the Stewardship Code, including: (a) enhancing compliance inspections and follow-up management led by a private-sector committee; (b) expanding the disclosure and use of the results of such compliance inspections; and (c) improving alignment with global standards. A summary of the key measures is set forth below:
Firstly, a compliance inspection procedure has been introduced under which the inspection results will be finally reviewed and approved by the Stewardship Code Development Committee.
Secondly, the scope of disclosure and use of compliance inspection results has been expanded:
Under the amendments to the Stewardship Code, an observing company will be required to post its self-prepared report on the Stewardship Code website (in addition to the company’s own website as currently required) and a comprehensive report enabling an easy assessment of the company’s compliance with each inspection item.
Thirdly, the Stewardship Code will be amended to improve global consistency:
The Stewardship Code Development Committee is considering amendments to the Stewardship Code to: (i) include all relevant Environmental, Social, and Governance (ESG) factors among matters to be considered in fulfilling fiduciary duties, (ii) expand the scope of fiduciary duties to cover not only shareholder engagement with respect to investment targets but also the selection of such targets; and (iii) take into account major foreign precedents where the scope of investments subject to fiduciary duties has been expanded beyond listed shares to include bonds, infrastructure, real assets and unlisted shares.
The Stewardship Code Development Committee has announced, in line with the above measures to strengthen the Stewardship Code, its plans to amend the Stewardship Code and related guidelines in the first half of 2026.
As the Stewardship Code is amended as described above, and as measures to protect shareholder interest during general meetings of shareholders and in corporate restructuring transactions (such as mergers and spin-offs) become increasingly emphasized in corporate governance disclosures, institutional investors’ exercise of their shareholder rights in these areas is expected to come under closer scrutiny.
Therefore, there is a growing need for the company’s management, finance, strategy and investor relations teams to review and prepare for these developments to ensure that they do not become points of contention in investor relations, especially with regard to institutional investors and the operation of general meetings of shareholders in 2026.
