Announcement of Finalized Amendments to the Stewardship Code

As previously noted, the “Capital Markets Stabilization and Normalization Roundtable” (chaired by President Lee Jae-myung on March 18, 2026) and the “Measures to Strengthen Structural Foundations for Capital Markets Stability” (published by the Financial Services Commission (the “FSC”) on March 19, 2026 reflecting the roundtable’s discussions), underscored the Korean government’s emphasis on fostering a corporate culture centered around shareholder value. The roundtable and the FSC announcement specifically focused on: (1) prohibiting duplicative listings as a matter of principle; (2) preventing corporate value impairment (including by failing to address chronically undervalued shares); and (3) strengthening the Stewardship Code to enhance the oversight function of institutional investors (Link). These initiatives have drawn significant attention from both corporations and market participants. In connection with item (3) above, the Stewardship Code Development Committee (the "SCDC"), which is responsible for Stewardship Code policies in Korea, and its supporting organization, the Korea Institute of Corporate Governance and Sustainability (the "KCGS”), released proposed amendments to the Stewardship Code on June 8, 2026 (Link).

On July 24, 2026, the SCDC adopted a final resolution on the proposed amendments to the Stewardship Code following an extensive public notice and comment process over approximately three weeks, during which diverse and in-depth comments from 18 stakeholders were received and reviewed. These revisions mark the first amendments to the Stewardship Code since its initial adoption ten years ago. Considering the necessary preparation period for participating institutions, full implementation of the amended Stewardship Code is scheduled to commence in 2027. While the Stewardship Code is not legally binding and applies only to voluntarily participating institutional investors and other participants, such participants are generally required, under a “comply or explain” framework, to comply with the Stewardship Code, or, to the extent they are unable to comply, to sufficiently explain and disclose their reasons for non-compliance and to propose alternative methods. Accordingly, many large institutional investors (such as public pension funds and asset managers) are expected to amend their own stewardship guidelines and proxy voting policies to reflect the amended Stewardship Code and strengthen related activities. Set forth below are the details regarding the amendments to the Stewardship Code (including changes reflecting input from the public notice and comment process) and subsequent follow-up measures by the Korean government.

1.	Amendments to the Stewardship Code

(1)

Establish the bodies responsible for overseeing the Stewardship Code and its implementation

The SCDC shall review: (i) the implementation of the Stewardship Code across the capital markets and by each participating institutional investor; and (ii) the specific provisions of the Stewardship Code at least once every three years, or more frequently as deemed necessary during the feedback collection process.
The KCGS shall provide administrative support to the SCDC.

(2)

Expand the scope of covered asset classes

The Stewardship Code shall apply not only to domestic and foreign institutional investors that invest in Korean publicly listed equity, but also to domestic and foreign institutional investors that (at their discretion) invest in other asset classes, such as bonds, infrastructure, real estate and private equity.

(3)

Incorporate sustainability considerations (including ESG factors)

The scope of non-financial information subject to periodic review (which currently focuses on corporate governance) shall be expanded to incorporate sustainability considerations (including ESG factors). Reflecting input from the public notice and comment process, the scope of sustainability considerations was expanded to include financially material ESG factors.
Institutional investors shall consider sustainability matters (including ESG factors) when exercising shareholder rights, including through engagement with target companies. Reflecting input from the public notice and comment process, the scope of engagement with companies was expanded from the “board of directors” to the “board of directors, etc.”

(4)

Expand the scope of stewardship responsibilities

Institutional investors shall participate in more proactive stewardship activities (including reviewing and engaging on key management matters, submitting shareholder proposals, and participating in litigation) and shall make investment decisions taking into account the outcomes of such activities. Reflecting input from the public notice and comment process, the term “shareholder activities” was revised to “stewardship activities.”
In accordance with their investment policies, institutional investors may reflect the outcomes of their stewardship activities in their asset allocation and portfolio management decisions as part of ESG integration.

(5)

Add new provisions regarding stewardship policies

Institutional investors shall prepare and disclose detailed stewardship policy guidelines (including measures to progressively enhance stewardship activities) in order to promote effective stewardship activities.
Where necessary, institutional investors shall be permitted to engage in stewardship activities collaboratively with other institutional investors in compliance with applicable laws and regulations.

(6)

Add new provision regarding proxy voting

Institutional investors shall establish policies on share lending and recall, and should directly exercise voting rights where necessary.

(7)

Introduce obligation to submit stewardship activity reports

Institutional investors shall submit to the KCGS those stewardship activity reports that they provide to their clients and beneficiaries.

(8)

Require that institutional investors have sufficient capability and expertise to carry out stewardship activities

Institutional investors shall ensure that they have appropriate organizational and staffing resources, taking into account relevant factors such as assets under management.

(9)

Provide guideline on the selection and management of delegated asset managers and external service providers

Institutional investors shall include in their stewardship policies provisions regarding the selection, management and review of delegated asset managers and external service providers, and shall comply with such stewardship policies.

(10)

Incorporate the expanded scope of directors’ duty of loyalty

The preamble shall be updated to reflect the expanded scope of directors’ duty of loyalty (under the amendments to the Korean Commercial Code), so that institutional investors may assess whether the board of directors is faithfully discharging its duty of loyalty and acting in the best interests of the company and its shareholders.

Subsequent Follow-up Measures

The Stewardship Code Guidelines (the "Guidelines”) will also be subsequently revised as a follow-up measure to the amendments to the Stewardship Code. The revised Guidelines are expected to provide more granular details regarding the amended Stewardship Code to enhance working-level understanding among the Stewardship Code’s participants.

During the public notice and comment process for the amended Stewardship Code, stakeholders provided the following key recommendations.

Institutional investors recommended the proportional application of the Stewardship Code based on the size of the participant and requested detailed practical implementation guidelines.
Civic groups proposed (i) the express listing of “climate change” as a core ESG factor, (ii) the adoption of an “apply and explain” framework; (iii) the strengthening of the “comply or explain” framework and (iv) the removal of the proportional application of the organizational and staffing resources requirement based on the size of the participant.
Expert groups emphasized the need for institutional mechanisms to facilitate collaborative stewardship activities and advocated the recognition of Stewardship Code implementation reports from overseas jurisdictions.
Business associations urged a cautious approach when introducing new guidelines on collaborative stewardship activities and including of directors’ duty of loyalty in the preamble of the Stewardship Code.

Stakeholder recommendations that were not expressly adopted into the amended Stewardship Code may be subject to further discussion and incorporated into the revised Guidelines.

In order to maintain their status, participants will be required to prepare and submit to the Secretariat of the SCDC (or the KCGS Stewardship Code Center), within six months following the publication of the revised Guidelines, documentation outlining whether and how the amended Stewardship Code and revised Guidelines have been adopted along with future implementation plans.

In addition, the Stewardship Code Compliance Standards will be revised to reflect the amended Stewardship Code. Considering the necessary preparation period for participating institutions, the implementation of the revised Stewardship Code Compliance Standards will begin with the 2027 compliance assessment.

As the amended Stewardship Code formalizes the concept of “financial materiality” concerning ESG factors, participants should undertake integrated reviews and preparations to align with the mandatory disclosure requirements (which are based on financial materiality) under the Sustainability (ESG) Disclosure Roadmap announced on July 8, 2026 (Link).

Furthermore, from a corporate governance perspective, the amended Stewardship Code:

expressly reflects the expanded scope of directors’ duty of loyalty under the amended Korean Commercial Code;
calls for the progressive strengthening of participants’ stewardship activities and permits collaborative stewardship activities with other institutional investors when necessary; and
expands the scope of stewardship activities to include more proactive measures (including the review of and engagement on key management matters, the submission of shareholder proposals and participation in litigation), and requires that investment decisions be made taking into account the outcomes of such activities.

Consequently, companies should anticipate increasingly specific inquiries and demands from institutional investors regarding: (i) their plans to increase shareholder returns and corporate value (“Value-up Program”); (ii) the performance by directors of their obligations to protect shareholders' interests; and (iii) improvements to internal controls. In addition, institutional investors may collaboratively raise issues or submit advisory shareholder proposals on major management matters at the 2027 annual general meeting of shareholders. Companies should therefore prepare thoroughly across proxy advisory engagements, institutional investor relations and the operation of board meetings and shareholder meetings, while taking into account related legislative updates, such as the amended Enforcement Decree of the Korean Commercial Code regarding electronic shareholders’ meetings, which we previously discussed.

[Korean Version]

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