Newly Published Analysis Regarding Current Trends in Corporate Governance and ESG Committees of Listed Companies

On October 28, 2022, the Economic Reform Research Institute under the Solidarity for Economic Reform, a major NGO on matters of corporate governance, published a report analyzing current trends in the adoption and operation of ESG committees, etc. by listed companies.

The committee within the board of directors of listed companies generally tends to be an audit committee, outside director candidate recommendation committee (or an officer (including the CEO) candidate recommendation committee), compensation committee, or internal transactions committee, the establishment of which has a legal basis. Recently, a growing number of governance bodies or ESG committees that oversee ESG matters are additionally being established.

Given these developments, companies that have already set up governance bodies or ESG committees or plan to do so at the 2023 ordinary general shareholders’ meeting are very interested the overall trends in such bodies and committees, and specific approaches to their establishment taken by other companies.

The report by the Economic Reform Research Institute appears to be intended to encourage more listed companies to set up ESG committees. Intent aside, the report presents the following data that may be useful in the operation of your governance bodies and ESG committees:

Status of committees concerning governance/ESG, such as ESG, sustainability, sustainable management, and transparent management committees (collectively “ESG committees”), under the board of directors of listed companies as of 1H 2022.

	-	188 of 792 listed companies (23.74%) have set up an ESG committee, etc. under the board of directors.

	-	Among them, 151 of such companies had KRW 1 trillion or more of assets while 89 had KRW 5 trillion or more, and 139 were affiliates of conglomerates; most companies establishing ESG committees, etc. are conglomerate affiliates with large total assets.

Companies generally began setting up ESG committees, etc. to improve governance structure and implement ESG management 2 years ago.

	-	Of the 189 ESG committees, etc. existing as of June 2022, 175 were newly formed or expanded/restructured in or after 2021; 41 ESG committees were newly formed in 2022.

Regarding the number of times ESG committees, etc. were convened, in 2021, 370 meetings were held across 147 companies, and in 2022, 348 meetings were held across 188 companies.

	-	The average number of ESG committee, etc. meetings held by conglomerate affiliates was 2.62 times in 2021 and 1.98 times in 2022. By contrast, companies that are not under a conglomerate umbrella held an average of 1.21 meetings in 2021 (8 companies only held 1 meeting during the entire year).

When categorizing the items on ESG committees’ agenda into items to be reviewed, items to be deliberated on, and items to put to vote, there were more items to be reviewed (46.23%) than those to be put to vote (43.85%).

	-	Given that 163 of 663 items to be put to vote (24.59%) were selected by the committee chair, the activities of ESG committees, etc. still appear to be driven mostly by core committee members.

ESG-related items accounted for more than half of the agenda items (48.7%), followed by governance-related items (21.83%).

	-	205 of the total 330 governance-related agenda items (62%) were about internal transactions. Internal transactions also comprised a significant portion of all agenda items at 13.56%. Most of the items about internal transactions were “approval of large-scale internal transactions”, for which a board of directors’ resolution is required.

	-	5.29% of the total agenda items concerned the environment, and 9.13% concerned social issues.

	-	Key management topics related to governance structure (e.g., restructuring, share purchase, creation of overseas subsidiaries, sale of business units) accounted for 14.68% of the total agenda items, specifically 128 in 2021 and 94 in 2022.

[Korean Version]

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