Korea Shows Improvement in Corporate Governance

Korean companies have been acknowledged for improved corporate governance.

CLSA, a France-based investment bank and ACGA (Asian Corporate Governance Association) released their 2003 report, in which Korea, along with Malaysia has achieved the most significant leap forward in corporate governance.

Out of 380 companies in ten emerging nations, four Korean companies, such as KT – formerly Korea Telecom, KT&G, Kookmin Bank, and Samsung Fire were selected by CLSA as top ten businesses. CLSA has evaluated companies in emerging markets for the past four years. According to its evaluation, not one Korean company has been on the list until Kookmin Bank was included among the ten best companies last year. Meanwhile, Samsung Electronics, KT Freetel, and Korea Electricity were ranked among the top 20 companies.

Regarding the overall status of corporate governance, it was said that Korea, ranked fifth, following Singapore, Hong Kong, India, and Taiwan, still has still a long way to go. Japan was excluded from the evaluation. Malaysia and China took sixth and eighth place, respectively.

ACGA Secretary General Jamey Allan, in an e-mail interview with the Dong-A Ilbo, said: “Korea has shown impressive progress in adopting a new legal framework for improving corporate governance. With the initiative of the People’s Solidarity for Participatory Democracy, vibrant public actions for empowering minority shareholders have contributed to improvement in corporate governance.”

Participation of institutional investors in companies` decision-making processes was also believed to be attributable.

In the meantime, the Secretary General pointed out, “The recent SK Global scandal led to some skepticism that the regulatory system in Korea has not yet taken root, and that corporate governance improvement for listed companies only appears as such.”

Tasks ahead for Korea include supervision and control by shareholders of management, and prevention of financiers including shareholders and creditors from profit-racketeering and negligence, thereby securing appropriate profitability.

Yong-Ki Kim ykim@donga.com