A “Roadmap for Management Transparency” By Korea’s 30 Conglomerates

Korea’s 30 largest conglomerates, including Samsung, LG, Hyundai Kia Motors, and SK, have decided to finalize and unveil a “Three-Year Roadmap Plan for the Voluntary Implementation of Transparent Management” by the end of May.

The roadmap will be drawn up to contain details about how conglomerates will promote transparent management for three years.

On March 24, the Federation of Korean Industries (FKI) managing director Lee Kyu-hwang presided over a meeting with senior planning executives from 15 conglomerates. The participants agreed to the roadmap plan. They also decided to set up a “Transparent Management Consultative Committee,” whose members will be chosen among accounting or planning officials (above the managing director level) at the 30 biggest conglomerates early next month.

What will the roadmap be about? –

The “Three-Year Roadmap Plan for the Voluntary Implementation of Transparent Management” is expected to lay out specifically what programs businesses will put into action over the next three years.

The specifics are related to the six goals in the “Social Pact on Anti-Corruption and Transparency.” The pact was concluded on March 9 among Korea’s five main economic organizations, including the FKI, headed by chairman Kang Shin-ho, members of the ruling as well as opposition parties, and representatives from civic groups.

Yang Geum-seung, the FKI’s chief of corporate planning team, said, “The guideline will include concrete ways to improve corporate governance and restore confidence in accounting documents provided by companies. The roadmap will consist of compulsory parts that require businesses to follow what the law states, recommendations from civic groups, and concerns’ voluntary projects.”

In other words, the goal of the plan is to work out ways to promote transparency in insider`s trading; to make sure that outside directors have more expertise and independence; to heighten CEOs’ sense of financial accountability; and to introduce a “whistleblower” protection system.

In what direction will the FKI take management transparency?-

The FKI will establish a sort of code of conduct in relation to transparent management and send it to its 300 member companies. This set of criteria is separate from the roadmap that will be handled mainly by businesses.

Furthermore, the FKI plans to hold a conference to share good examples of companies that successfully manage their boards of directors, make good use of the system of outside directors, or maintain accounting transparency.

In addition, the economic organization will develop a transparent management index in cooperation with a credit-rating agency to assess each of its businesses’ efforts to put management transparency into practice.

Young-Hae Choi Sang-Soo Kim yhchoi65@donga.com ssoo@donga.com