[Struggling with Dinosaur Coalitions in NongHyup] Restrictions on Cooperative Head Influence in Personnel Recommendation Committee... Ongoing Controversy over Auditor Independence

Amendment to the NongHyup Act Reducing Proportion of Personnel Recommendation Committee Chairpersons Passed in National Assembly Plenary Session
Until Election of Audit Committee Members... Central Association's Influence Strengthened if Bylaws Are Changed

[Sejong=Asia Economy Reporter Moon Chaeseok] Alongside the direct election system for the Nonghyup Central Association president, the audit committee is also drawing attention in terms of authority. Although the audit committee is supposed to oversee and monitor the entire Central Association, there has been ongoing controversy over its independence because the audit committee members are recommended by the personnel recommendation committee, which is formed by the Central Association’s board of directors. The ruling party has proposed introducing a 'direct election system for audit committee members,' including former cooperative heads, through the Central Association’s highest decision-making body, the delegates’ assembly (general meeting). However, Nonghyup is planning to increase the number of external members influenced more by the Central Association rather than cooperative heads in the personnel recommendation committee, raising criticism that this move might weaken the audit function. Especially considering that internal controls in public institutions have become a major issue following the Korea Land and Housing Corporation (LH) scandal, Nonghyup’s action appears to be moving in the opposite direction.

According to the National Assembly and the Ministry of Agriculture, Food and Rural Affairs on the 25th, Nonghyup Central Association is currently pushing for amendments to its articles of association to increase the proportion of external experts in the personnel recommendation committee that selects audit committee members. Currently, the personnel recommendation committee consists of four cooperative heads and three external members, but the plan is to adjust this to three and four, respectively. This is a follow-up measure after the amendment to the Nonghyup Act, which includes the composition of the personnel recommendation committee, passed the National Assembly plenary session the day before.

The Ministry of Agriculture, Food and Rural Affairs and Nonghyup claim that this is to check the Nonghyup Central Association president, whose authority may strengthen through direct election. Minister Kim Hyun-soo of the Ministry of Agriculture, Food and Rural Affairs stated at the full meeting of the National Assembly’s Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee last month, "The intention is to secure more transparency in the operation of the cooperative central association."

The personnel recommendation committee’s composition is drawing attention because it relates to the election of audit committee members who oversee the Central Association. The Central Association’s audit committee consists of five members, and the personnel recommendation committee nominates three external experts and two cooperative heads as audit committee members, who are then elected by the delegates’ assembly.

However, experts express concerns that changing the personnel recommendation committee’s composition ratio through the amendment could actually strengthen the Central Association’s influence in selecting audit committee members. Lee Hojung, executive director of the Agriculture and Fisheries Policy Forum, said, "The board of directors, which includes the Central Association president, appoints the personnel recommendation committee members, and the recommendation committee selects the audit committee members. The higher the proportion of external experts in the personnel recommendation committee, the more likely it is that the management will effectively select the audit committee members."

The Presidential Committee on Agriculture, Fisheries and Rural Areas (Agricultural Special Committee) also raised concerns. The committee recently resolved at a plenary meeting to pursue 'organizational and structural institutional improvement plans for revitalizing Nonghyup’s economic business' as a task. The improvement plan includes governance reforms of the Central Association, such as the audit body and board of directors. The committee stated that the independence of the Nonghyup Central Association’s audit committee is insufficient and specified that "the chairman and members of the audit committee should run for election at the Central Association delegates’ assembly without recommendation from the personnel recommendation committee."