Three Years of Mandatory Disclosure for Governance Reports... Compliance Rate at 64.5%

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[Asia Economy Reporter Junho Hwang] Compliance rates for mandatory disclosure of corporate governance reports by companies have improved. As the importance of ESG (Environment, Social, Governance) grows, this trend is expected to strengthen further.

NH Investment & Securities analyzed that among the 175 non-financial companies subject to mandatory disclosure of corporate governance reports with total assets exceeding 2 trillion KRW, the average compliance rate improved by 5.9 percentage points from the previous year to 64.5%.

Looking at key indicators, improvements were seen in the adoption of electronic voting, holding shareholder meetings excluding concentrated dates, notifying shareholders of dividend policies, and holding independent meetings between internal and external auditors. On the other hand, policies on CEO succession and internal control preparation worsened.

By company, SK Telecom showed the highest compliance rate (100.0%) for three consecutive years. LG Group's affiliate average compliance rate significantly improved from 62.9% to 79.0%.

NH Investment & Securities views that with the strong ESG wave, efforts to improve corporate governance are accelerating. Compliance rates for governance reports show a high correlation with ESG ratings, serving as a 'Governance (G) simplified rating table.' The governance report disclosure system was introduced in 2019 to enhance corporate value by providing consistent and detailed information related to governance. In 2026, mandatory disclosure will be expanded to all listed companies on the KOSPI market.

Dongyang Kim, a researcher at NH Investment & Securities Research Center, stated, "The separation of the chairman of the board and CEO, establishment of ESG committees, increase in female executive directors, and decrease in long-serving outside directors are spreading the establishment of ESG management systems." He added, "With rapid expansion of ESG funds through the National Pension Service and others, it is expected that responsible investment will enter a virtuous cycle with refinement of ESG indices and expansion of ESG integrated investment."