CJ Group Chairman Lee Jae-hyun Serves as Non-Registered Executive at 5 Companies, Receives 12.38 Billion KRW in Compensation

Fair Trade Commission Analyzes and Announces Governance Status of Publicly Disclosed Business Groups in 2021

176 Cases of Unregistered Executive Positions Held by Family Members of the Group Head... On Average, Each Group Head Serves in 2.6 Companies
Four Groups Including 'Jungheung Construction, Yujin, CJ, HiteJinro' Have One Group Head Serving in Five or More Affiliates

Group Heads Registered as Directors Average 3 Companies Each
Five Groups Including SM, Harim, Lotte, Youngpoong, Amorepacific Have One Group Head Registered as Director in Five or More Affiliates
Fair Trade Commission: "Governance Structure Makes Responsible Management Difficult"

Outside Directors’ Board Attendance Rate at 97.9%... Highest in 5 Years
216 Companies Adopted at Least One of Concentrated, Written, or Electronic Voting Systems... 69 More than Previous Year

[Sejong=Asia Economy Reporter Joo Sang-don] Lee Jae-hyun, Chairman of CJ Group, was found to have served as an unregistered executive in five affiliates, receiving a total compensation of 12.379 billion KRW.

On the 2nd, the Fair Trade Commission analyzed and announced the governance status of business groups subject to disclosure in 2021, which included this information.

According to the analysis, there were a total of 176 cases where family members of the group head served as unregistered executives who do not participate in board activities. Family members served as unregistered executives in 15.5% of companies subject to private interest regulation and 8.9% of companies in the blind spot category. In contrast, only 3.6% of companies not subject to regulation had unregistered executives from the group head’s family. This shows that unregistered executive positions are concentrated in companies subject to private interest regulation and those in the blind spot.

The group head himself served as an unregistered executive in an average of 2.6 companies each. In four groups?Jungheung Construction (11 companies), Yujin (6 companies), CJ (5 companies), and HiteJinro (5 companies)?one group head served in five or more affiliates. Chairman Lee Jae-hyun of CJ Group served as an unregistered executive in five affiliates?CJ, CJ CheilJedang, CJ Logistics, CJ CGV, and CJ E&M?receiving a total compensation of 12.379 billion KRW.

Regarding the registration of group heads as directors, it was also concentrated in companies subject to private interest regulation and those in the blind spot within large business groups. The group head himself was registered as a director in an average of three companies. Among them, five groups?SM (12 companies), Harim (7 companies), Lotte (5 companies), Youngpoong (5 companies), and Amorepacific (5 companies)?had one group head registered as director in five or more affiliates. The Fair Trade Commission evaluated this as "a governance structure where responsible management is difficult to achieve."

In terms of board composition, there were 46 cases (38 companies, 20 groups) where outside directors who were former retired executives of affiliates were appointed, and among these, 36.9% (17 cases) were appointed in companies subject to private interest regulation and those in the blind spot.

From an operational perspective, most agenda items submitted to the board were approved as originally proposed (99.62%). In the case of large-scale internal transactions (limited to goods and service transactions) between affiliates (341 cases), all agenda items were approved as originally proposed.

Notably, most large-scale internal transactions were conducted through private contracts (340 out of 341 cases), and in 72.4% of these cases, the reasons for private contracts were not even stated in the agenda, indicating that substantive deliberation did not take place.

The institutional foundation to check controlling shareholders or management, such as outside directors, audit committee members, and internal committees, has been continuously strengthened. Among the listed companies belonging to business groups subject to disclosure (274 companies), most appointed outside directors meeting the minimum legal requirements (Commercial Act, Financial Company Governance Act). Furthermore, they appointed a total of 120 more outside directors than the legal minimum.

This year, the attendance rate of outside directors at board meetings was 97.9%, the highest in the past five years. Among the 274 listed companies belonging to business groups subject to disclosure, 153 companies (49 groups) that had a demand for audit committee member elections this year all elected audit committee members in accordance with the separate election system. In particular, four companies?Hyundai Everdigm (3 members), KCC (2 members), DB Financial Investment (3 members), and Yujin Investment & Securities (2 members)?elected two or more audit committee members separately, exceeding the legal minimum.

Among the 274 listed companies belonging to business groups subject to disclosure, 216 companies (78.8%) adopted at least one of the concentrated, written, or electronic voting systems, a significant increase from 147 companies the previous year. On the other hand, 58 companies did not adopt any of these voting systems.

A Fair Trade Commission official said, "The proportion of companies that introduced and implemented electronic voting systems increased significantly this year, and the number of shares exercised by minority shareholders through electronic voting nearly doubled compared to the previous year, greatly enhancing minority shareholder rights. However, while the proportion of companies with group heads registered as directors is steadily decreasing, the fact that many serve as unregistered executives without bearing the responsibilities of registered executives is a concerning point from the perspective of responsible management."