Kim Ji-hyung's Final Advice: "Compliance Monitoring Is Not Just Corporate Face-Saving... Requires Management's Will and Decision"

Samsung Compliance Committee Holds Forum with Experts... Discussing Measures to Enhance Compliance Effectiveness
Sharing the Need for Governance Improvement and Ethical and Compliance Controls over Controlling Shareholders

[Image source=Yonhap News]

[Asia Economy Reporter Lee Hye-young] On the 18th, the Samsung Compliance Committee held a forum titled "Current Status and Improvement Measures of Compliance (Legal Compliance and Internal Control) in Large Corporations" with experts from various fields to explore ways to establish an effective compliance system.

Experts commonly expressed the opinion that compliance must be driven by a strong will at the CEO or group head level. There were also repeated points that governance improvement should precede in order to restore corporate trust and achieve sound management.

Kim Ji-hyung, chairman of the Samsung Compliance Committee, emphasized at the forum, "Compliance (legal compliance and control) should be pursued as a corporate philosophy and value, not as a mere formality, and must be driven by the firm will of the CEO. The will and determination of management are the starting point of compliance management."

Chairman Kim pointed out, "Compliance can no longer be a 'mere formality' for companies," and stressed that "the belief and cause behind why compliance is necessary must be clear." He further insisted that by establishing a cyclical approach of prevention, response, and recovery with a roadmap for each period, the compliance culture should be spread, its foundation strengthened, and sustainability secured.

Chairman Kim Ji-hyung, a former Supreme Court justice who has led Samsung's Compliance Committee for two years / Photo by Kim Hyun-min kimhyun81@

"Ethics and Compliance of CEOs and Group Heads Must Be Addressed"

Professor Lee Bong-ui of Seoul National University Law School, who gave the first part of the forum’s keynote presentation, also cited the will of corporate CEOs and group heads as the most important factor in compliance. Referring to the current status and issues of compliance operations in large corporations including Samsung, Professor Lee pointed out, "Ethics and compliance management should cover the ethics and compliance of CEOs (including group heads) beyond the level of employees at the affiliate level."

Regarding the restructuring of Samsung’s governance, one of the major tasks of the second Compliance Committee, Professor Lee stated, "There is no definitive answer to the most desirable governance structure, and no corporate group has a legal obligation to improve governance in a specific form," but he predicted, "Public opinion is likely to interpret changes in Samsung Group’s governance as linked to the consolidation of current control rights and the succession to the fourth generation."

He emphasized the need to develop into an "active compliance" that responds to political and social demands, adding, "Above all, the will of the group head is important. The Compliance Committee should not become a placebo, and caution is needed to prevent serious side effects from the 'vaccine'."

In the subsequent discussion, Professor Jeong Jun-hyuk of Seoul National University Law School said, "Considering that most corporate violations in Korea occur in relation to controlling shareholders’ private benefits and management succession processes, in-depth discussions on compliance systems at the controlling shareholder and corporate group levels are necessary."

Park Jong-geun, head of Ethics Management at Siemens Korea, referred to the situation when Siemens was involved in a corruption scandal and introduced the company’s specific remedial measures and compliance-related systems established thereafter.

Kang Sung-boo, CEO of KCGI (center) / Photo by Hyunmin Kim kimhyun81@

"Governance Improvement Needed to Enhance Compliance Effectiveness"

Kang Sung-bu, CEO of KCGI, who presented on "Corporate Compliance through Stakeholders (Shareholders, Investors, etc.)," proposed redesigning the system to include shareholders and investors across all areas of compliance for the long-term survival and growth of companies and ESG (Environmental, Social, and Governance) improvement.

Kang also argued for measures to enhance compliance effectiveness through governance improvement. He emphasized, "Governance improvement is necessary so that compliance principles can be realized for stakeholders such as shareholders through board-centered management."

In related discussions, Shin Jin-young, president of the Korea Capital Market Institute, pointed out that Korea’s governance and compliance are centered on controlling shareholders, explaining that this situation sometimes causes the "Korea discount." He analyzed, "Given the reality of Korean companies, compliance implementation that comprehensively considers stakeholders at the corporate group level is necessary, and compliance enforcement on controlling shareholders at the top of governance is a priority task."

Park Kyung-seo, director of the Corporate Governance Research Institute (AICG) at Korea University Business School, cited controlling shareholder management, monopoly of management rights, and limitations of internal and external board discipline as the background for compliance failures in domestic companies. Regarding corporate group compliance systems, he said, "It is necessary to subdivide and differentiate matters according to whether they relate to controlling shareholders and at the individual company or corporate group level."

Meanwhile, the Samsung Compliance Committee, launched in February 2020, will conclude the first term led by Chairman Kim Ji-hyung, a former Supreme Court justice, at the end of this month. Lawyer Lee Chan-hee, former president of the Korean Bar Association, will take over as the new chairman and begin the second term next month.

The Samsung Compliance Committee was established following the order from the retrial court of Vice Chairman Lee Jae-yong’s political scandal case to establish an internal compliance monitoring system. The committee is an independent organization that does not receive instructions from Samsung on the surface, with seven major affiliates including Samsung Electronics, Samsung C&T, Samsung SDI, Samsung Electro-Mechanics, Samsung SDS, Samsung Life Insurance, and Samsung Fire & Marine Insurance participating as signatories.