LGD Outside Directors Countermeasure Committee, Can It Take Measures Like the Korean Version of Foxconn?

Outside Directors Take on ESG Issues
Attention on Whether Reform Proposals Can Be Presented

There is an analysis that the task force activities on the team leader death incident, initiated by LG Display's outside directors, could become a model case for domestic ESG (Environmental, Social, and Governance) management. Similar to how Apple and U.S. labor watchdog groups conducted investigations and proposed improvements following the death of workers at Foxconn (Hon Hai Precision Industry), Apple's largest partner in Taiwan, attention is focused on whether outside directors will actively step up to solve the problem and fulfill their fundamental role of checking and monitoring management.

Four LG Display outside directors?Moon Du-cheol, Kang Jeong-hye, Oh Jeong-seok, and Park Sang-hee?have decided to operate a task force on the employee death issue without the involvement of CEO Jung Ho-young. The purpose is to identify the cause of death, understand the circumstances before and after, and establish fundamental countermeasures, with no specified duration for the activities.

All four outside directors participating in the task force also serve as audit committee members with the authority to review all company documents. Article 412 of the Commercial Act states that auditors may investigate the company's business and financial status at any time. According to LG Display's 2022 Corporate Governance Report, all four outside directors recorded a 100% attendance rate at audit committee meetings last year.

Experts responded that it is significant for outside directors to take the initiative in devising countermeasures independently of investigations by the police and the Ministry of Employment and Labor. This is because it is rare for outside directors to actively engage in resolving serious company incidents. Jo Myung-hyun, a professor of business administration at Korea University and former president of the Korea Corporate Governance Service (now Korea ESG Standards Institute), said, "It is meaningful that audit committee members with document review rights have volunteered to write their own report and deliver it to management even before it is presented to the board."

Although smaller in scale than the 'Foxconn investigation,' there is interest in whether a similar case can be derived. In 2010, after 13 employees committed suicide at Foxconn in one year, Apple conducted an investigation into Foxconn's labor conditions together with the U.S. labor watchdog Fair Labor Association (FLA). The investigation revealed that Foxconn had violated more than 50 Chinese labor laws. Subsequently, wages were doubled, and weekly working hours, which had exceeded 60, were reduced to 49.

Kim Dong-su, head of the ESG Management Research Institute at Kim & Chang Law Firm, said, "It is more important to establish a system to prevent recurrence after an incident than to engage in risk prevention activities before the incident occurs, and the LG Display outside directors' task force activities are meaningful in that regard." He added, "Even if the task force activities by outside directors do not produce results comparable to the reports published by Apple and the FLA, the fact that external personnel have started independent activities is a positive event for ESG management in Korea."

Institutions that evaluate corporate ESG management activities through board meeting attendance rates and other factors are also paying attention to LG Display outside directors' task force activities. An official from one such institution, who requested anonymity, said, "If outside directors propose solutions to a very impactful internal ESG issue, especially an 'S (Social)' issue, and the company implements them, it will become a very important model case for improving ESG management in Korea."