Only 1 out of 10 Boards of Directors in 30 Major Group Affiliates Has an 'Outside Director Chairperson'

Leaders Index Analyzes Status of 237 Affiliates in 30 Major Groups
Average Independence of Outside Directors 3.2 out of 5 Points 'Weak Independence'

Concerns have been raised that the independence of outside directors is insufficient, with only about 10% of outside directors serving as chairpersons of the board among the top 30 domestic conglomerates.

Outside Director. Photo by Getty Images

Leaders Index, a corporate analysis research institute, announced on the 31st that an analysis of 237 affiliates with outside directors among the top 30 groups ranked by assets showed that the average independence score of outside directors was 3.2 out of 5.

Leaders Index derived five evaluation criteria based on the backgrounds of 826 outside directors from these affiliates: separation of the board chairperson role, influence of former bureaucrats, academic connections, conflicts of interest in career history, and independence of audit committee members. The selection of these criteria reflected academic papers on outside director independence and expert opinions.

The separation of the board chairperson role scored the lowest at 1.5 points. Among the 237 affiliates surveyed, only 11.4% (27 companies) had outside directors serving as board chairpersons. The bureaucrat influence criterion, which assesses whether outside directors had served in government agencies capable of influencing the relevant industry, scored 2.5 out of 5, the second-lowest among the five criteria.

Leaders Index explained that there were 202 outside directors with bureaucratic backgrounds on the boards of the surveyed affiliates, accounting for 24.5% of the total, and most of them held positions or were affiliated with institutions capable of exerting influence.

The academic connection criterion, which applies when outside directors attended the same high school or university (with the same major) around the same time as the company owner or inside directors, scored 3.8 points. There were 124 outside directors meeting this criterion, representing 15% of the total.

Regarding the alma mater of outside directors based on undergraduate education, Seoul National University had the highest number with 345 directors (48.1%). In terms of age distribution, those born between 1958 and 1969 accounted for 502 directors, making up more than half at 60.8%. The audit committee independence criterion averaged 3.8 points, and the conflict of interest in career history scored 4.5 points.