[Q&A] "Write the Corporate Value Enhancement Plan Autonomously According to the Company's Situation"

Exchange Announces Guidelines for Corporate Value Enhancement Plans
Qualitative Descriptions Allowed Depending on the Case
"Failure to Achieve Targets Alone Does Not Result in Being Deemed an Unfaithful Disclosure Corporation"

The Korea Exchange emphasized the importance of autonomously drafting plans tailored to the individual circumstances of each company as it announced guidelines for corporate value enhancement plans.

Jung Eun-bo, Chairman of the Korea Exchange, held a press conference at the Korea Exchange on the 24th to mark his 100th day in office, under the theme "Korea Exchange's Core Strategies for Corporate Value-Up and Capital Market Level-Up." Chairman Jung is presenting the prepared content. Photo by Heo Young-han younghan@

On the 24th, marking the 100th day since Chairman Jeong Eun-bo’s inauguration, the Exchange held a press briefing at the Korea Exchange in Yeouido, Seoul, and announced guidelines for corporate value enhancement aimed at corporate value-up.

Before finalizing the guidelines, the Exchange gathered opinions from various market participants, including domestic and international institutional investors, listed companies, and corporate value-up advisory groups, regarding the preparation methods and disclosure considerations for corporate value enhancement plans.

The following is a Q&A with a Korea Exchange official addressing questions and concerns raised during the opinion-gathering process with market participants.

- Since applicable indicators vary depending on industry and company size, and even the same financial indicators have different appropriate levels depending on the industry, what indicators should companies select to establish their corporate value enhancement plans?

▲ Each company can autonomously select indicators suitable for the purpose of medium- to long-term value enhancement, considering the characteristics of the industry, the unique features of the business, and the growth stage. For example, banks may use the Bank for International Settlements (BIS) capital adequacy ratio, media companies may focus on intellectual property (IP) holdings, and biopharmaceutical contract manufacturing may consider production capacity (CAPA) and price-to-sales ratio (PSR). The indicators listed in the guidelines are merely examples frequently used to evaluate market valuation, capital efficiency, and shareholder returns, and companies are not limited to selecting only these indicators. Additionally, it is preferable that the indicators include information necessary for shareholders’ investment decisions, and if quantitative representation is difficult, qualitative descriptions are also acceptable.

- Since methods for enhancing corporate value differ depending on the company’s situation and growth stage, and for some companies investment is important while for others shareholder returns are key, is there an overemphasis on shareholder returns?

▲ The guidelines and explanatory notes do not emphasize shareholder returns as the sole method for enhancing corporate value. Methods for value enhancement may vary depending on company characteristics, growth stage, industry, and market strategy. Companies can pursue corporate value enhancement through various means beyond shareholder returns such as dividends and treasury stock cancellations, including research and development (R&D) investment, profitability expansion, and growth strengthening. Whether to expand shareholder returns through dividends, share buybacks, and cancellations using surplus cash or to invest in physical and human capital for growth is a decision for the company to make autonomously. However, it is necessary to sufficiently explain the reasons and purposes for decisions on shareholder returns or investment expansion while communicating with shareholders and investors.

- What are the length, format, and required items for drafting a corporate value enhancement plan?

▲ There is no restriction on length. The plan should be drafted according to the table of contents in the guidelines, but companies may exclude sections that are not applicable or appropriate considering their characteristics. If the plan is lengthy, a separate summary of about two pages can be provided alongside the full corporate value enhancement plan for investor convenience. The format is also at the company’s discretion, and documents can be prepared in various formats such as word processors or PDFs. It is not necessary to list all items suggested in the guidelines; companies may select and include only some elements. It is recommended to focus on content that is meaningful for corporate value enhancement and requires communication with shareholders, considering the company’s growth stage and business structure.

- Is it mandatory to obtain board resolutions or reports when establishing the corporate value enhancement plan?

▲ This is determined autonomously by each company. However, considering that management goals and business plans included in the corporate value enhancement plan are generally matters for board resolution and the importance of the plan, board participation is desirable. If the board participates in establishing the plan, including the date of the board meeting and details of deliberations can enhance the credibility of the plan.

- Must all core governance indicators from the Corporate Governance Report guidelines be included when drafting the corporate value enhancement plan?

▲ Companies autonomously select governance-related elements that require improvement for corporate value enhancement or are of high interest to shareholders. The core indicators and detailed disclosure items in the Corporate Governance Report guidelines are provided as useful references to assist companies’ choices and do not need to be all included. Companies subject to mandatory disclosure of the governance report should avoid simple repetition of the report content and focus on describing important elements. Companies not subject to mandatory disclosure are not required to disclose core indicators but may refer to the Corporate Governance Report guidelines and check the 15 core indicators if deemed necessary.

- Could there be issues with disclosing trade secrets when drafting a detailed corporate value enhancement plan?

▲ Since the corporate value enhancement plan is intended for medium- to long-term value improvement, trade secrets should not be disclosed in a way that damages corporate value. Companies should disclose the plan considering the balance between protecting trade secrets and the specificity of the plan.

- Are goals presented only as quantifiable figures?

▲ According to the guidelines, it is preferable for listed companies to present clear goals using quantifiable figures. Quantitative goals may be set as ranges rather than single numbers for the target period or figures, and if rapid changes in the business environment make goal revisions unavoidable, existing goals can be modified. If it is difficult to set goals in quantifiable terms, qualitative descriptions may be used.

- How and when should the corporate value enhancement plan be disclosed?

▲ The corporate value enhancement plan is disclosed through the Korea Exchange’s Listed Company Disclosure System (KIND) using a voluntary disclosure form. Prior to disclosure via the system, care should be taken to avoid selectively providing information to specific individuals through website announcements or other means. Periodic disclosure, such as once a year, is recommended. Disclosure is advised in the first half of the year after financial statements are finalized, key indicators are calculated, and business reports are distributed. It is also preferable to disclose at similar times each year to facilitate easy year-on-year comparison by shareholders. However, if disclosing at similar times annually is inappropriate or if changes in the business environment require adjusting the disclosure timing, the timing can be announced through a preliminary disclosure. Since this year is the first year for implementing corporate value enhancement plan disclosures, companies should begin disclosing once preparations are complete following the guideline announcement, with annual disclosures recommended in the first half of the year starting in 2025.

- Does failure to achieve the goals in the corporate value enhancement plan constitute a non-compliant disclosure?

▲ The corporate value enhancement plan is subject to the same regulations as other disclosures regarding false disclosures and designation as a non-compliant disclosure company. However, simply failing to achieve set goals does not result in designation as a non-compliant disclosure company. If reasonable grounds for forecasts are provided and disclosures are made according to the disclosure regulations for forecast information, exceptions to non-compliant disclosure regulations may apply.

- How should the corporate value enhancement plan be revised or supplemented?

▲ Like other corporate disclosures, corrections and supplements to the corporate value enhancement plan can be made through correction disclosures when necessary. If there are errors in previously disclosed information or significant changes in business or management plans occur, correction disclosures should be made. Considering that the plan includes forecast information and is disclosed periodically, not all changes require correction disclosures. Correction disclosures are necessary when important matters that could affect investment decisions change and the entity responsible for establishing the plan makes decisions related to those changes.