Change of Head at ESG Standards Institute, One of the Top 3 ESG Rating Agencies
Declining Prestige Compared to the Past... Challenges of Talent Attrition
Recently Reappraised Through Value-Up Policies and Stewardship Code
The terms of office for the heads of major domestic capital market institutions are expiring one after another. Following the expiration of the term of the president of the Capital Market Research Institute, known as the 'think tank of the capital market,' this month, the Korea ESG Standards Institute, one of the top three ESG (Environmental, Social, Governance) evaluation agencies, will also welcome its next president next month.
According to the financial investment industry on the 30th, Shim In-sook, president of the ESG Standards Institute, will complete her three-year term on October 21. The next president, who will be appointed through the general meeting of members, will also serve a three-year term, and unless there are special circumstances, the term will begin the following day, October 22.
The president of the ESG Standards Institute is elected through the general meeting of members, so there is no external recruitment process. Professors have mainly held the position so far. A financial investment industry official said, "Since the president must resign from all outside director positions to avoid conflicts of interest, this aspect will likely be considered first when selecting candidates," adding, "Those receiving the offer will inevitably have to contemplate this as well."
The ESG Standards Institute, a corporation under the Korea Exchange, was established through joint investment by eight related organizations, including the Korean Institute of Certified Public Accountants, the Korea Financial Investment Association, and the Korea Listed Companies Association. Lee Jung-ui, the newly appointed vice president as of May, previously served as deputy head of the Management Support Headquarters and deputy head of the Derivatives Market Headquarters at the Exchange. The institute conducts annual ESG rating evaluations of domestic listed companies and is responsible for drafting and revising model codes and analyzing proposals. Currently, as an ESG specialized institution, it is also involved in the process of establishing detailed standards for incentive measures that exempt companies with excellent governance from the Financial Supervisory Service's 'Periodic Auditor Designation System.'
The status of the ESG Standards Institute, which attracted attention during the 2015 Samsung C&T-Cheil Industries merger and the 2018 Hyundai Motor Group governance restructuring, is now considered to be less prominent. Since the introduction of the Stewardship Code system in Korea in 2016, the demand for ESG-related professionals has increased, leading to a rise in personnel moving to private organizations. The Stewardship Code refers to guidelines for exercising voting rights as a prudent manager. The institute's salary system, which lagged far behind that of private organizations within the same capital market such as the Capital Market Research Institute, was also reportedly a problem. The 2022 name change from 'Korea Corporate Governance Service' to 'Korea ESG Standards Institute' was also regarded as a 'bad move.'
However, recently, as the Stewardship Code has been reappraised in connection with value-up programs, the ESG Standards Institute has also gained attention. In fact, in March, the Financial Services Commission decided to revise the Stewardship Code guidelines to encourage institutional investors such as the National Pension Service to participate in 'corporate value-up support measures.' As of the 27th, the number of institutions participating in the Stewardship Code totals 232, including the National Pension Service, Government Employees Pension Service, and Private School Teachers' Pension, and the number is expected to increase to 282 when including institutions planning to participate.
Another financial investment industry official said, "Since it is an institution invested by the Exchange and is effectively overseen by the Financial Services Commission, it is the most trusted among ESG evaluation agencies," adding, "Due to repeated internal personnel departures, the budget has also been increased, allowing somewhat more flexibility."
Meanwhile, the term of Shin Jin-young, the current president of the Capital Market Research Institute, expires on the 29th of this month. The Capital Market Research Institute's presidential candidate recommendation committee completed the public recruitment process for the 9th president on the 10th and has begun candidate verification. The next president's term will be three years, until 2027.
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