A Conservative Company's Turnaround... KT&G's Secret to Top Scores [K-Food G Report]②

[The K-Food Governance Report] Part 1
Analysis of Corporate Governance Reports
for the Top 20 Listed Food and Beverage Companies by Market Capitalization
KT&G: The Only Company to Receive an A Grade (18 Points or Higher)
High Marks for

Editor's NoteDespite the global "K-Food" boom elevating the status of Korean food companies, their corporate governance structures remain outdated. While global brand credibility continues to rise, there is criticism that management systems are still rooted in past practices and that efforts to restore investor trust are insufficient. In line with the enforcement of the revised Commercial Act, Asia Economy has assessed the governance of the top 20 listed food companies by market capitalization. Over a series of five articles, we will examine the results of our quantitative and qualitative analysis of 10 key areas, including dividend policy, treasury stock management, dual listing structures, and board composition, as well as highlight areas for improvement.

KT&G is the only company to receive an "A" grade (18 points or higher) in Asia Economy's corporate governance evaluation of the top 20 listed food and beverage companies by market capitalization. The company was recognized as a model case for corporate governance, earning consistently high marks across core indicators such as the independence and expertise of its board, advanced shareholder return policies, and a robust internal control system.

This evaluation was conducted by Asia Economy, targeting the top 20 listed food and beverage companies by market capitalization, and assessed 10 categories-including dividend policy, dual listing structure, treasury stock management, and board operation-using both quantitative and qualitative methods. KT&G scored 18 out of a possible 20 points.

Board Centered on Outside Directors... CEO and Chair Separation Maintained for 15 Years

KT&G's board consists of eight members, six of whom are outside directors, making up 75% of the board. The board chair is selected from among the outside directors, and the company has maintained a structure separating the CEO and board chair for over 15 years. A dedicated board office (Board Operations Department) has also been established.

Key committees-including the Audit Committee, Governance Committee, Evaluation and Compensation Committee, and Outside Director Nomination Committee-are composed entirely of outside directors. All committee chairs are also outside directors, ensuring an effective system of management oversight.

The nomination process for outside directors is both fair and transparent. Candidates identified by external search firms are reviewed alongside those proposed by shareholders, and the Outside Director Nomination Committee independently vets candidates before submitting them to the general shareholders' meeting. This committee is composed exclusively of outside directors.

Previously, the authority to nominate inside directors rested with the CEO, but following amendments to the articles of incorporation, this authority now belongs to the board. The CEO appointment process has been refined into a three-stage structure: Governance Committee → CEO Nomination Committee → Board of Directors. Notably, last year, the articles of incorporation were amended to explicitly exclude the incumbent CEO from participating in the CEO Nomination Committee, further enhancing the independence and transparency of the process.

As of December 31 of last year, KT&G's largest shareholder was the Industrial Bank of Korea, holding approximately 7.59% of shares. Individual minority shareholders-those holding less than 1% of the total issued shares-account for 31.52%, underscoring the separation of ownership and management.

Top-Tier Shareholder Return Policy: Dividends and Treasury Stock Cancellation

KT&G implements the highest level of shareholder return policy in the domestic food industry, both in terms of dividends and treasury stock cancellation. Over the three years from 2021 to 2023, the company returned KRW 2.75 trillion to shareholders-KRW 1.75 trillion through dividends and KRW 1 trillion through treasury stock buybacks. From last year, KT&G announced an expanded plan to return a total of KRW 3.7 trillion (KRW 2.4 trillion in dividends and KRW 1.3 trillion in treasury stock buybacks) by 2027. Last year alone, the company repurchased 4.96 million shares, worth approximately KRW 385.4 billion.

KT&G resumed treasury stock cancellation in 2023 for the first time in 14 years since 2009. The company canceled 3.47 million shares in 2023 and 11.76 million shares last year (including previously held treasury shares). Earlier this year, it canceled an additional 3.3 million shares. By the end of 2027, KT&G plans to cancel approximately 20% of its total issued shares as of the end of 2023.

The company’s dividend payout ratio also exceeds the global average for food companies, at 57.2% in 2022, 65.4% in 2023, and 50.5% in 2024-surpassing 50% for three consecutive years. In 2023, KT&G introduced semi-annual dividends, establishing a twice-yearly dividend system.

Cumulative Voting System in Practice... Enhanced Effectiveness of Shareholder Proposals

KT&G not only codifies the cumulative voting system in its articles of incorporation but also implements it in practice. Between 2023 and 2025, cumulative voting requests and shareholder proposals were submitted by the Industrial Bank of Korea and AGNES (Flashlight Capital Partners), among others, and all were included as agenda items at the general shareholders' meetings, with actual votes taking place.

At the 37th regular general shareholders' meeting, the board-recommended CEO candidate Bang Kyungman (Agenda Item 3-1) was appointed with a 50.9% approval rate, while the Industrial Bank of Korea's nominee Son Donghwan (Agenda Item 3-3) was approved with a 34.3% approval rate. The outside director candidate Lee Sanghyun, proposed by AGNES (Agenda Item 3-4), withdrew his candidacy, resulting in the agenda item being withdrawn. Shareholder proposers were given opportunities to explain and speak on their proposals at the meeting.

In advance of this year's regular general shareholders' meeting, the company amended its articles of incorporation to separate the election of the CEO and other directors. This change addresses the structural limitation where, under cumulative voting, the CEO appointment was previously decided together with other directors, and clarifies shareholder intent regarding the CEO appointment.

Advanced Internal Control and Audit System... Minority Shareholders as "Equal Owners"

KT&G's Audit Committee is composed entirely of outside directors, including experts such as Ko Yoonseong (professor of accounting), Kim Myungcheol (former CFO of Shinhan Financial Group), Kwak Sangwook (former audit committee member of the Board of Audit and Inspection), and Son Kwansu (formerly of CJ), specializing in accounting, law, and finance. In addition, the internal audit department reports directly to the Audit Committee, enhancing the independence and authority of its operations. The audit team is led by an executive vice president and is divided into specialized departments such as procurement, global, finance, and Indonesia audits. Each department is staffed primarily by certified public accountants (CPAs) and professionals with practical experience. Last year, the Audit Committee held nine meetings and reviewed 27 agenda items.

The internal accounting control system also received an unqualified opinion from external auditors, and the company regularly holds non-public quarterly meetings with external auditors to review audit plans and ensure audit quality.

KT&G is also strengthening communication with minority shareholders holding less than 1% of the total voting shares. In addition to NDRs (Non-Deal Roadshows) organized by securities firms and conferences for domestic and international investors, the company regularly holds IR meetings with small institutional investors. In November of last year, when announcing its "Corporate Value Enhancement Plan," KT&G held an online video conference in both Korean and English, open to all participants.