Average Compensation for Outside Directors at KOSPI 200 Companies Reaches 71.09 Million Won... "Influence of Recruiting Prominent Figures"

Deloitte Korea Analyzes Boards of KOSPI 200 Companies
4 Out of 10 Audit Committee Members Are Finance/Accounting Experts

The Center for Corporate Governance of Deloitte Korea Group announced on January 14 that it has published the sixth edition of the "Corporate Governance Data Trends," which analyzes key board statistics of KOSPI 200 listed companies.

According to the report, 4 out of 10 audit committee members at KOSPI 200 companies have expertise in finance or accounting. As of FY2024, the distribution of audit committee members by expertise showed that "finance/accounting" accounted for the largest share at 41.2% (254 members), followed by academia at 25.1% (155 members), and legal professionals at 13.3% (82 members). When classifying audit committee members who meet the requirements for accounting or finance experts under the Commercial Act, "those with experience in financial institutions, government, or securities-related organizations" comprised 33.7% (91 members), while "those holding degrees in accounting or finance" accounted for 32.6% (88 members).

As of FY2024, the average compensation for outside directors at KOSPI 200 companies was 71.09 million won, about 1.5 times higher than the average for all listed companies (49.07 million won), and a slight increase from the previous period (70.63 million won). The average compensation for audit committee members was 74.46 million won, about 1.4 times higher than the overall listed company average (53.95 million won). The report interpreted this gap as a result of large corporations with substantial assets and sales more actively recruiting prominent figures as outside directors, which in turn leads to relatively higher compensation levels. Meanwhile, among the Global 500 companies, the annual base compensation for outside directors is around 210 million won, significantly higher than in Korea, and various forms of compensation, such as stock awards, are also utilized.

As of FY2024, the average board size at KOSPI 200 companies was 7.3 members, an increase of 0.2 members from the previous period (7.1 members). During the same period, the proportion of outside directors was 58.4%, up 0.7 percentage points from the previous period (57.7%). The report emphasized that, rather than the absolute number of directors, the optimal board size and support system that enable the board to function efficiently are more important. As overseas research cases, the report cited findings that a board size of 7 to 9 is desirable in the United States, while in Germany, an audit committee size of 12 to 14 is considered the upper limit for efficiency.

In FY2024, the total number of board agenda items at KOSPI 200 companies was 8,924, an increase of 423 items (5.0%) from the previous period. By agenda type, "business/management" items accounted for the largest share at 47.3%, followed by personnel (17.0%), related-party transactions (13.5%), finance (10.8%), and regulations/articles of incorporation (7.0%). Meanwhile, resolutions accounted for 6,113 items (68.5%) and reports for 2,811 items (31.5%), with no significant change from the previous period. The board approval rate stood at approximately 99%. The report also highlighted that, as of FY2024, global boards are increasingly focusing their strategic discussions on technology, with artificial intelligence (AI) governance comprising 58% of all agenda items and third-party risk 33%, among other key issues.

The report also presented the status of directors and officers liability insurance (D&O insurance) enrollment and operation. This insurance, which also covers outside directors, is becoming increasingly important as a condition for attracting competent outside directors and protecting executives from lawsuits arising from management errors. As of FY2024, 91.9% (181 companies) of KOSPI 200 companies had enrolled in this insurance, and among them, 65.2% (118 companies) had established mechanisms to prevent the abuse of director liability waivers. Additionally, the report noted that, in the United States, the D&O insurance premium index has been trending upward recently due to the increasing scale of class action lawsuits.

The report further noted that, with the spread of AI technology, security, privacy, and ethical risks are emerging as core governance issues for companies, making it increasingly important for boards to strengthen their oversight capabilities in AI governance.

Kim Hanseok, Head of the Center for Corporate Governance at Deloitte Korea Group, stated, "As recent regulatory changes and expanding stakeholder demands increase the importance of independence and expertise in board composition, as well as the supporting systems, companies need to go beyond disclosure compliance and systematically review and improve the effectiveness of board operations."

This edition of the report also covers major regulatory trends for the second half of the year, including the main provisions of the amended Commercial Act. The amendments expand the fiduciary duty of directors to shareholders, mandate cumulative voting for large listed companies, broaden the separate election of audit committee members, and introduce mandatory treasury stock cancellation under the third amendment. These changes are expected to strengthen the independence and accountability of boards and audit committees, enhance shareholder rights protection, and impact overall corporate governance, highlighting the need for governance-level response strategies.

The full text, card news, and video news of the sixth edition of "Corporate Governance Data Trends" are available on the Deloitte Korea Group website. Since its establishment in 2014, the Center for Corporate Governance at Deloitte Korea Group has supported the work of boards and audit bodies (audit committees and auditors) at Korean companies through a variety of publications-including Corporate Governance Insights, Corporate Governance Data Trends, Corporate Governance Resource Guides, and Korean translations of Deloitte Global reports-as well as seminars and webinars.

Meanwhile, the Center for Corporate Governance at Deloitte Korea Group has expanded access to its online education platform, the "Deloitte Boardroom Academy," which is operated to strengthen the expertise of boards and audit committees. Anyone interested in corporate governance can register as a member and use the platform free of charge.