Developed Based on TF Deliberations and Opinions from All Sectors of Society
The Ministry of Justice announced the "Guidelines on Directors' Codes of Conduct" on the 25th.
The guidelines were prepared in response to public calls for concrete behavioral standards following the first amendment to the Commercial Act, which expanded the scope of directors' duty of loyalty to shareholders.
The guidelines were developed based on the discussions of a consultative task force (TF) composed of experts and on opinions gathered from various sectors of society. Although they do not have the force of law, they present ways for directors to fulfill their duty of loyalty to shareholders. If directors perform their duties in line with these guidelines, they are expected to be able to make sound business judgments while at the same time reducing unnecessary legal risks.
Measures for fulfilling the duty of loyalty include: establishing a "special committee" composed of outside directors and others without conflicts of interest to advise on board decision-making; having external experts in areas such as legal affairs, finance, tax, and environment conduct prior reviews of the fairness of transactions; and providing shareholders with sufficient information on matters involving conflicts of interest, including the background and standards of directors' decision-making.
Justice Minister Jung Sung-ho said, "By referring to these guidelines, I hope that trust in directors' efforts to protect shareholders and in the fairness of transactions will increase, leading to the continuous growth of companies."
The Ministry of Justice plans to continue to issue guidelines for types of transactions that carry a high risk of conflicts of interest.
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