Governance GLOBAL PREMIER EXCHANGE

KRX has adopted the “Comply-or-Explain (CoE)” approach for corporate governance disclosure, which has been in force since March 10, 2017.

• Companies either comply with ten core rules on corporate governance, or explain explicitly why they do not comply with.
• The ten core rules (contained in the link) are selected, in accordance with the Corporate Governance Best Practices.

In March 2018, the Financial Services Commission (FSC) and KRX announced “Plans to Improve Corporate Governance Disclosure”, with a view to encouraging listed companies to faithfully perform disclosure obligations and enhancing the quality of disclosure reports.

• Starting from 2019, KOSPI-listed companies with total asset value of not less than KRW 2.0 trillion* are mandatorily required to disclose their governance information. From 2021, all KOSPI-listed companies will be bound by mandatory disclosure obligations.

       * The number of such companies is to reach 201 as of the end of 2019 (based on consolidated financial statements)

• The ten core rules are detailed, so as to improve the quality of disclosed information, whilst the guidelines on corporate governance report specify the particulars that corporate governance reports must include, so that investors can be clearly informed of how companies comply with the core rules.

Basically, companies are required to provide sufficient and substantial information in the corporate governance report.

• Listed companies must state in a manner that evidences their compliance with the core rules and other specific principles, and that fully explains the reasons for non-compliance or unfaithful compliance.
• Companies must provide complete and full information as required by the guidelines, and also present other material information regarding the core rules, if any.

“The Korea Stewardship Code: Principles on the Stewardship Responsibilities of Institutional Investors” was published on December 19, 2016.

• Rules and guidelines are laid down for institutional investors to fulfill their responsibilities as a steward of the entrusted assets. The Korea Stewardship Code applies to institutional investors who are voluntary signatories. The signatories have the right to choose which rules/guidelines they are to comply with. Thus, they are required to give explanations about their choice of non-compliance with certain rules/guidelines.
주의96 institutional investors and advisory firms voluntarily signed up to the Korea Stewardship Code, as of the May 2019.

Backed by strong support from financial authorities and increasing attention from the public, the Korea Stewardship Code continues to impact the financial industry and investment environment.

• The National Pension Service (NPS) adopted the Korea Stewardship Code in July 30, 2018.
• The Korea Stewardship Code is expected to ensure long-term growth of investee companies, greater investment returns for their clients, and a healthy capital market in place.
• Stewardship code-related services (e.g. publication of research, guidance on participation, public relations, etc.) are provided by the Korea Corporate Governance Services (KCGS)