International

Regulator to tighten rules on financials' CEO, auditor selections

South Korea's top financial regulator said Thursday it will toughen rules on the selection of corporate firms' chiefs and on recommendations for outside directors in a bid to improve corporate governance.

Financial Services Commission Chairman Choi Jong-ku speaks during a meeting with experts and officials on March 15, 2018, about a corporate governance reform plan. (Yonhap)

Financial Services Commission Chairman Choi Jong-ku speaks during a meeting with experts and officials on March 15, 2018, about a corporate governance reform plan. (Yonhap)

It is part of a set of measures the Financial Services Commission (FSC) put forth after its recent inspection into the country's financial holding firms found "structural flaws in their nomination processes that hurt their checks and balances systems."


   Under the scheme, sitting CEOs will be banned from joining committees to select candidates for outside directors and audit commissioners so as to help those selected serve their primary role of guarding against the excesses of executives, according to the FSC.

The regulator also vowed to strengthen its current evaluation system meant to assess the eligibility of major shareholders on a regular basis.

Currently, only a top investor among multiple shareholders is subject to the examination, which leads to limitations in looking into "those who have practical power in managing financial firms," the FSC said.

To boost transparency in the CEO selection process, companies will also be required to stipulate detailed evaluation criteria for CEO candidates in their internal regulations, while informing shareholders of the latest updates, it noted.

The regulator will seek to amend relevant legal codes to have the reform measures take effect within this year.

"The excessive influence of major stakeholders and executives can be a source of bad management and unhealthy business practices," FSC Chairman Choi Jong-ku said during a meeting with experts and relevant officials.

"Such efforts to correct them will help financial firms win public trust and find ways for innovation in the overall industry," he added.

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