The Era of Independent Board Chairs

In February 2019, SK Group Chairman Choi Tae-won stepped down as board chair of SK Inc., the group's holding company. Yom Jae-ho, former president of Korea University, was tapped as his successor. It was the first case among Korea's top 10 conglomerates of appointing an outside director as board chair of a holding company. Board-centered responsible management had begun in earnest in Korea.

Samsung Electronics (005930.KS), the country's largest conglomerate by market value, also moved preemptively. In 2018, then-CEO Kwon Oh-hyun, who headed the Device Solutions division, stepped down as board chair and was replaced by Lee Sang-hoon, head of the corporate management office, separating the roles of CEO and board chair. Then in 2020, the company appointed its first outside director as board chair — Park Jae-wan, a former Minister of Economy and Finance.

Recently, LG Group went a step further, declaring an "outside director chair system" that places outside directors at the helm of the boards of all its listed subsidiaries. It is the first such attempt among Korea's four largest conglomerates. LG Group Chairman Kwang-mo Koo relinquished the board chairmanship at LG Corp., the group's holding company, to focus solely on management. Major affiliates including LG Chem and LG Display also appointed outside directors as board chairs.

Outside director-led boards have already become the norm in advanced economies, approaching a global standard. The system has established itself as an advanced governance structure that prevents conflicts of interest that can arise when controlling shareholders or CEOs concurrently serve as board chair, promoting transparent decision-making. Apple's board has been chaired since 2011 by Arthur Levinson, former CEO of Genentech. Walt Disney's board is led by James Gorman, a former CEO of Morgan Stanley. As external figures, they oversee management with thoroughly independent leadership, faithfully fulfilling their core mission of checks and balances.

Domestically, the outside director board chair system has taken root at companies without a specific controlling shareholder, such as the four major financial holding groups — KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group — as well as KT and POSCO Holdings. Outside directors at Korean companies have long been criticized for merely acting as rubber stamps, deferring to controlling shareholders or management. The practice of recruiting former bureaucrats or legal professionals as shields also persists. Ultimately, the key to board independence lies in substantive decision-making authority. For the outside director board chair system to properly take hold, these chairs must wield real power beyond serving as figureheads.