Sejong Law Firm, led by Managing Partner Oh Jong-han, announced on July 27 that it is offering Korea's first 'one-stop director appointment advisory service' to support the entire process of appointing directors. This initiative comes as institutional investors and voting advisory firms increasingly prioritize candidates' expertise, independence, and potential conflicts of interest in their voting decisions.
The criteria for appointing directors are rapidly evolving. This year, during the regular shareholders' meeting, a candidate recommended by an activist fund was elected as an independent director after a fierce vote, highlighting the growing importance of objective qualifications such as individual expertise and history of harming corporate value in the appointment process.
In the past, the recommending party and the candidate's experience were major considerations. Now, objectively verifying a candidate's qualifications has become a critical governance task for companies.
This shift aligns with recent legislative changes that have strengthened demands for the independence and accountability of boards of directors. Additionally, a bill has been proposed in the National Assembly to require more thorough disclosures regarding the independence of director and auditor candidates, their relationships with major shareholders, and any concurrent positions held in other companies.
As a result, the process of objectively reviewing the qualifications and independence of director candidates is expected to become a key element in forming responsible boards and securing investor trust.
In many countries, such reviews have already become standard practice in the director appointment process. Global voting advisory firms like ISS and Glass Lewis use candidates' independence, potential conflicts of interest, and history of harming corporate value as primary evaluation criteria. Domestic voting advisory firms are also continuously enhancing their evaluation systems to reflect global standards. Companies are increasingly required to establish objective and transparent review processes from the outset of director appointments and to reasonably explain the basis for their decisions to shareholders and investors.
To proactively respond to these market changes, Sejong has developed a standardized director appointment advisory service based on its experience advising on Korea's first public director candidate verification process this year. This service focuses on helping companies explain the objectivity and rationality of their candidate selections to institutional investors and voting advisory firms, going beyond simple candidate evaluations.
Sejong's 'Director Appointment Advisory Service' aims not only to evaluate candidates but also to help companies preemptively assess legal and reputational risks that may arise during the director appointment process, enabling them to make objective and transparent decisions.
The review results will be provided in the form of a qualification verification report issued by the Corporate Governance Research Institute, and a qualification confirmation letter can also be issued if necessary. This report can be used as reference material for the executive candidate recommendation committee's deliberations, as well as for explanations to institutional investors and voting advisory firms. Through this, companies can enhance the objectivity and transparency of their director appointment processes and more effectively explain the rationality and validity of their decisions to stakeholders.
Specifically, Sejong will provide a comprehensive review of candidates under consideration for director appointments, including: examination of legal disqualifications under relevant laws such as the Commercial Act and Capital Markets Act; analysis of relationships with major shareholders and related parties to assess independence; analysis of past board attendance rates and voting records; evaluation of the candidate's ability to perform duties based on concurrent positions; analysis of any history of harming corporate value; and risk analysis considering the main evaluation criteria of institutional investors and voting advisory firms. Companies can use this information to objectively assess the qualifications of director candidates and proactively manage any legal and reputational risks that may arise during the appointment process.
Ah Hyoseop, head of Sejong's Corporate Governance Research Institute, stated, "The process of appointing directors has evolved into a crucial decision-making process that influences sustainable growth and shareholder trust, going beyond merely finding suitable candidates. Companies must now be able to objectively explain 'why this candidate is qualified' rather than 'who recommended them,' making candidate verification an essential corporate governance procedure rather than an option."
Lee Dong-gun, managing partner of Sejong and head of the Corporate Governance Strategy Center and Corporate Governance Research Institute, added, "Sejong will provide integrated legal advice on corporate governance, including director appointments, board composition and operation, shareholder rights responses, corporate value enhancement, and governance improvements, to help companies effectively respond to increasing legal and regulatory demands and heightened investor expectations. We plan to continuously enhance our related services to remain a trusted partner throughout the entire process of corporate board operations."
Meanwhile, the Corporate Governance Research Institute under Sejong's Corporate Governance Strategy Center collaborates closely with experts in corporate governance and management disputes, including Ah Hyoseop, Lee Dong-gun, and Lee Sook-mi, to provide legal services covering the entire spectrum of corporate governance, including director candidate qualification verification, shareholder return and IR strategy development, corporate value enhancement planning and related disclosures, major shareholder succession strategy advice, board operation modernization, and executive compensation policy formulation.
Sejong Law Firm, established in 1983, is one of Korea's leading large law firms, providing optimized legal services to corporate and individual clients across various fields, including M&A, finance, litigation, tax, intellectual property, and labor, with a team of approximately 700 experts.
* This article has been translated by AI.
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