Recent trends in global governance are rapidly shifting from a focus on 'who' is on the board of directors to 'how' the board operates effectively. In the past, the composition of the board was a primary concern, but now the emphasis is on how the board functions and contributes to corporate strategy and long-term value creation.
South Korea is undergoing a similar transformation. Starting in 2026, all listed companies on the securities market will be required to disclose corporate governance reports, necessitating that companies explain not only their board composition but also their operational practices to the market and investors.
So, how is board capability developed? Many companies seek answers by appointing directors with expertise. They make significant efforts to recruit experts from various fields, including industry, policy and regulation, academia, and finance, to enhance their boards. Selecting the right experts for corporate strategy is undoubtedly important.
However, appointing outside directors does not complete the board's capability. The appointment is just the beginning. A strong board is not formed solely through appointments. The effectiveness of a board is determined by how it operates and evolves after appointments.
Over the past two decades, I have supported CEOs and the appointment of outside directors for domestic and international companies, and I have recently engaged in discussions about board operations across various firms. Each company faces different challenges. Some are concerned about securing candidates for audit committees, while others focus on training newly appointed directors or seek advice on how to conduct board evaluations.
While the visible challenges differ, one fact has been consistently confirmed in practice: appointments, training, and evaluations are conducted separately and do not connect into a cohesive operational system. Few companies have established a virtuous cycle where necessary capabilities lead to subsequent appointments, and training and evaluation results are reflected back into board operations.
In a changing business environment, boards must continuously assess and develop the necessary capabilities. The spread of AI technology, geopolitical risks, supply chain restructuring, and shifts in industry boundaries are rapidly altering the agendas that boards must address. Relying solely on expertise once acquired is insufficient to respond to these changes. It is essential to enhance understanding of the company and industry post-appointment, continuously supplement expertise needed for the evolving environment, and reflect the results back into future appointments and operations.
Board capability does not arise merely from appointing numerous qualified directors. It is realized when diverse expertise and experiences are connected under a unified corporate strategy, fostering questions and discussions from various perspectives that lead to better decision-making. Ultimately, what matters is not the individual expertise of each director, but how that expertise is integrated within the board to inform decision-making.
The operational system I advocate for boards is precisely about this. It is not about creating new systems but defining the capabilities necessary for corporate strategy, appointing suitable directors, and continuously developing those capabilities through training and evaluation, thereby creating a virtuous cycle that connects back to future appointments and operations. When appointments, training, and evaluations flow as a single process, the board can evolve from being an organization reliant on individual experiences to a decision-making body that continuously learns and grows.
The expansion of corporate governance report disclosures signifies the same direction. The market is no longer focused solely on who is on the board but is also examining the principles and systems governing its operations. In the future, companies must explain not how many directors with impressive credentials they have, but whether they have the operational foundation to translate that expertise into actual decision-making.
A good board is not created by chance. It is formed when necessary capabilities are designed, suitable directors are appointed, and those capabilities are continuously developed through training and evaluation. Now, the focus of our companies should expand from 'who is on the board' to 'how to continuously develop board capabilities.'
* This article has been translated by AI.
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