Samsung Group has created the positions of senior outside directors, granted as much authority as the chairs of boards of directors, for the first time in its history. The move is aimed at strengthening the role of external directors and indicates its new step toward board-centered, transparent management.
On Thursday, Samsung SDI Co. and Samsung SDS Co. appointed their first-ever senior outside directors at board of director meetings.
They will perform check-and-balance roles at the group subsidiaries, where the CEO or inside director leads the board of directors.
Kwon Oh-Kyung, a chair professor in the Department of Electronic Engineering at Hanyang University and Shin Hyun-Han, a professor of Yonsei University School of Business, were named as the first senior outside directors of Samsung SDI and Samsung SDS, respectively.
They are granted the authority to request reports on major issues from management and convene outside directors’ meetings.
Samsung became the first non-financial services group to adopt the system of senior outside directors.
In 2018, SK Hynix Inc. voluntarily introduced the system, but no more runs it, without giving a reason.
TWO-TRACK APPROACH
Samsung Group is taking a two-track approach to bolster the role of outside directors, under which its subsidiaries, which have outside directors as chair of their boards of directors, do not necessarily need to appoint senior outside directors.
But if the chief executives or inside director chair their boards, they are obliged to hire senior outside directors.
Given this, Samsung Electronics Co., Samsung Electro-Mechanics Co., Samsung Life Insurance Co., and Samsung C&T Corp. are not subject to the senior outside director system because their boards of directors are headed by outside directors.
SAMSUNG ELECTRONICS
In March 2018, the world’s largest memory chip maker separated the positions of CEO and chairman of the board. In February 2020, it appointed an outside director to lead its board of directors.
The move is expected to serve as a new standard for management transparency for other South Korean companies.
In the US, 68% of companies have hired senior outside directors. By comparison, only 5% of South Korean companies have adopted the senior outside director system.
A Samsung official said the appointment of senior outside directors for both Samsung SDI and Samsung SDS was a voluntary move to enhance their internal checks and balances of management, regardless of legal obligations.
Write to Jeong-Soo Hwang at hjs@hankyung.com
Yeonhee Kim edited this article
