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Legal Study on the Separate Election of the Audit Committee Members in Joint-stock Company

  • Legal Theory & Practice Review
  • Abbr : LTPR
  • 2022, 10(1), pp.111-134
  • Publisher : The Korea Society for Legal Theory and Practice Inc.
  • Research Area : Social Science > Law
  • Received : February 4, 2022
  • Accepted : February 23, 2022
  • Published : February 28, 2022

Shin,Jong-Seok 1

1배화여자대학교

Accredited

ABSTRACT

Since Asian Financial crisis in late 1997, changes and improvements in corporate governance have been required in terms of transparency in corporate management in Korea. The Audit Committee System was introduced in the revised Commercial Act 1999 to enhance transparency of enterprises, requiring to be installed if it is listed company with assets of more than 2 trillion won mandatorily. Audit Committee is a board of directors consisting of three or more directors, and the Audit Committee itself consists of directors related to major shareholders, making the selection of member audit committee a concern for Economic Democratization. The revised Commercial Act(effective from 2020.12.29.) requires listed companies with audit committees to appoint at least one director to act as an auditor at the general shareholders' meeting (clause 2 of Article 542-12). In the case of separate election of auditors, the voting rights of the largest shareholders, etc. were limited to 3% so that those representing by minority shareholders could become auditors. The purpose is enhancing a transparency of corporate governance by improving the decision-making structure of the Audit Committee. The separation election of audit committee members would be two-sided, so they have had difficulties on its enforcement. There was a strong backlash from the business community and some scholars, and there was a counterargument that it was an excessive regulation to each company, and that it would be a major obstacle to business operations as well. The separate election of auditors may help improve corporate transparency and Economic Democratization, but supplementary measures for legislation should be follow in consideration of the company's position. This paper would like to introduce opinions on legal issues such as the process of changing the audit system, the separation selection system for auditors, and the pros and cons of the separation election of auditors, and to suggest supplementary measures for amended Commercial Act of 2020.

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