* This is a re-proposed bill of the partially revised legislation on the Act on Corporate Governance of Financial Companies that was submitted to the National Assembly in September 2018 (Government draft, repealed by the expiration the 20th National Assembly).

(This is the same legislation as Bill No. 2018-240)

(1) Reasons for Proposal

This amendment aims to improve the fairness of the appointment procedures for executives, including preventing a member of the committee for recommendation of candidates for executive officers from attending to a resolution of the committee to recommend the member himself/herself as a candidate for an executive officer; strengthen the independence and duty commitment of the auditor and audit committee members, including stipulating the term of office of audit committee members for two years or more; reinforce the remuneration transparency of executives and employees of financial companies by requesting the disclosure of the total amount of remuneration and the total amount of bonus for each executive who receives a certain amount of remuneration or bonus, and the calculation standards and methods of the amount of remuneration or bonus; and otherwise improve and complement some of the weaknesses that have emerged from the operation of the current system.

(2) Major Provisions

A. Limit the influence of the representative director, etc., to the committee for recommendation of candidates for executive officers (Article 17 (2) and (5) and Article 17 (6) newly inserted) 

Require that more than two-thirds of the members of the committee for recommendation of candidates for executive officers are composed of outside directors in the process of recommending key executives of financial companies; prohibit a member of the committee for recommendation of candidates for executive officers from attending and voting a resolution of the committee to recommend the member himself/herself as a candidate for an executive officer; and prohibit the representative director from attending and voting a resolution of the committee for recommendation of candidates for executive officers to recommend a candidate for an audit committee member or an outside director.

B. Strengthen the independence and duty commitment of the auditor and audit committee members (Article 19 (10), Article 19 (11), and the latter part of Article 20 (2) and Article 20 (3), (4), and (7) newly inserted) 

1) Stipulate the term of office of audit committee members for two years or more to ensure the independence of the auditor and audit committee members; prohibit any person who has served as an outside director, full-time auditor, or full-time audit committee member of a financial company for more than six years from becoming a full-time auditor or full-time audit committee member of the same financial company; prohibit any audit committee member from serving as a member of committees other than the committee for recommendation of candidates for executive officers and the remuneration committee.

2) For financial companies over a certain size, mandate the audit committee to appoint an internal audit officer who oversees the regular audit work of a financial company by assisting the audit committee through the resolution of the audit committee, and ensure that the internal audit officer maintains his/her duty independence from the management, equivalent to compliance officers.

C. Reinforce the remuneration transparency of executives and employees of financial companies (Article 22 (5) and Article 22 (6) and (7) newly inserted) 

Require disclosing the total amount of remuneration and the total amount of bonus for each executive who receives a certain amount of remuneration or bonus and the specific calculation standards and methods of the amount of remuneration or bonus through the annual report on remuneration payment, and require listed financial companies whose total assets are more than a certain size to explain the remuneration payment plan for individual executives to the general meeting of shareholders.

D. Clarify the obligation to comply with internal control standards and risk management standards (Article 24 (4), Article 27 (4), and attached Tables 25-2 and 29-2 newly inserted) 

Require representative directors and representative executive directors and the representatives, compliance officers, or risk managers of domestic branches of foreign financial companies to check compliance with internal control standards and risk management standards, and provide a basis for the Financial Services Commission to sanction those executives in cases where they neglect their management obligations, causing damage to multiple financial consumers.