South Korea Advances Corporate Governance Reforms and Oversight of Financial Cooperatives
12 Mar 2026
South Korea Advances Corporate Governance Reforms and Oversight of Financial Cooperatives
In 2025, South Korea introduced several reforms aimed at strengthening corporate governance, improving transparency, and protecting minority shareholders. The updates focus on limiting the power of dominant shareholders, increasing board accountability, and modernizing how companies and cooperative financial institutions are supervised.
Limiting the Power of Large Shareholders
One of the most significant reforms expanded the so-called “3% rule.” Under this rule, when shareholders vote to elect members of a company’s audit committee, the voting power of any single large shareholder and their related parties is capped at 3%, regardless of how many shares they own. The goal is to prevent controlling shareholders from dominating audit committees and to give minority investors more influence in oversight decisions.
Additional reforms require some audit committee members to be elected through separate votes and introduce stronger shareholder voting systems, such as cumulative voting, which allows smaller shareholders to concentrate votes on specific candidates. These changes are intended to increase board independence and transparency in major companies.
Directors’ Duties to All Shareholders
Another key change clarified that corporate directors must act in the best interests of all shareholders, rather than only those who nominated them. This reform is designed to address long-standing concerns about governance practices in large family-controlled conglomerates, often referred to as chaebol.
The new rules are part of broader efforts to improve corporate governance and reduce what investors call the “Korea discount,” a phenomenon where South Korean companies trade at lower valuations due to concerns about transparency and shareholder protections.
Modernizing Shareholder Participation
Reforms also introduced new rules allowing electronic or remote shareholder meetings, making it easier for investors to participate in company decisions. These digital meeting options aim to increase accessibility and transparency for shareholders who may not be able to attend meetings in person.
Oversight of Financial Cooperatives
At the same time, the government has been reviewing supervision of large cooperative financial institutions. One proposal would transfer oversight of the MG Community Credit Cooperatives from the Ministry of the Interior and Safety to the Financial Services Commission. The change is being considered after concerns about rising loan defaults and financial misconduct within the sector.
Supporters of the shift argue that placing the organization under the national financial regulator could strengthen supervision and improve stability in the cooperative financial system.
A Broader Push for Economic Transparency
Overall, South Korea’s 2025 governance reforms reflect a broader effort to modernize the country’s financial system and corporate structure. By strengthening shareholder rights, increasing oversight, and improving transparency, policymakers hope to make companies more accountable while attracting greater international investment.
References
Reuters. South Korea parliament passes amended bill to target low equity valuations.
Reuters is a global news organization known for reporting on international business, policy, and economic developments. The Asian Corporate Governance Association researches corporate governance practices across Asia, focusing on transparency, investor rights, and regulatory reform.
