Government Reviews Mandating Board and Shareholder Approval for Performance Bonuses Tied to Operating Profit

The government is considering a plan to mandate prior review by the board of directors and approval by shareholders for decisions on the scale of performance-based bonuses paid by companies.

Following recent instances of large performance bonuses being paid by some major corporations, demands have grown across various industries, including automotive and shipbuilding, for a portion of operating profits to be paid as performance bonuses, prompting the government to initiate institutional improvements.

Through these institutional improvements, the government hopes that shareholders will receive fair compensation and that labor-management conflicts related to performance bonuses can be resolved within a clear framework.

Amendments to the Commercial Act or the Capital Markets Act are being discussed as specific institutional improvement measures, and if legislative changes take time, there is also a possibility of pursuing them through revisions to the Enforcement Decree.

The government is prioritizing institutional improvements through amendments to the Commercial Act or the Capital Markets Act, and when drafting legislative proposals, detailed matters such as performance bonus payment criteria, scale calculation methods, and board and shareholder meeting resolution procedures will be stipulated.

These government moves are advancing towards enhancing corporate management transparency and protecting shareholder rights. They are expected to contribute to preventing internal and external conflicts within companies caused by the payment of high performance bonuses and fostering a stable management environment.