[비즈한국] This year's regular general shareholder meeting season faces more than just treasury stock issues. The agenda item for approving director compensation limits has also emerged as a new burden for companies. Since the Supreme Court ruled in April of last year in the Namyang Dairy003920 case that it is illegal for Hong Won-sik, the former chairman who was both a major shareholder and a director, to exercise voting rights on the approval of his own director compensation limit, this year marks the first season where this ruling is being fully reflected in actual shareholder meeting practices.
Previously, there was a strong perception that conflicts of interest only arose when determining the specific compensation for individual directors, but now, the voting rights of director-shareholders can be restricted even on agenda items setting the total compensation limit for all directors.
Article 388 of the Commercial Act stipulates that if the articles of incorporation do not specify amounts, director compensation must be determined by a general meeting resolution, while Article 368, Paragraph 3 stipulates that those with a special interest in a resolution cannot exercise their voting rights. In the Namyang Dairy case, the court combined these two clauses to rule that agenda items setting the "limit" for director compensation are also directly linked to the individual director's economic interests, thus constituting a special interest. This interpretation was finalized when the Supreme Court dismissed the appeal on April 25, 2025, effectively changing long-standing business practices.
The problem is the quorum. Under the Commercial Act, a general resolution requires a majority of shareholders present and at least one-quarter of the total issued shares. However, if the major shareholder is a director in a compensation limit agenda, those shares may be excluded from the vote calculation. Consequently, the company must exceed the 25% threshold using only the shares held by specially related persons and votes in favor by general shareholders.
According to an analysis by the Korea Listed Companies Association, out of 1,104 listed companies where the major shareholder serves as a director, only 332 can meet this requirement solely with shares from specially related persons, while the remaining 772 companies cannot guarantee the passage of the agenda without separate persuasion of shareholders. This accounts for 32% of all 2,410 listed companies.
SK034730 is considered a representative case. For SK Co., Ltd., Chairman Chey Tae-won's voting stake is 23.8% (excluding treasury stocks), but the stake held by specially related persons among the circulating shares, excluding his own, is only 13.3%. This means that to meet the 25% quorum without the Chairman's own votes, additional consent from general shareholders must be secured. This is why even owner-led companies with high stakes cannot rest easy. Even if a major shareholder's stake is large, if that shareholder cannot exercise voting rights on director compensation agenda items, the approval process turns into a completely different kind of vote tally than before.
Until now, domestic listed companies have used a method where the total director compensation limit passes relatively easily at the general meeting, with the actual distribution left to the board of directors. However, after the Namyang Dairy ruling, the very structure in which owners or CEOs pass their own salary systems could be shaken. Ultimately, companies must provide more concrete criteria for compensation calculation and secure proxy votes from institutional investors or minority shareholders. Yulchon LLC pointed out, "The Namyang Dairy ruling directly contradicts existing practices, and a major ripple effect is expected."