[비즈한국] Boards of directors at large corporations are shrinking. With the implementation of the revised Commercial Act on September 10, which mandates cumulative voting and expands the separate election of audit committee members, many companies have moved to reduce the number of directors or lower the maximum number of directors stipulated in their articles of incorporation. While companies cite "operational efficiency of the board" as the reason, a smaller board could also narrow the opportunity for minority shareholder-backed candidates to enter the board through cumulative voting.
According to an analysis by the corporate research institute Leaders Index of 332 listed companies (out of the top 500 domestic firms) that allowed for a comparison between 2025 and 2026, the number of registered executives stood at 2,328 as of the end of August, a decrease of 46 (1.9%) from 2,374 the previous year. In contrast, the number of independent directors (formerly outside directors) increased by two, from 1,256 to 1,258, over the same period. The proportion of independent directors among all registered executives also rose from 52.9% to 54.0%.
Some companies have gone beyond simply not reappointing directors whose terms have expired, opting to amend their articles of incorporation to lower the maximum board size. In effect, the work of restructuring the boards in response to the revised Commercial Act, which takes effect on the 10th, began as early as the annual general shareholders' meetings last March.
From 9 to 5… LS Electric even amends its articles of incorporation
One of the most notable cases of board downsizing is LS Electric. The Leaders Index survey shows that the number of registered executives at LS Electric dropped from 9 last year to 5 this year.
LS Electric amended its articles of incorporation at the annual general shareholders' meeting held on March 26. The previous articles stipulated that the board should consist of "no less than 3 and no more than 9 directors," but changed this to "no less than 3 and no more than 5." The maximum number of directors was nearly halved. The stated purpose for the change, as disclosed by the company, was to "enhance the efficiency and professionalism of board operations." The term of office for directors was also changed from a uniform 3 years to "within 3 years, with the possibility of setting different terms for each director considering the expertise and diversity of the board composition."
At the same shareholders' meeting, LS Electric also deleted the clause excluding cumulative voting from its articles. This was a measure taken in accordance with the revised Commercial Act. From September 10, listed companies with total assets of 2 trillion won or more cannot exclude cumulative voting based on their articles when requested by shareholders meeting certain requirements. LS Electric also specified that the relevant article clause would take effect "when a shareholders' meeting for the election of directors is convened for the first time after September 10, 2026." The number of audit committee members subject to separate election was also increased from 1 to 2.
Celltrion is in a similar situation. Celltrion reduced its registered executives from 12 to 9 this year. At the same time, it lowered the maximum number of directors in its articles of incorporation from 15 to 9. The reason cited by Celltrion for the change was "board reorganization." It also deleted the existing clause that excluded the application of cumulative voting and increased the number of audit committee members subject to separate election from 1 to 2.
In fact, Korea Zinc saw the largest decrease in the number of directors, with registered executives falling from 19 to 14. However, since Korea Zinc has been locked in a long-term management dispute with Young Poong and MBK Partners, it is difficult to interpret the decrease solely as a response to the revised Commercial Act.
Board downsizing is not limited to a few companies. When Leaders Index analyzed the results of annual shareholders' meetings for 269 comparable listed companies among the top 50 groups in April, the total number of directors had fallen by 47, from 1,780 to 1,733. In particular, the number of executive directors dropped by 36, from 843 to 807, and the number of outside directors fell by 11, from 937 to 926 at the time.
By group, Kakao had the largest reduction at 14 people. Lotte followed with 13, Samsung with 9, LS with 7, Hanwha with 6, and Young Poong with 4. Hyundai Department Store, Mirae Asset, Hyosung, LX, and E-Land kept their number of outside directors the same while reducing only the number of executive directors.
Several companies also adjusted their director counts through amendments to their articles of incorporation. In the Leaders Index survey, 15 companies submitted related agenda items. Hyosung proposed such items at 5 affiliates, including Hyosung, Hyosung TNC, Hyosung Chemical, Hyosung Heavy Industries, and Hyosung Advanced Materials, while 4 companies in the LS Group—LS Electric, LS Networks, E1, and Yesco Holdings—also sought to adjust their director counts. Other companies included Hankook & Company, Hankook Tire & Technology, Hanjin KAL, GS Global, Lotte Chemical, and Celltrion. However, the proposal for amending the articles of incorporation was rejected at Hyosung Heavy Industries.
Data from the Korea Corporate Governance Forum’s analysis of this year's general shareholders' meeting notices also reveals specific changes. In addition to the aforementioned Celltrion and LS Electric, companies like Kakao (11 to 7), Lotte Chemical (11 to 9), Hankook Tire & Technology (15 to 11), and Hanjin KAL (11 to 9) submitted proposals to reduce their number of directors. HS Hyosung Advanced Materials and Hyosung TNC pushed to lower their limits from 16 to 7 and 16 to 9, respectively.
Does reducing the number of directors weaken the effect of cumulative voting?
The reason the downsizing of board size is attracting attention is due to the structure of cumulative voting.
In cumulative voting, shareholders are granted voting rights equal to the "number of shares held × number of directors to be elected" when electing two or more directors at once. For example, if 5 directors are being elected, a shareholder with 1 share is given 5 votes. Any shareholder can concentrate their voting rights on a specific candidate. While a controlling shareholder aiming to elect multiple directors must distribute their votes among multiple candidates, a minority shareholder can concentrate their votes on a single candidate they support, increasing the likelihood of securing a seat on the board compared to standard voting.
From September 10, listed companies with total assets of 2 trillion won or more cannot exclude cumulative voting based on their articles if requested by a shareholder who holds 1% or more of the total issued shares.
However, if the number of directors elected at one time decreases, the effect of cumulative voting also diminishes. By reducing the total number of directors and staggering their terms, companies can limit the number of directors being elected at a single shareholders' meeting. This is why lowering the maximum number of directors in the articles and staggering terms is being discussed as a response to the revised Commercial Act.
The Governance Strategy Center at law firm Sejong also analyzed this year's shareholders' meetings and concluded that many companies have chosen the strategy of adjusting the maximum number of directors in their articles and staggering terms to minimize the effect of cumulative voting and reduce the number of directors elected at once. In fact, many companies have changed their articles to change fixed 3-year terms to "within 3 years" or allow for different terms for each director.
Under the current Commercial Act, large listed companies with 2 trillion won or more in total assets must already have at least 3 independent directors (formerly outside directors), and they must constitute a majority of the total number of directors. Therefore, reducing the total board size does not lower the mandatory ratio of independent directors, but it could reduce the absolute number of independent directors required by law. If a board has 9 members, at least 5 independent directors are needed, but if the board has 5 members, the requirement can be met with 3.
For this reason, institutional investors and proxy advisory firms have generally expressed negative views on amending articles of incorporation to lower the maximum number of directors. Law firm Sejong explained that institutional investors generally opposed these agenda items this year, citing "potential limitations on board flexibility and infringement of shareholder rights." Concerns have also been raised that staggered terms, which distribute director tenures, could be used as a means to entrench the management's control.
However, downsizing the board itself is not illegal, nor is it immediately equivalent to evading the intent of the Commercial Act revision. Companies may need to adjust board size based on changes in scale or business structure, and they often present efficiency and professionalism as reasons for amending their articles. The purpose behind each company's decision to reduce its number of directors must be examined on a case-by-case basis.
Fewer directors, but more audit committee members
A point worth noting is that the number of audit committee members has increased, contrary to the overall board size.
According to the Leaders Index survey, the number of audit committee members at 332 listed companies increased by 9, from 917 last year to 926 this year. The number of companies that have established an audit committee increased by 2, from 274 to 276. DN Automotive and Daewoong Pharmaceutical each created a new audit committee composed of 3 members. Kyeryong Construction Industrial increased its committee members from 3 to 5, and Nongshim, Daelim Industrial (Daehan Oil), LS Cable & System, and Meritz Financial Group also added 1 member each.
This, too, is not unrelated to the revised Commercial Act. Since July 23, the so-called "3% rule" has been in effect, which limits voting rights to a combined total of 3% for the largest shareholder and specially related persons when electing or dismissing audit committee members. From September 10, the number of audit committee members who must be elected separately from other directors in large listed companies has increased from the existing minimum of 1 to 2.
For companies, increasing the number of audit committee members can also serve as a countermeasure. If a committee has 3 members and 2 are elected separately, they account for two-thirds of the total; however, if the committee has 5 members, their share drops to 40%. While the restriction on the major shareholder's voting rights regarding separately elected audit committee members does not disappear, they can reduce the weight these members hold within the audit committee.