Even though Korea accepted American shareholder capitalism, Korea transformed it into owner capitalism in which major shareholders own a company and a special management structure 'jaebol' unique to Korean companies appeared. Representative director system played a significant role in Korean economic development, but, as Korean market opened its door to the world major, the weakness of its structure was revealed and the absence of monitoring function of management affairs due to owner management led to moral laxity of managers, causing transparency in corporate management to disappear.
Under this circumstance, Korea had an IMF financial crisis in 1997, which required Korea to revise law relating to corporate governance by international standards from international financial institutions such as IMF and IBRD. Accordingly, Korean commercial law introduced American independent board system and audit committee system in 1998 and 1999 respectively in order to strengthen monitoring functions and transparency of companies. Even though these systems were introduced to magnify supervisory functions on management function institution, they did not maintain restraint ability on management since executive officer system was not introduced. Moreover, companies tended to avoid independent board system, and thus most major listed companies finally led to generations of non-registered executive officers.
However, it was recognized as problematic that non-registered executive officers did not have any clear legal position due to absence of any legal bases in commercial law and thus they just had authority but did not have any responsibility in transactions. In response to the need for guaranteeing their legal status, authority, and responsibilities, executive officer system was introduced as an alternative to the existing board of directors and CEO. Since it was defined as non-mandatory provision in commercial law, both existing board of directors and CEO system and board of directors and executive officer system could be in effect.
The fundamental purpose of this executive officer system introduction lies in magnifying efficiency of management and supervision by way of separating business execution(executive officers) and supervision(board of directors), and in encouraging sound corporate culture along with globalization of corporate economy.
Executive officer system in America refers to the system in which business execution officers are separated from board of directors and are recognized as a separate company department. The purpose in to grant executive officers legal status and responsibility and to strengthen supervisory function of board of directors which consist of non-executive officers and have higher independence.
American executive officer system is a result of accepting corporate governance structure in reality as a legal system, but Korean executive officers are introduced with the specific purpose of improving corporate governance structure. Based on the discussions on whether the introduction of executive officer system can contribute to such purpose, this thesis examines a commercial law which introduced executive officer system, and compares it with American and Japanese executive officer system.
The grounds of views acknowledging the need for executive officer system are that business execution and supervisory function should be separated to strengthen supervisory function of board of directors, and that status and responsibility of executive officers who are separated from board of directors should be clear. Thus, the thesis reviews whether executive officer system is suitable for the purpose of strengthening supervisory function of board of directors and efficient management of managers.
As a result of review, discussions can be summarized as follows. First, even though supervisory function of board of directors is important, final authority of board of directors for business execution cannot be excluded. Board of directors is a part of management process and performs decision-making, business consulting, supervision, and management control functions in an integrated way. In order for these functions to perform organically, the structure and atmosphere in which board of directors can be separated from management and get sufficient and objective information on management are needed. However, it should be considered that if executive functions of board of directors are separated, board of directors can get structural and formal independence but have difficulty getting information needed for understanding company and performing their job. Second, legal status of executive officers should be judged realistically, regardless of whether they are registered or not. Registration of executive officers is just about formal acknowledgement of whether they are executive officers or not. Since degree of who is qualified for registration is not clear, it is likely that some of them are registered. In that case, responsibilities of other non-registered officers are unclear. Making executive officers responsible independently is buck-passing of board of directors' responsibilities. Along with these discussions, characteristics of owning structure Korean conglomerate should be considered.
Since corporate governance structure is naturally adjusted to company's decision and changes in owning structure, it can be redeemed desirable that a commercial law permits companies to introduce executive officer system selectively. Also, considering that executive officers have more authorities than board of directors who is responsible for supervision, it is natural that executive officers take responsibilities, and evaluation and wages of executive officers be reorganized.
Executive officer system is a means to separate business execution and supervision, and its final purpose is to improve management achievements by making business execution more efficient. However, opinions on whether commercial law is faithful to this purpose or not can vary from scholars to scholars. Nevertheless, acknowledging company's autonomy in introducing executive officer system, emphasizing efficiency of business execution out of many functions of executive officers, and trying to establish executive officer system successfully should be highly esteemed.