Increased Corporate Transparency

IR on Track. Boost for Follow-up Efforts, Including Governance Restructuring

By Doje Park
Origianal link on: Herald Biz

Last autumn, I had the opportunity to talk to the chairman of Dong-A Pharmaceutical, Shin-Ho Kang, at the Westin Chosun Hotel. Although we mainly discussed serious matters, such as the corporate ownership disputes, I recall a particularly amusing expression from our conversation: “AA-EE-AA-RU.” Chairman Kang said, "I have run the company for all these years but never realised the need for AA-EE-AA-RU.” Then he added, “Now I realise how important AA-EE-AA-RU is and plan to keep it.” “AA-EE-AA-RU” is the Japanese pronunciation of “IR” or “investor relations.” He was referring to investor seminars.

He emphasised how the “AA-EE-AA-RU” efforts seemed to be producing results. As the ownership disputes were resolved, there were visible follow-up efforts to make corporate governance more transparent and create a rational governance structure.

On 31st January, Dong-A Pharmaceutical held an IR seminar for corporate investors. It was extremely unusual for the company to give a presentation on its previous year performance, as it was the first time the company had held a large-scale seminar for corporate investors at the start of a new year since 2000. The company had hosted official quarterly IR events before, but they were mostly for specific corporate investors, not all corporate investors. Chairman Kang's strong desire to keep his promise to put more emphasis on IR must have been behind it.

This year Dong-A Pharmaceutical plans to host overseas IR seminars as well as local corporate seminars. It held two overseas seminars to elicit investor support and plans to do so again.

While increasing corporate IR activities to improve transparency, the company is also making an increasingly evident effort to create a rational governance structure. The company recently formed an “Outside Boardmember Recommendation Advisory Committee” in order to allow outside board members to play a bigger role and improve corporate transparency. The Committee is expected to nominate objective and competent outside board member candidates at the upcoming general shareholders' meeting in March, and the recommended candidates will be selected by means of a shareholder vote.

In order to bring the corporate governance structure into line with global standards, Dong-A Pharmaceutical signed a contract with Sodali, a UK consultancy firm specialising in corporate governance for consultancy services. The company invited John C. Wilcox, the internationally renowned authority on corporate governance structure, to hold a workshop on global corporate governance structure standards for top management and executive officers. The efforts made by the company, and Chairman Kang, to create a rational corporate decision making system seem to be nicely on track.