“THE REPRESENTATIVE DIRECTOR IN KOREAN COMPANIES”

More often than not, foreign investors are puzzled by the corporate title of a Representative Director found in many Korean companies.

Simply put, the Representative Director is the highest position in a stock company incorporated under the laws of Korea; which is why it is often compared to a CEO. However, there is a significant difference between the two positions, and that difference is why at times foreign-investor board members find the Representative Director to be insubordinate while the Representative Director finds such board members to be infringing the Representative Director’s power to execute affairs.

The difference is as follows: whereas the CEO is a position hired under an employment contract pursuant to which the CEO generally reports to, and operates under the supervision of, the board of directors (“BoD”), the Representative Director is elected among the directors to represent the company with the authority to conduct all business affairs of the company. The Commercial Act of Korea, art. 209, art. 389 (2020).

It would be safe to say that a Representative Director has much greater discretion in terms of corporate management compared to a CEO since a CEO is under the close supervision of the BoD while the Representative Director is a voting member of the BoD and usually runs it as chairperson.

This is because the Representative Director is a post that only a director may hold in addition to being a director. Accordingly, a director remains a director regardless of whether he/she has been elected as, or removed from the position of, the Representative Director.

All in all, it is advised that foreign investors fully consider the above and its ramifications when incorporating or investing in companies in Korea. A non-resident foreigner may well become the Representative Director of a company, or one may as well appoint someone locally to the position. If the latter, make sure that there is mutual trust built among those involved and that everyone shares a clear understanding of the direction towards which the company is heading.