Following the launch of the holding company, LG Corp., LG Electronics operates under an advanced corporate governance structure that comprises a professional administrator and a Board of Directors. This structure helps us deploy more transparent, value-creating management activities that help increase corporate and shareholder value.
When LG Electronics removed the Circulating Investment Structure of its affiliated companies (through the launch of a holding company system), this enabled the holding company to take full charge of investments. Consequently, LG Electronics has been able to focus on its own businesses while increasing the overall value of the Company. This corporate governance structure has laid the groundwork for increasing managerial transparency. Through a responsible management system comprising of the CEO of LG Electronics and a Board of Directors, we are taking huge steps in strengthening our competitiveness at both the domestic and international level, in order to maximize corporate and shareholder value.
LG Electronics' Board of Directors maintains independence from its management and major shareholders. Currently, the Board has a total of seven directors, four of whom are outside directors. To ensure that external directors are appointed fairly and independently, the "External Director Recommendation Committee," comprised of one in-house director and one external director, nominates external directors following close examination of their qualifications. These outside directors are then voted on at the next shareholders' meeting.
The BOD is supported by three Board Committees. They are the Audit Committee, the Outside Director Candidate Recommendation Committee and the Management Committee. The Audit Committee consists of three Outside Directors, and is responsible for examining corporate financial records and accounting to ensure compliance with the accounting laws and transparency. The Management Committee reviews and determines the agendas delegated by the BOD and ordinary management activities. In 2010, the Management Committee reviewed a total of 52 agendas.
Compensation for the BOD members is made within regulations pertaining to BOD compensation that has been approved at the General Shareholder's Meeting. The evaluation of management and executives of LGE is held annually. Top management and executives are evaluated to determine whether they have set and achieved challenging goals, whether their job objectives composed of quantitative and non-quantitative factors were achieved, as well as their capability through fair and objective process, and appropriate compensation corresponding to the outcome of the evaluation is determined.
To ensure complete independence from the company’s management and major shareholders, the Audit Committee is composed of three outside directors. The Committee's role is to examine various financial reports and enhance managerial transparency and fairness as supervisors. In addition, the committee members approve the appointment of outside auditors only after careful review of the candidates' professionalism, independence, reputation, capability, ability to audit international businesses, as well as possibilities of conflict of interest associated with the Company.