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Korea FSC Proposes New Rules to Improve Corporate Disclosures

2025.12.15

<span style="font-size:18px;"><span style="color:#c0392b;"><strong>Introduction</strong></span></span>
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<span style="font-size:18px;">On November 17, 2025, the Korea Financial Services Commission (FSC), the Korea Financial Supervisory Service (FSS), and the Korea Exchange (KRX) released a policy package to improve English-language disclosures, increase transparency around annual general meetings (AGMs), and enhance clarity in executive compensation reporting.  These measures respond to long-standing concerns from global investors who consider Korea’s disclosure regime procedurally sound but difficult to navigate due to language barriers and limited detail in areas relevant to governance evaluations.  For investors with Korean equity exposure, the reforms are expected to ease information monitoring, refine proxy-voting analysis, and reduce practical barriers to stewardship and due diligence.  </span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>1. Expansion of English Disclosure Regulations</strong></span></span>

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<span style="font-size:18px;">Foreign investors have historically lacked timely, comprehensive English disclosures.  Korea’s DART system<sup><span style="color:#c0392b;">1)</span></sup> is almost entirely in Korean, forcing non-Korean speakers to rely on secondary sources, unofficial translations, or local intermediaries when monitoring corporate developments.<br />
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The mandatory English disclosures will be implemented through a multi-phase roadmap.  Phase I, which began in 2024, established the initial regulatory framework.  Phase II, effective from May 1, 2026, will expand these obligations to all KOSPI-listed companies with assets of KRW 2 trillion or more.  Phase III will complete the full market-wide implementation.  Under Phase II, covered issuers must provide English translations for all disclosure categories under the KRX rules, including material business events, governance developments, fair disclosures, and inquiry-based disclosures.<sup><span style="color:#c0392b;">2)</span></sup>  Timing standards will also be tightened: companies with assets of KRW 10 trillion or more must provide English disclosures on the same day as their Korean filings, while companies with assets between KRW 2 trillion and KRW 10 trillion will have up to three business days.  The scope of mandatory English disclosure is expected to expand market-wide by 2028.<br />
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In parallel, the KRX will expand its translation support program, and an AI-based glossary will be developed to standardize terminology across industries.  The FSS also plans to introduce an English-language version of DART, addressing a consistent request from foreign institutions for more accessible and authoritative translations.  Collectively, these steps should substantially narrow the information gap faced by foreign investors, especially in time-sensitive governance or event-driven situations.</span><br />
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<table cellpadding="8px" style="width:100%; text-align:center; border:1px solid #bbb; border-collapse:collapse;" width="100%">
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			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: top;" width="25%"><span style="font-size:16px;"><strong>Phase</strong></span></td>
			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: top;" width="25%"><span style="font-size:16px;"><strong>Coverage Threshold</strong></span></td>
			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: top;" width="25%"><span style="font-size:16px;"><strong>Requirements</strong></span></td>
			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: top;" width="25%"><span style="font-size:16px;"><strong>Timeline</strong></span></td>
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			<div style="line-height: 25px; font-size: 15px">Phase I (2024)</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">KRW 10T or more</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">26 material items</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Within 3 business days</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Phase II (2026)</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">KRW 2T or more</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">All 55 items + fair + inquiry disclosures</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">10T or more: Same-day<br />
			2T or more: 3 days</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Phase III (2028)</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">All KOSPI companies</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Full English disclosure</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">To be announced</div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>2. Enhanced Annual General Meeting Transparency</strong></span></span>

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<span style="font-size:18px;">Foreign investors have long struggled with an AGM information gap.  Although approval outcomes are disclosed, the absence of vote percentages has made it difficult to measure shareholder sentiment, evaluate dissident influence, or assess board support levels.  This limitation has hindered proxy voting analysis, especially for global managers who use quantitative governance models or stewardship frameworks aligned with OECD standards.<br />
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Beginning with the March 2026 AGM season, Korean listed companies must disclose voting results in full detail.  For each agenda item, companies will report the percentage of votes in favor, against, and abstaining, published via KRX ad hoc disclosures on the day of the meeting.  Annual business reports will also include these results and the number of shares corresponding to each category.  This will allow proxy advisors and institutional investors to incorporate more granular data, identify resolutions with weak support, and detect emerging governance tensions.  It will also enable more informed stewardship engagement, particularly for global managers applying “comply or explain” codes across jurisdictions.<br />
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Another challenge for foreign investors has been the clustering of AGMs in late March, when most Korean companies hold their meetings.  This concentration makes it difficult for foreign investors to cast informed votes or track developments across portfolios with reasonable time.  The new incentive-based approach of rewarding companies that revise record-date provisions to shift AGMs into April is intended to gradually reduce this congestion.  If widely adopted, it is expected to ease operational pressures during voting season and give foreign shareholders more time to review proposals, engage with investor relations teams, and exercise their rights.</span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>3. Executive Compensation Transparency</strong></span></span>

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<span style="font-size:18px;">Executive compensation disclosures have also posed interpretive challenges.  Korean filings often present compensation information without sufficient context, making it difficult to assess how remuneration aligns with company performance, shareholder returns, or peer competitiveness.<br />
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The reforms introduce several structural improvements addressing such issues.  Companies will be required to present total shareholder return (TSR) and operating profit for the prior three years alongside compensation tables for executives and the five highest-paid individuals.  This places performance outcomes and compensation decisions in the same analytical frame, allowing foreign investors to evaluate whether pay practices align with results.<br />
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Additionally, stock-based compensation will no longer be disclosed in fragments.  All forms of stock-linked remuneration, including restricted stock, performance shares, and other equity-based grants must be consolidated in the executive compensation disclosure.<sup><span style="color:#c0392b;">3)</span></sup>  Unvested equity awards must be reported at their cash-equivalent value, not merely in share counts.  This should provide a more accurate measure of economic value and address concerns that the true scale of stock-based compensation is understated. </span><br />
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<table cellpadding="8px" style="width:100%; text-align:center; border:1px solid #bbb; border-collapse:collapse;" width="100%">
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			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: top;" width="33%"><span style="font-size:16px;"><strong>Category</strong></span></td>
			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: top;" width="33%"><span style="font-size:16px;"><strong>Before Reform</strong></span></td>
			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: top;" width="33%"><span style="font-size:16px;"><strong>After Reform</strong></span></td>
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			<div style="line-height: 25px; font-size: 15px">Performance linkage</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Not required</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px;">
			<div style="line-height: 25px; font-size: 15px">3-year TSR + operating profit disclosed side-by-side</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Stock-based awards</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Fragmented; inconsistent</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Consolidated into a single disclosure framework</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Unvested awards</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Disclosed only as share counts</div>
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			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px;">
			<div style="line-height: 25px; font-size: 15px">Cash-equivalent valuation required</div>
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<div><span style="font-size:18px;">For foreign investors, these updates move Korea closer to pay-versus-performance standards seen in the United States and to remuneration transparency practices common in Europe.  They also provide clearer metrics for engagement on compensation governance.<sup><span style="color:#c0392b;">4)</span></sup><sup><span style="color:#c0392b;"> 5)</span></sup></span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>4. What Foreign Investors Should Expect</strong></span></span>

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<span style="font-size:18px;">The FSC will introduce regulatory amendments to implement these reforms, with the public comment period it had opened from November 17, 2025 to December 8, 2025.  Final rules are expected to take effect in the first half of 2026, with the KRX issuing corresponding updates to its KOSPI disclosure rules.<br />
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During this transition, foreign investors should anticipate a transitional period during which compliance quality varies by issuer.  Large-cap companies with established translation functions are likely to adjust quickly, while some mid-cap companies may experience early operational strain. </span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>Conclusion</strong></span></span>

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<span style="font-size:18px;">Korea’s reforms represent a significant recalibration of its capital markets infrastructure.  By expanding English disclosures, mandating detailed AGM vote reporting, and improving the clarity of executive compensation disclosures, regulators are responding directly to issues that foreign investors have long identified as impediments to market accessibility.  For foreign investors, the result should be more reliable information, more meaningful governance oversight, and fewer procedural disadvantages relative to domestic investors.  As these reforms take hold, Korea is positioned to strengthen its standing as a transparent, investable, and globally integrated market.  Given the evolving regulatory landscape, companies and investors should consult qualified legal professionals to ensure full compliance with the updated requirements and their implications. </span></div>

<hr align="left" background-color="#cc0000" size="1" width="33%" />
<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">1) </span><strong>DART (Data Analysis, Retrieval and Transfer System)</strong>: Refers to the electronic disclosure system operated by the Financial Supervisory Service in Korea. The platform provides online access to disclosure documents submitted by listed companies and financial institutions, allowing investors and the public to view financial statements, business reports, audit reports, and more.</div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">2) </span><strong>Inquiry-based disclosures</strong>: A disclosure triggered when the KRX requests clarification or confirms unusual market activity.</div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">3) </span><strong>Restricted stock</strong>: Equity awards granted to executives or employees that vest over time based on continued employment, regardless of whether specific performance targets are met.</div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">4) </span>Ius Laboris, Executive Pay and the Challenges for Boards of Directors (Jan. 28, 2021).</div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">5) </span>Greenberg Traurig LLP, SEC’s Pay vs. Performance Rule Requires Disclosure of Relationship Between Executive Officer Compensation, Company Performance (Feb. 17, 2023).</div>
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