The number of female executives in listed companies is rapidly increasing, but there are still 1,431 companies that don’t have a single female director. This accounts for 63.7% of all 2,246 listed companies. In other words, in more than six out of ten listed companies in South Korea, women can’t even dream of becoming an executive. The remaining 815 companies (36.3%) had both men and women on their boards with at least one or more female executives. There was no company that did not have a male executive. In reality, male executives were the “default.” There were only eight gender-equal companies with women accounting for 50% or more of the board.

Companies with assets of 2 trillion won or more will be subject to Article 165-20 of the Financial Investment Services and Capital Markets Act next year, and 118 (77.6%) of all 152 companies have appointed a female director. In particular, 85 (55.9%) of the 152 companies appointed one or more women as a registered director, so more than half of the companies subject to the legislation have met the legal standard. The revised Capital Markets Act, which the National Assembly passed last year, is referred to as the “bill to break the glass ceiling.” The newly included Article 165-20 on gender-related exceptions concerning the board of directors bans listed companies with more than 2 trillion won in assets from forming a board of directors consisting of only a certain gender. So at least one woman has to sit on the board of directors. There is still a year left before the new bill is enforced, and there are no penalties for violations, but companies are quickly abiding by the regulation. The number of women appointed as registered directors surged three-fold from 31 in 2019, before the legislation passed, to 97 this year. The policy had a strong impact.

But a closer look into the individual companies show that we still have a long way to go. In the latest survey by the Ministry of Gender Equality and Family, Samsung Electronics had the most female executives with sixty on its board, but women only accounted for 5.6% of the company’s executives. Among the top twenty companies in terms of the number of female directors, only three--Daekyo (9, 34.6%), LF (11, 31.4%), and Hanmi Pharmaceutical Co. (13, 26.0%)--had more than the OECD average of female executives (25.6%). Among companies with more than 2 trillion won in assets, Kakao was the only company that surpassed the OECD average of female executives, with two women (28.6%) among seven executives.

■ A Year Before the Enforcement of the Capital Markets Act: The Starting Line for Change in Organizational Culture

The amendment of the Capital Markets Act will be enforced in August 2022, allowing South Korean society to take its first step towards breaking the glass ceiling. The discourse on the amendment of the Capital Markets Act started last year from the proportion of female executives, which remained at the 2% level and was inappropriate for a country with an economy that ranked in the world’s top ten. Women Corporate Directors (WCD) called for change describing the situation in advanced countries, where women aimed to occupy 50% of the board, and both ruling and opposition lawmakers of the parliamentary National Policy Committee, which oversaw this issue, agreed. However, the legislation process was not smooth sailing. The first proposal mandated companies to appoint women for at least a third of its board of directors, but due to practicality, a third was reduced to one woman on the board, and companies subject to the new bill was also reduced to companies with total assets of 2 trillion won or more. The article, which was revised to a recommendation for fear of putting an excessive burden on companies, was finally passed after it was modified again into a mandate with a two-year grace period.

“It motivated female workers with no role model in the company to look up to.” “It created the possibility of meeting a female executive no matter which company you joined.” These were some of the messages welcoming the bill when it was passed. Lee Bok-sil, chairperson of the Korean chapter of the Women Corporate Directors, who worked harder than anyone else to pass the bill, said, “Rather than focus on the number of female directors, we hope to see the spread of a gender-equal organizational culture or corporate culture and hope gender equality, along with corporate performance, leads to win-win results beneficial to both men and women.” Yoon Jeong-koo, a professor of business administration at Ewha Womans University, who conducted a survey on the establishment of human and cultural pipelines in the top 50 Korean companies based on their brand power, argued that how the company accepted female executives was more important than the existence of female executives.

Professor Yoon claimed that a review of several domestic and overseas studies on female executives and corporate performance showed a mix of positive and negative results. In the case studies, what was crucial in the company’s actual performance was the company’s awareness that diversity was beneficial to the company rather than the existence of female executives itself. Yoon said, “The company has to provide specific measures to maximize the capabilities of women and create a win-win situation,” and suggested creating a pipeline for the growth of female executives. A pipeline refers to the company’s culture and efforts to actively foster female executives. In other words, appointing female executives alone does not guarantee successful results.

■ Like Eco-friendly companies, Female-friendly and Gender-equal Companies Are Now the New Standard

Last January, the global investment bank, Goldman Sachs announced that it would not take a company public without diversity on its board beginning July 1, and specified that the focus of diversity was on women. Nasdaq submitted a proposal to the U.S. Securities and Exchange Commission making it mandatory for listed companies to include at least one woman and one ethnic minority or sexual minority on their board. In the future, all Nasdaq companies will have to disclose the figures on the diversity of their board. Companies that fail to meet the diversity requirement must explain the reason if they are to avoid being removed from Nasdaq. The United Arab Emirates, which is the financial hub of the Middle East, also enforced an article mandating all listed companies to appoint at least one woman on their board. These were some of the news reported by the foreign press in the last few months. Earlier in 2018, BlackRock, the world’s largest asset management company declared that it would not invest in companies with fewer than two female directors.

South Korea only recently revised the Capital Markets Act and focused on female representation in companies, but the world had sought various measures to increase diversity in corporate boards since the early 2000s. In 2000, Denmark began filling 30% of the boards of state-owned enterprises with women. As for private companies, in 2003, Norway introduced a mandatory quota of at least 40% for female directors in listed companies. The European Union (EU) is demanding member states to meet expectations for women to account for 30-40% of the corporate board. Germany, where the gender gap is relatively wide compared to other European countries, also decided to introduce a quota for female executives at the end of last year after more than ten years of discussions. Listed companies with three or more directors on the board and with 2,000 or more employees must have women fill at least a third of its executive positions. The United States also established the Alliance for Board Diversity (ABD), and the state of California passed a legislation requiring listed companies to appoint female directors. Israel, India and the Canadian state of Quebec also stipulates a quota for female executives in law.

The reason companies are emphasizing diversity in their board of directors is because of an awareness that diversity is essential for corporate innovation and growth. A series of studies also showed that the existence of female executives had an impact on the actual performance of the company. According to a report released by the consulting firm, McKinsey, companies in the top 25% in terms of gender diversity in its management were 25% more likely to reap in above-average profits than those in the bottom 25%. A study of 170 listed domestic companies by the Korean Women’s Development Institute also showed that during five years, the return on shareholders’ equity ratio was on average more than twice as high in companies where the number of female managers increased than in comparison companies. In the 2019 Report: Womenomics 5.0, Goldman Sachs said it expected South Korea’s GDP to increase 14.4% if equal participation of men and women was achieved in the South Korean labor market.

Recently, the atmosphere is calling for ESG responsible management. ESG stands for environmental, social, and governance. And the appointment of female board members is influencing decisions by consumers and investors as well as the actual performance of the company. Investors now regard female directors as an important factor in investment decisions, and more state pensions and funds are voting against companies without female directors and announcing more investment in companies with more women participating in management.

Lee Eun-hyung, a professor of business administration at Kookmin University said, “There are some who see the Capital Markets Act amendment as a bill that is considerate to women, but it is definitely not so.” She further assessed, “Diversity, independence, and expertise are vital to the board of directors, and this is a measure to improve diversity, which we absolutely lack in an excessively lopsided reality.”