Corporate Governance

Through transparent corporate governance, LG H&H tries to protect the BOD’s independence and our shareholders’ right. Since the launch of the LG Corp, holding company in 2003, we founded a transparent governance system, intensifying responsible management by professional managers. Additionally, we are maximizing managerial efficiency and enhancing corporate value by operating the BOD in an independent and specialized manner. Moreover, we collect the opinions of various stakeholders and actively reflect them in the way our business is operated.

Shareholder Composition

As of the end of December 2013, the total number of issued shares(including
preferred shares) was 17,717,894, The largest shareholder was LG Corp., which
held a 34% stake. At every annual general shareholder’s meeting the CEO
reports the company’s performance to shareholders and listens to their opinions
related to major decision making and other managerial issues.

The opinions submitted by shareholders are reflected on the overall management
after in-depth reviews of management and the BOD. Additionally, key management
issues related to investors’ profits are publicly announced via the electronic
disclosure system of the Financial Supervisory Service, Korea Stock Exchange
and the LG H&H’s homepage.

We are leading the maximization of business efficiency and shareholder value
by improving corporate governance through management specialists’ and independent
and professional board of directors (BOD) operations.

[ Common shares, as of December 2013 ]

Key Shareholders Foreigners 46%, LG Corp. 34%, Domestic Institutions and Individuals 14%, Treasury Stock  6%

BOD Composition and its Operation

The board directors of LG H&H is comprised of three internal directors and four external directors. Their independence from the largest shareholder and management is secured. When a shareholder suggests the selection of directors based on relevant regulations, the BOD can present the bill at the general shareholders’ meetings as long as it is legitimate.

However, when a director nominee has a special relationship with key shareholders, his/her qualification to be selected is limited. The outside directors play a critical role in the decision-making process for management such as providing valued opinions on basic policies on the company’s expertise in the economic, environmental and social areas. In addition, they monitor and check the company’s performance to enhance corporate value and improve stakeholders’ right.

Compensation for external and executive directors comprises an annual basic salary and incentives. The annual salary is determined within the maximum compensation for directors as approved by the shareholders’ meeting, while incentives depend on the company’s business performance. The BOD holds regular meetings according to the pre-set annual operations plan, and convenes temporary meetings whenever other key management issues urgently need to be discussed.

To prevent conflict of interests during the BOD’s resolutions, the voting rights of stakeholders with interests in certain motions are limited in accordance to Commercial Law and the company’s own BOD regulations. On the other hand, to ensure that the BOD fulfills its role as the de facto highest decision-making body of the company, an employee within the legal team is designated to support directors. The employee is responsible for providing materials and explanations to outside directors.

By providing sufficient time before general meetings, he/she should help the directors to carefully analyze and review bills for discussion based on sufficient information. In 2010, the BOD held a total of 10 meetings, 93% of which were attended by outside directors. The board made decisions on major bills such as approving the acquisition of HAITAI Beverage and approving the acquisition of remaining shares of THEFACESHOP. In addition, the meetings covered sustainability management issues through reports including operating performance and plans of fair trade compliance program, and operating conditions and assessment results of the internal Accounting Management System.

Activities of Audit Committee

The Audit Committee is operated according to separate operational regulations from those for the BOD. This separation helps to secure independency and transparency from the shareholders and management. The Committee comprised of three outside directors, including the committee head, establishes and executes an internal audit plan through an independent position.

Furthermore, it approves quarterly audit results reported by external auditors and plays a role as a supervisory organization for management. To effectively support its audit activities, LG H&H allows the Audit committee to request external auditors, who review reports on the company’s sales and property status.

Gathering Opinions of Stakeholders and Reflecting them on Management Decisions

LG H&H listens to the voices of internal and external stakeholders, who are customers, shareholders and employees, and then reflect their opinions on the company’s decision-making process and management activities. Investment information on management, finances and stocks, and sustainability management are posted on the company’s website to be shared.

In addition, shareholders’ opinions on the company can be submitted through an online forum. Customers can also make various suggestions, and key comments are selected to be posted on our intranet system to be shared with all employees. Furthermore, after the quarterly public disclosure of the company’s performance, regular company meetings are held to share information on business performance, management strategies and visions with employee.