2018 LG Electronics Corporate Governance Report Corporate Governance... · 2020-01-06 · 0 2018 LG Electronics Corporate Governance Report LG Electronics Inc. Our company has compiled

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2018 LG Electronics

Corporate Governance Report

LG Electronics Inc.

Our company has compiled this Report to help investors understand the current status of our corporate

governance in accordance with Article 24, Paragraph 2 of the Regulations on Issuance, Public Disclosure,

etc. of Securities. The Report contains the status of corporate governance as of December 31, 2018. Any

changes in the Report as of the date of its submission are separately stated.

The details of activities related to corporate governance in the Report are those applicable to the public

disclosure period (January 1, 2018-December 31, 2018) except those with a different period specified in

the guideline.

※ Note: The original document is written in Korean. And it is translated for stakeholders to understand

our status on corporate governance. So this document can be used solely as a reference.

1

Contents

Ⅰ. Overview 3

Ⅱ. Current Status of Corporate Governance 4

1. Corporate Governance Policy 4

1) Corporate Governance Principles 4

2) Governance Features 4

3) Current Status of Governance (Summary) 5

2. Shareholders 7

1) Shareholder Rights (Key Principle 1) 7

(Principle 1-○1 ) 7



2) Fair Treatment of Shareholders (Key Principle 2) 13



3. Board of Directors 20

1) Functions of BOD, Etc. (Key Principle 3) 20



2) Structure of BOD and Appointment of Directors (Key Principle 4) 24





3) Responsibilities of Independent Directors (Key Principle 5) 31



4) Assessment of Independent Directors (Key Principle 6) 35



5) Operation of BOD (Key Principle 7) 36



6) Committees under BOD (Key Principle 8) 42



2

4. Audit Bodies 49

1) Internal Audit Bodies (Key Principle 9) 49



2) External Auditors (Key Principle 10) 54



5. Other Key Matters (When Necessary) 57

Appendix. Corporate Governance Index Status 58

3

Ⅰ Overview

▶ Corporate name: LG Electronics Inc.

▶ Document manager: (chief) manager Hwang Jae-seung, (assistant) manager Sung Ki-ho

▶ Date of report: December 31, 2018

▶ Corporate overview

Business category Assets scale (consolidated) Listed market

Listed as large

business group

(Fair Trade Act)

Non-

financial Financial

Less than

500

billion

won

Less than

2 trillion

won

2 trillion

won or

more

KOSPI KOSDAQ Unlisted Applicable* Not

applicable

O O O O

*Name of large business group: LG

4

Ⅱ Current Status of Corporate Governance

1. Corporate Governance Policy

1) Corporate Governance Principles Our company considers it essential to practice stable, efficient and transparent corporate governance for

continuous growth of the company, increase of the company value as well as protection of the rights and

interests of the shareholders.

Regarding corporate governance, stability can be achieved and maintained through checks and balances

among the members, efficiency through expertise and diversification of perspectives of the members, and

transparency through disclosure of task processing standards, procedures and results. Our company fulfills

this core principles of corporate governance through “BOD-centered management.”

A) Stable Corporate Governance

More than 50% of the board members (four out of the seven board members in total) are independent

directors in order for the BOD to practically carry out its function of keeping the management’s business-

conducting rights in check.

Furthermore, our independent directors are transparently and fairly elected by the Independent Director

Candidate Recommendation Committee (where independent directors have a majority).

B) Efficient Corporate Governance

Our company complies with the "principle of diversity” in forming the BOD in order to prevent it from

having a majority of members from a specific common background or representing certain interests. In

actual operation of the BOD, our company is trying to recruit people from various areas of expertise so as

to prevent the BOD from tilting towards specific backgrounds or professions. As the independent directors

are composed of experts from industrial, financial/accounting and administrative fields, the BOD can

perform sound deliberation of the agendas suggested to it based on various personal backgrounds and

areas of expertise and efficiently monitor how the management conducts its business. Moreover, our

company has installed a business management committee under the BOD. The committee is entrusted with

power to approve any issues that does not require collective decision-making by all of the board members

so as to efficiently implement corporate governance.

C) Transparent Corporate Governance

At the same time, our company supports the board members so that they can make the best business

decisions by holding a preliminary briefing session prior to a BOD meeting and providing sufficient

information on details of agendas through the BOD Secretariat.

2) Governance Features A) Structure of BOD with Independent Directors Having Majority

Our company’s BOD, as the highest standing decision-making body, has the power to appoint and dismiss

the CEO and is operated with independent directors at its center. At present, out of seven board members,

the number of independent directors stands at four (accounting for 57% of the total), thus comprising a

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majority.

To improve efficiency of the BOD, outside experts from various areas of expertise and backgrounds are

recruited as board members. Also, with multiple independent directors with verified independence, the

board’s function of keeping the management in check is strengthened.

B) BOD Led by Committees

Our company’s BOD has three committees that are installed and operated, namely, the Audit Committee,

Business Management Committee and Independent Director Candidate Recommendation Committee.

Among them, installation of the Independent Director Candidate Recommendation Committee and Audit

Committee is mandatory as stipulated by the relevant laws, and the Business Management Committee

carries out deliberations and decision-making on matters delegated by the BOD.

C) Strengthening Expertise of Independent Directors

Our company’s independent directors are composed of experts from industrial, financial/accounting and

administrative fields. In order to recruit the most suitable independent directors, our company selects a

group of candidates for independent directors with very strict standards through interviews and pre-

verification conducted by the relevant divisions. The BOD Secretariat supports independent directors in

carrying out their jobs. Specifically, the Secretariat holds a preliminary briefing session before a BOD

meeting in order for the directors to review main issues in detail beforehand, and provides internal and

external training for newly appointed independent directors to swiftly adapt to our company’s BOD-led

corporate culture.

3) Current Status of Governance

Internal Body

Composition

(no. of Independent

directors/no. of board

members)

Chairperson

(committee president)

(executive director/

independent director)

Main Responsibilities

Board of Directors 4/7 Jo Seong-jin1)

(executive director)

Approving BOD resolutions in accordance with laws and

the Articles of Incorporation

Approving agendas to be proposed to the general

shareholders’ meetings

Approving main financial issues

Approving mid/long-term strategies and business policies

Approving personnel issues and others

Audit Committee 3/3 Lee Chang-woo2)

(Independent director)

Auditing overall company businesses including financial

status

Supervising jobs carried out by directors and the

management

Approving selection of external auditors and supervising

their audit work

Assessing the actual operation status of the internal

accounting management system and the operational

status of the internal supervision system

Independent Director

Candidate

Recommendation

Committee

2/3 Jo Seong-jin


Recommending independent directors after verifying

independence, diversity and capability of a group of

candidates for independent directors

Managing and verifying groups of candidates for

independent directors on a regular basis

6

1) On March 15, 2019, Kwon Young-su was appointed as a director of the board in the general shareholders’ meeting and as the

chairperson of the BOD.

2) On March 15, 2019, Kim Dae-hyung was appointed as the president of the Audit Committee.

Business

Management

Committee

0/3 Jo Seong-jin


Approving individual loans within the annual limit and

issuance of company bonds and CP (corporate bills)

Certifying payments under certain amount limits and

signing or extending credit limit agreements

Installing, relocating and closing branches

Approving businesses in general, financial issues and

other matters delegated by the BOD

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2. Shareholders

(Key Principle 1) Shareholder Rights

Shareholders should be provided with sufficient information in a timely manner to exercise their rights

through appropriate procedures.

(Principle 1-①)

The company should provide the shareholders with sufficient information regarding the date and time,

location and agendas of a general shareholders’ meeting a sufficient amount of time before the meeting and

take all measures to enable all shareholders to participate and give opinions during the meeting.

A) General Shareholders’ Meeting Status

Our company officially announces the date and time, location, agenda, result and so forth related to general

shareholders’ meetings through DART (Data Analysis, Retrieval and Transfer System, http://dart.fss.or.kr)".

Regular general shareholders’ meetings are held within three months after closing of each business year,

and extraordinary shareholders’ meetings are held when necessary. For the past three years, our company

has held three general shareholders’ meetings in total but did not hold any extraordinary shareholders’

meeting. Our company’s status and details of general shareholders’ meetings for the past three years are

as shown in the table below.

(Table 1-1-1) General shareholders’ meetings held from the start of the business year immediately before

the public disclosure period up to the disclosure filing date

Classification The 17th Regular General

Shareholders’ Meeting

The 16th Regular General




Meeting decision date February 18, 2019

(25 days before the meeting)

February 22, 2018


February 23, 2017


Meeting Announcement Date February 18, 2019


February 22, 2018


February 23, 2017


How to notify shareholders of

details of regular general

shareholders’ meetings

Send a meeting notification (to

those holding 1% or more) and

make notification on the

website, in DART of Financial

Supervisory Service and Korea

Stock Exchange, and RNS of

London Stock Exchange.

Send a meeting notification

(to those holding 1% or

more) and make notification

on the website, in DART of

Financial Supervisory Service

and Korea Stock Exchange,

and RNS of London Stock

Exchange.


(to those holding 1% or

more) and make notification

on the website, in DART of

Financial Supervisory Service

and Korea Stock Exchange,

and RNS of London Stock

Exchange.

Whether and how to notify

meeting in ways

understandable by foreign

shareholders


(attach agenda document) to

the major investors via RNS of

London Stock Exchange.


via RNS of London Stock

Exchange and send the

agenda document to the

major investors.

Regular general shareholders’

meeting notification via RNS

of London Stock Exchange

Meeting Date March 15 (Fri.), 2019, 9 a.m. March 16 (Fri.), 2018, 9 a.m. March 17 (Fri.), 2017, 9 a.m.

Whether the meeting is held on

one of the major shareholders’

meeting dates

Not applicable Not applicable -

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Classification The 17th Regular General






Meeting Venue Main Auditorium, B1 East Wing

of LG Twin Tower

Main Auditorium, B1 East

Wing of LG Twin Tower

Main Auditorium, B1 East

Wing of LG Twin Tower

Details

Attendance of board

members 2 members attended 2 members attended 2 members attended

Main remarks by

shareholders

Multiple shareholders agreed to

the agenda or made a second

request

- Two individual

shareholders made the

following remarks

1) Requested increase of the

dividend in the following year

2) Requested continuance of

director compensation based

on the standards and

principles

- Multiple other shareholders

agreed to the agenda or

made a second request

Multiple shareholders agreed

to the agenda or made a

second request

B) Votes For/Against Rates, Etc.

The following are the votes for and against rates and approval status for the agenda items in the 17th

(held on Mar. 15, 2019) and 16th (held on Mar. 16, 2018) regular general shareholders’ meetings of our

company.

(Table 1-1-2) Votes for and against rates from the general shareholders’ meetings held from the start of

the business year immediately before the public disclosure period up to the disclosure filing date

<The 17th regular general shareholders’ meeting (Mar. 15, 2019)>

Agenda Resolution

Type Meeting Purposes

Approval

Status

No. of Shares

That Have

Voting Right

(①)1)

Among ①, No.

of Shares That

Have Executed

Voting Right

(A)2)

Rate of Votes

For (B)

(%)3)

Rate of Votes

Against and

Abstention (C)

(%)4)

Item 1 Ordinary Approving the 17th

financial statements Passed 162,884,642 112,222,068

104,259,835

(92.9%)

7,962,233

(7.1%)

Item 2 Special

Approving the amendment

of the Articles of

Incorporation

(Reflects the amendments

in electronic securities

laws and stipulations of

the Commercial Act

related to BOD

resolutions.)

Passed 162,884,642 112,222,068

112,200,289

(100.0%)

21,779

(0.0%)

Item 3 3-1 Ordinary Appointing 1 executive

director Passed 162,884,642 112,222,068

106,666,333

(95.0%)

9

Agenda Resolution


Approval

Status

No. of Shares

That Have

Voting Right

(①)1)

Among ①, No.

of Shares That

Have Executed

Voting Right

(A)2)

Rate of Votes

For (B)

(%)3)

Rate of Votes

Against and

Abstention (C)

(%)4)

(Jeong Do-hyeon) 5,555,735

(5.0%)

3-2 Ordinary

Appointing 1 non-executive

director

(Kwon Young-su)

Passed 162,884,642 112,222,068

106,581,219

(95.0%)

5,640,849

(5.0%)

3-3, 3-4 Ordinary

Appointing 2 independent

directors

(Lee Sang-gu, Kim Dae-

hyung)

Passed 162,884,642 112,222,068

106,666,333

(95.0%)

5,555,735

(5.0%)

Item 4 Ordinary

Appointing 2 members of

the Audit Committee

(Paek Yong-ho, Kim Dae-

hyung)

Passed 102,693,106 52,030,532

49,985,405

(96.1%)

2,045,127

(3.9%)

Item 5 Ordinary Approving director’s

compensation limits Passed 162,884,642 112,222,068

97,250,475

(86.7%)

14,971,593

(13.3%)

1) For the agenda items related to audit or appointing members of the Audit Committee, write the number of shares

excluding those with restricted voting rights.

2) No. of shares (A) = No. of shares (B) + No. of shares (C)

3) Rate of votes for (%) = (B/A) x 100

4) Rate of votes against and abstention (%) = (C/A) x 100

<The 16th regular general shareholders’ meeting (Mar. 16, 2018)>

Agenda Resolution


Approval

Status

No. of Shares

That Have

Voting Right

(①)1)

Among ①,

No. of

Shares

That Have

Executed

Voting

Right (A)2)

Rate of Votes

For (B)

(%)3)

Rate of Votes

Against and

Abstention (C)

(%)4)

Item 1 Ordinary Approving the 16th

financial statements Passed 162,884,642 120,812,941

112,698,897

(93.3%)

8,114,044

(6.7%)

Item 2

2-1 Ordinary

Appointing 1 executive

director

(Jo Seong-jin)

Passed 162,884,642 120,811,900

114,421,961

(94.7%)

6,389,939

(5.3%)

2-2 Ordinary Appointing 1 independent

director Passed 162,884,642 120,811,900

114,020,235

(94.4%)

10

Agenda Resolution


Approval

Status

No. of Shares

That Have

Voting Right

(①)1)

Among ①,

No. of

Shares

That Have

Executed

Voting

Right (A)2)

Rate of Votes

For (B)

(%)3)

Rate of Votes

Against and

Abstention (C)

(%)4)

(Choi Jun-keun) 6,791,665

(5.6%)

Item 3 Ordinary

Appointing 1 member of

the Audit Committee

(Choi Jun-keun)

Passed 102,284,070 60,212,369

59,384,611

(98.6%)

827,758

(1.4%)

Item 4 Ordinary Approving director’s

compensation limits Passed 162,884,642 120,812,941

74,878,022

(62.0%)

45,934,919

(38.0%)

1) For the agenda items related to audit or appointing members of the Audit Committee, write the number of shares

excluding those with restricted voting rights.

2) No. of shares (A) = No. of shares (B) + No. of shares (C)

3) Rate of votes for (%) = (B/A) x 100

4) Rate of votes against and abstention (%) = (C/A) x 100

C) Making Notification of General Shareholders’ Meeting Early Enough Before Meeting

According to the Commercial Act, the notification of a general shareholders’ meeting must be made two

weeks before the meeting. Our company makes an official notification of the meeting three weeks before

the meeting to provide sufficient information of the meeting including the date and time, location and

agenda.

However, it is currently not easy to adopt the 4-week prior notification method recommended by Korea

Stock Exchange due to difficulties in preparation such as having to advance the February board meeting by

more than one week or make a meeting notification in January and other reasons such as having to avoid

the settlement days, board meetings and major shareholders’ meeting days on the fourth week of March.

We cannot say with certainty that our company will adopt the 4-week prior notification method sometime

in future, but we will continue to consider adopting methods to more quickly provide information related to

general shareholders’ meetings.

D) Holding Shareholders’ Meeting on Day Other Than Major Shareholders’ Meeting Days

As specified in Table 1-1-1 above, all general shareholders’ meetings from 2017 to 2019 were held on a

day that is not a major day for shareholders’ meetings.

E) Implementation of Vote in Writing and Electronic Vote and Proxy Solicitation

Although Article 368-3 of the Commercial Act stipulates introduction of a vote-in-writing system through

which shareholders can exercise their voting rights via written letters without attending a general

shareholders’ meeting as defined in the Articles of Incorporation, our company does not have any grounds

for vote in writing in its Articles of Incorporation and has never introduced an electronic vote system in

accordance with Article 368-4 of the Commercial Act.

As our company has in place a proxy solicitation system (power of attorney system) to enable shareholders

to exercise voting rights by proxy without attending a shareholders’ meeting, the same goal can be

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attained from the perspective of voting participation without introducing a vote in writing or electronic

vote system.

Although our company has reviewed the necessity to introduce an electronic voting system, it has decided

that such adoption is premature, considering that electronic voting is not popularized yet and that the rate

of participating in general shareholders’ meetings via electronic voting is still low and has little impact on

the resolution process.

For reference, our company produces reference documents (including power of attorney forms) and

officially provides them in DART in accordance with Capital Markets Act and also provides power of

attorney forms on the company website.

F) Taking Actions to Induce Maximum Participation in General Shareholders’ Meetings

As explained above, our company seeks to meet the quorum and facilitate the shareholders’ convenience in

exercising their voting rights through proxy solicitation. Therefore, although it is not adopting a vote-in-

writing or electronic voting system, our company is taking the necessary measures to maximize

shareholders’ participation in the general shareholders’ meetings.

(Principle 1-②)

The company should make sure that the shareholders can freely make proposals in establishing the agenda

of the general shareholders’ meetings and freely ask questions and request explanations with regards to the

agenda items during the meeting.

A) Informing Shareholders of Procedure of Making Proposals on Website

Although the company website currently does not provide information regarding the procedure of making

proposals for shareholders, it plans to continuously create opportunities to communicate with and receive

proposals from the shareholders. We will review providing guidances on the procedures of proxy solicitation

and shareholder proposal from various angles.

B) Internal Standards and Procedure for Handling Agenda Items Proposed by Shareholders

Also, there is currently no separate standard or procedure established for handling proposals made by

shareholders. Since the Commercial Act already stipulates such procedures in detail, our company has no

plan to establish new internal standard or procedure at the moment.

C) Proposals by Shareholders and Implementation Status from Start of Business Year Immediately Before

Public Disclosure Period up to Disclosure Filing Date (votes for and against rates on agenda)

Since there has been no shareholder proposal in the general shareholders’ meetings within the past three

years, no execution details have been included with regard to shareholder proposals.

D) Ease of Exercising Shareholder Proposal Right and Meeting for Agenda Determination

Minority shareholders can exercise the right to make proposals during general shareholders’ meetings of

the company according to the related laws. Also, our company provides opportunities for the shareholders

to freely ask questions and request explanations regarding agenda proposals made by the shareholders.

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(Principle 1-③)

The company should provide the shareholders with information regarding the policy and future plans of dividend payout

and respect the shareholders’ rights to receive an appropriate amount of dividend based on the related policies.

A) Policy and Plans of Dividend Payout and Guidance

Our company has in place a dividend payout policy to confirm the annual dividend payouts through the BOD

by comprehensively considering the annual profit level, cash flow, strategic investments in future and

improvement of shareholders’ values in the market. Every year, the dividend payout amounts are

determined by the BOD in January and announced through an official notification before the general

shareholders’ meeting notification. The payout amounts are finalized in the general shareholders’ meeting

and dividends are paid out to the shareholders within one month after the meeting.

B) Dividend Payout Ratios (consolidated ratios and individual ratios separately), Total Dividends, Dividend

Yield Ratio, etc. for Past Three Business Years

Our company has paid out dividends continuously for the past three years, and the following are the details

of dividend payouts.

(Table 1-3-1) Dividend payouts in past three years (share, won ,%)

Business

Year

Financial

Closing

Month

Share

Type

Share

Dividend

Cash Dividend

Par

Value

Dividend

per Share

Total

Dividends

(one million

won)

Dividend

Yield

Ratio

Dividend Payout Ratio

Consolidated Individual

2018 12

Ordinary

share - 5,000 750 122,163 1.2

11.0

N/A

*Negative

net profit

during

term

Preferred

share - 5,000 800 13,745 3.1

2017 12

Ordinary

share - 5,000 400 65,154 0.4

4.2 9.6 Preferred

share - 5,000 450 7,732 1.0

2016 12

Ordinary

share - 5,000 400 65,154 0.8

94.8

N/A

*Negative

net profit

during

term

Preferred

share - 5,000 450 7,732 1.8

1) To calculate dividend per share, add the quarterly, interim, and final dividends together.

2) Dividend payout ratio = Total dividends / Consolidated net profit attributable to parent or Individual net income

3) Dividend yield ratio = Dividend per share / Share price on dividend payout day x 100

(Share price of dividend payout date is an arithmetic average of official closing prices between 1weeks and 2 days before

transaction date)

C) Implementation and Records of Difference Dividends, Quarterly Dividends and Interim Dividends for Past

Three Business Years

Our company has paid out dividends continuously for the past three years and has not implemented

difference dividends, quarterly dividends or interim dividends during that period.

D) Sufficient Explanation of Dividend Payout Information to Shareholders

Our company may announce the above-mentioned dividend policy along with dividend implementation plans

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in the form of public disclosure.

E) Respect for Shareholders’ Rights to Receive Appropriate Amount of Dividend

Our company has paid out dividends even when the term net profit (individual) or the net cash flow

(consolidated) were negative in order to improve shareholder values. Thus, our company respects the

shareholders’ rights to receive dividends at appropriate levels.

(Unit: 100 million won) 2013 2014 2015 2016 2017 2018

Net CF (consolidated) Δ2,067 Δ4,652 6,547 5,838 Δ5,054 1,005

Net profit attributable to

parent (consolidated) 1,768 3,994 1,244 769 17,258 12,401

Net profit (individual) Δ1,891 Δ1,545 Δ3,558 Δ2,765 7,580 Δ48

Total Dividends 369 729 729 729 729 1,359

Against net CF (%) - - 11.1 12.5 - 135

*Net Cash Flow: The sum of cash flows due to business activities, investment activities and foreign exchange fluctuation effects

(Key Principle 2) Fair Treatment of Shareholders

The company should provide the shareholders with voting rights fairly according to the types and numbers of shares

held and make efforts to establish a system for fairly providing company information to the shareholders.

(Principle 2-①)

The company should make every effort not to violate the shareholders’ voting rights and provide the shareholders with

sufficient company information in a timely and fair manner.

A) Status of Outstanding Shares

The table 2-1-1 summarizes our company’s status of outstanding shares.

(Table 2-1-1) Status of Outstanding Shares

Classification Issuable Shares (shares)* Outstanding Shares (shares)** Remarks

Ordinary share 300,000,000 163,647,814 Treasury share: 763,172

Preferred share 300,000,000 17,185,992 Treasury share: 4,692

*No. of issuable shares: the number of authorized shares as of the date of report (number of shares on the Articles of

Incorporation)

**No. of outstanding shares: Total number of shares issued and sold as of the date of report - Total number of removed shares as

of the date of report (capital reduction, acquisition of own shares, etc.)

B) Voting Rights for Different Classes of Shares and General Shareholders’ Meetings for Certain Classes of

Shares

Our company has issued preferred shares in addition to ordinary shares. Preferred shares provide no voting

rights, but the holders do receive dividends in money in the amount that is 1% more annually than what is

paid for ordinary shares on the basis of the par value. There have been no general shareholders’ meetings

for certain classes of shares within the past three years.

C) Fair Assignment of Voting Rights

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Our company’s ordinary shares provide one voting right per share in accordance with Article 369 of

Commercial Law so that all shareholders can exercise their voting rights fairly.

D) Status of Holding IR

Our company makes a public disclosure of tentatively calculated business performance in early January,

April, July and October of every year (effective since the first quarter of 2016) and holds regular a

conference call for quarterly performance explanations about three weeks after each disclosure of

temporary outcome.

Conference calls are web-cast live on our company’s website

(http://www.lge.co.kr/lgekor/company/ir/irMain.do) in order for all investors to have fair access. The

relevant outcomes are also publicly disclosed and provided on the website. Also, for transparency in

providing information, the company operates quiet periods from the end of each quarter to the day of

announcing business performance. As summarized in Table 2-1-2, our company frequently conducts IR

activities such as attending conferences held by securities companies, visiting investors’ meetings,

conference calls, etc.

(Table 2-1-2) Major IR activities Date Participants Type Major Contents

2018.01.25 Investors, analysts and press Conference

call

Announcement of business performance (4th

quarter, 2017)

2018.01.30~02.02 Domestic institutional investors NDR1)

Business performance review (4th quarter, 2017)

and Q&A

2018.02.08~02.13 Foreign investors

: Securities firm (Mirae Asset Daewoo)

conference

Conference

2018.02.26~03.02 Foreign (Americas) institutional

investors

NDR


: Securities firm (Daiwa) conference

Conference

2018.03.14 Foreign investors

: Securities firm (BoA) conference

Conference


call

Announcement of business performance (1st

quarter, 2018)

2018.04.30~05.04 Domestic institutional investors NDR

Business performance review (1st quarter, 2018)

and Q&A


: Securities firms (BNP Paribas, JP

Morgan) attended conference

Conference

2018.05.14~05.18 Foreign (Europe) institutional investors NDR


: Securities firm (Maybank) conference

Conference


call

Announcement of business performance (2nd

quarter, 2018)

2018.07.31~08.03 Domestic institutional investors NDR Business performance review (2nd quarter,

2018) and Q&A 2018.08.06~08.10 Foreign (Asia) institutional investors NDR

2018.08.13~08.17 Foreign (Europe) institutional investors NDR


call

Announcement of business performance (3rd

quarter, 2018)


Business performance review (3rd quarter, 2018)

and Q&A


: Securities firm (Korea Investment and

Securities) conference

Conference


: Securities firm (Daiwa) attended

Conference

15

Date Participants Type Major Contents

conference


call

Announcement of business performance (4th

quarter, 2018)


Business performance review (4th quarter, 2018)

and Q&A


investors

NDR


: Securities firm (JP Morgan)

conference

Conference

2019.02.25~03.01 Foreign (Asia) institutional investors NDR


: Securities firm (Daiwa) attended

conference

Conference


: Securities firm (BoA) attended

conference

Conference


: Securities firm (Credit Suisse)

attended conference

Conference


call

Announcement of business performance (1st

quarter, 2019)


Business performance review (1st quarter, 2019)

and Q&A


investors

NDR


: Securities firm (Korea Investment and

Securities) attended conference

Conference


: Securities firm (CLSA) attended

conference

Conference

2019.05.27~05.31 Foreign (Asia) institutional investors NDR

1) Non-deal roadshow (investment briefing where discussions are held with no deals offered)

※ It is held during the above-mentioned conference calls/IR activities, meetings with investors/analysts during their visit of our

company, conference meetings with domestic investment institutions, etc.

E) Website

Emails can be sent to the IR department via the Contact IR menu item on the company’s website.

(Related path: LG Electronics About LG– Investor Relations

(https://www.lge.co.kr/lgekor/company/ir/irMain.do)– Contact IR)

The phone numbers of the IR department are not provided on the website but are included in the official

notification of performance presentation, etc.

F) Website in English for Foreign Shareholders, Disclosure of Manager Contact Information and Public

Disclosure in English

Our company currently does not provide public disclosure in English via KIND. The company operates an

English website for foreign shareholders (https://www.lg.com/global/investor-relations). The managers’

contact information is not disclosed, but emails can be sent to the IR department through the Contact IR

menu.

Also, the company provides public disclosure in English in London Stock Exchange, and the following are the

contents.

https://www.lge.co.kr/lgekor/company/ir/irMain.do

16

Disclosure Date Disclosure Title Major Contents

2018.01.08 2017 4Q Pre-earnings Guidance Tentative performance of 4th quarter, 2017

2018.01.25 Annual Financial Report Finalized performance of 4th quarter, 2017

2018.02.22 Notice of AGM Confirmation of The 16th Regular General


2018.04.09 PRE-EARNINGS GUIDANCE FOR 1Q 2018 Tentative performance of 1st quarter, 2018

2018.04.26 1st Quarter Results Finalized performance of 1st quarter, 2018

2018.07.06 2018 2Q Pre-earnings Guidance Tentative performance of 2nd quarter, 2018

2018.10.05 2018 3Q Pre-earnings Guidance Tentative performance of 3rd quarter, 2018

2018.10.25 3rd Quarter Results Finalized performance of 3rd quarter, 2018

2019.01.08 2018 4Q Pre-earnings Guidance Tentative performance of 4th quarter, 2018

2019.01.31 Annual Financial Report Finalized performance of 4th quarter, 2018

2019.02.18 Notice of AGM Confirmation of The 17th Regular General

Shareholders’ Meeting and official notification

2019.05.13 1st Quarter Results Finalized performance of 1st quarter, 2019

G) Fair Disclosures

(Table 2-1-4) Fair disclosures from the start of the business year immediately before the public disclosure

period up to the disclosure filing date (fair disclosures submitted via KIND of Korea Stock Exchange)


2018.01.08

Based on consolidated financial

statements

Performance (tentative) (fair disclosure)

Tentative performance of 4th quarter, 2017 including

revenue, business profit, etc.

2018.01.25

[Corrected] Based on consolidated

financial statements


Revenue, business profit, profit from continuing operations

before deduction of corporate tax, net profit and net profit

attributable to parent of the 4th quarter, 2017

2018.04.06


statements


Tentative performance of 1st quarter, 2018 including


2018.04.26

[Corrected] Based on consolidated

financial statements




attributable to parent of the 1st quarter, 2018

2018.07.06


statements


Tentative performance of 2nd quarter, 2018 including


2019.07.26

[Corrected]


statements




attributable to parent of the 2nd quarter, 2018

2018.10.05


statements


Tentative performance of 3rd quarter, 2018 including


2018.10.25

[Corrected]


statements



attributable to parent of the 3rd quarter, 2018

17



2019.01.08


statements


Tentative performance of 4th quarter, 2018 including


2019.01.31

[Corrected]


statements




attributable to parent of the 4th quarter, 2018

2019.04.05


statements


Tentative performance of 1st quarter, 2019 including


2019.04.30

[Corrected]


statements




attributable to parent of the 1st quarter, 2019

H) Designation as Insincere Public Disclosure Corporate

Our company has not been designated as an insincere public disclosure corporate.

I) Disclosure of Corporate Information

Our company makes fair public disclosures in compliance with the public disclosure regulations of Financial

Services Commission and Korea Stock Exchange. Since the performance disclosure in the first quarter of

2016, the company has disclosed tentative performance about three weeks before the conference call in

order to prevent confusions in the market. Each quarter, the company provides sufficient corporate

information in timely and fair manner to the shareholders via channels such as conference calls and web

casting.

In addition to the above, more corporate information can be found on the company’s website

(http://www.lge.co.kr) and electronic public disclosure systems such as DART (http://dart.fss.or.kr) and

KIND (http://kind.krx.co.kr). Also, our company’s website provides viewing of corporate sustainability report,

business report, audit report, management information such as BOD members and BOD operation status as

well as status of shares and shareholders, financial information, electronic notifications, etc.

Since the company considers that the corporate’s contact information such as the email address, phone

number, etc. of the IR department is sufficiently provided on the company’s website and public disclosure

materials, it currently does not have any improvement plans.

Also, the company makes public disclosures in London Stock Exchange and actively communicates with

foreign shareholders on all important public disclosure matters, and thus it considers that it is currently not

necessary to make public disclosures in English via KIND. However, by constantly listening to the opinions

of foreign shareholders, we will review necessity of implementing public disclosure in English.

(Principle 2-②)

The company should set up and operate tools with which to prevent fraudulent internal dealings by the controlling

shareholder or other shareholders and to protect shareholders from self-dealings.

18

A) Tools for Controlling Internal and Self Dealings (policy)

Our company stipulates that "approval of transactions between a director and the company" is subject to

BOD resolution in Article 14 of the BOD regulations in order to prevent any of the management members

and controlling shareholder from making internal dealings or self-dealings for the purpose of gaining

personal benefit. Also, the company is reinforcing the control against internal dealings and self-dealings by

prohibiting the board directors who have a specific interest as to the BOD resolution from exercising

his/her voting rights. In accordance with Article 542-9, Clause 3 of the Commercial Act, prior approval from

the BOD is necessary if the size of annual transactions with LG (the largest shareholder), its affiliate

persons and our company’s affiliate persons stands at more than 5% of the total assets/sales, or if the size

of each transaction is more than 1% of the total assets/sales. Furthermore, under Article 398 of the

Commercial Act, any transactions made with major shareholders such as LG, LG’s subsidiaries of which LG

holds 50% or more of the shares, daughter companies of the subsidiaries, and companies which may pose

concerns over conflicts of interest because of the same person holding posts in the different companies

should be approved by the BOD. In addition, as the Fair Trade Act stipulates that large-sized internal

transactions worth more than 5 billion won with affiliated companies should be approved by the BOD and

be made public, our company, as one of the LG Group companies, is disclosing all such transactions after

legitimately passing them through the BOD approval process. Such disclosures are available on DART.

B) Transactions with Interested Parties Including Controlling Shareholder

The following are transactions with LG Group affiliates within Korea recorded on the business report in

compliance with the Fair Trade Act.

For details, refer to “X. Transactions with Interested Parties” in Business Report 2018.

(A) Asset transfer, etc. with LG Group affiliates (January 1, 2018-December 31, 2018, unit: 1 million won)

Counterparty Relationship Transaction

Type

Transaction

Object

Transaction

Purpose

Transaction

Date

Transaction

Amount Remarks

Transaction

Conditions

LG Innotek

Co., Ltd. Affiliate

Asset

acquisition

Mechanical

equipment

Buying of

mechanical

equipment

2018.11.30 471

Not subject

to BOD

approval.

Executed

after

internal

review

Issue a 120-day

promissory note

LG Chem Co.,

Ltd. Affiliate

Business

transfer

Membrane

business

To promote

operation

efficiency

of the

membrane

business

October 1,

2018

(settlement

date:

December

17, 2018)

4,017

Not subject

to BOD

approval.

Executed

after

internal

review

Transaction

loss of

1.107

billion won

Pay cash on the

transaction date

19

Counterparty Relationship Transaction

Type

Transaction

Object

Transaction

Purpose

Transaction

Date

Transaction

Amount Remarks

Transaction

Conditions

LG Chem Co.,

Ltd. Affiliate

Asset

acquisition

Machinery

equipment

Buying of

production

equipment

2018.08.31 134

Not subject

to BOD

approval.

Executed

after

internal

review

Pay cash or pay by

promissory note

within 30 business

days after the

delivery date

LG Chem Co.,

Ltd. Affiliate

Asset

transfer

Emissions

trading

(100,000t

CO2)

To gain a

profit by

selling

remaining

free-allocated

emissions

2018.07.18 2,270

Not subject

to BOD

approval.

Executed

after

internal

review

Transaction

gain of

2.270

billion won

Pay by promissory

note within 30 days

after the date of

transfer, based on

the official closing

price in Korea Stock

Exchange on the

contract date

(22,700 won)

Silicon

Works Co.,

Ltd.

Affiliate Business

transfer

OLED T-Con

chip design

business

To promote

the operation

efficiency of

the

semiconductor

chip design

business

2018.07.01 46,130

Approved

by the BOD

on May 29,

2018

Transaction

gain of

38.789

billion won

Pay cash on the

transaction date

LG Display

Co., Ltd.

Affiliate Real estate

transfer

472.2 square

meters of

land in

Magok-dong,

Gangseo-gu,

Seoul

Adjustment of

shares of the

land within LG

Science Park

among LG

affiliates

2018.06.05

1,273

Not subject

to BOD

approval.

Executed

after

internal

review

Transaction

loss of 72

million won

Pay cash by June 8,

2018

LG Chem Co.,

Ltd. 256

(B) Business transactions with LG Group affiliates in Korea

The following are business transactions with major shareholders (LG Group affiliates in Korea) each of

which accounts for 5% or more of the total revenue during the recent business year.

(January 1, 2018-December 31, 2018, unit: 1 million won)

Name of Affiliate Relationship Transaction Type Transaction

Period Transaction Details

Transaction

Amount

Hi Plaza Co., Ltd. Affiliate Selling, buying, etc. 2018.1.1~

2018.12.31

Selling of electronic

products such as TVs,

refrigerators, etc.

1,981,101

LG Display Co.,

Ltd. Affiliate Selling, buying, etc.

2018.1.1~

2018.12.31

Selling of equipment, etc.

and buying of display

products, etc.

1,829,172

20

3. Board of Directors

(Key Principle 3) Functions of BOD

The BOD should determine the business goals and strategies for the benefit of the company and shareholders and

effectively supervise the management.

(Principle 3-①)

The BOD should effectively execute the functions of making management decisions and supervising management.

A) Institutional Tools for Supporting BOD in Carrying Out Tasks Effectively

Our company supports smooth operation of the BOD through the BOD Secretariat, which carries out tasks

such as performing legal review and actions regarding proposed the BOD agenda, reporting management

status to the independent directors and providing support for requests for matters necessary for the

independent directors to perform their tasks. Specifically, the Secretariat holds a preliminary briefing

session before a BOD meeting in order for the directors to review main issues in detail beforehand, and

provides internal and external training for newly appointed independent directors to swiftly adapt to our

company’s BOD-led corporate culture. Department (team) Name Number of

Employees

Position Main Tasks

BOD Secretariat 3 1 vice president, 2 managers - Explaining the BOD agenda to the

independent directors beforehand

- Providing support for requests for

matters necessary for the

independent directors to execute

their tasks

B) Issues to be Deliberated and Decided by BOD

Our company’s BOD, as the highest standing decision-making body of the company established based on

the Commercial Act, makes decisions on major issues subject to the BOD’s approval in accordance with the

relevant laws and the Articles of Incorporation, important financial matters involving amounts of money

that exceed certain limits, mid/long-term strategies and business policies, personnel issues and other main

issues related to committees under the BOD. Details of matters that should be deliberated and decided by

our company’s BOD are stipulated in Article 32 of the Articles of Incorporation and Article 14 of the BOD

regulations. The main contents are as shown in the table below.

Classification Main Issues to be Approved

BOD resolutions based

on the Commercial Act

and the Articles of

Incorporation

Convoking general shareholders’ meetings

Approving business reports

Approving financial statements

Appointing and dismissing the CEO

Appointing and dismissing managers [delegating the jobs to the Business Management Committee]

Installing, relocating and closing branches [delegating the jobs to the Business Management

Committee]

Deciding matters of issuing new shares and taking care of forfeited shares and fractional shares

21

Classification Main Issues to be Approved

Approving transactions between directors, etc. and the company

Installing, operating and closing committees and appointing and dismissing committee members

Agendas to be

proposed to the

general shareholders’

meetings

Transferring all or important parts of a business

Lending the entirety of a business or delegating business management

Signing, amending or canceling contracts on which all operating profits and losses are shared with

others or other similar contracts

Acquiring all or parts of a business that critically affects the company’s business

Paying out share dividends

Reducing the capital

Amending the Articles of Incorporation

Exempting directors from liability toward the company

Important financial

issues

Providing guarantees and securities for others (However, in the event that a guarantee or security is

provided for a subsidiary, only cases worth more than 100 billion won are subject to approval.)

Acquiring and selling businesses and assets (Only cases worth more than 100 billion won are

subject to approval.)

Selling investments and shares (Only cases worth more than 100 billion won are subject to

approval.)

Investing in facilities (Only cases worth more than 100 billion won are subject to approval.)

Setting and increasing the annual limit of loans (excluding loans secured by receivables) and of

issuing corporate bonds and CP (corporate bills)

Large-sized internal transactions under the Fair Trade Act

Approving transactions made with the company’s largest shareholder (including the shareholder’s

affiliated persons) and affiliated persons or approving the total amount of transactions in

accordance with Article 542-9 of the Commercial Act.

Selling investments or shares used to incorporate, establish or exclude subsidiaries under the Fair

Trade Act

Mid/long-term

strategies and

business policies

Setting strategic business directions

Assessing the current year’s business performance and establishing business plans and reaching

agreement on goals for the next year

Personnel issues

Personnel issues (excluding assignment to positions) on executives and issues on their

compensations

Appointing the chief financial officer

Other matters Issues defined by other laws or the Articles of Incorporation, issues delegated at a general

shareholders’ meeting and issues that the BOD chairperson acknowledges to be necessary

C) Delegation of BOD’s Rights to Committees or President (or CEO)

Article 33, Paragraph 1 of our company’s Articles of Incorporation and Article 13, Paragraph 1 of the BOD

regulations stipulate that the Audit Committee, Independent Director Candidate Recommendation

Committee and other necessary committees should be installed to operate the BOD pursuant to the

Commercial Act. Furthermore, the BOD may delegate some of its powers to the committees under the

BOD to the extent that it does not breach the relevant laws or the Articles of Incorporation in accordance

with Article 13, Paragraph 2 of the BOD regulations. Therefore, our company assigns some of the

important financial matters defined in Article 14, Paragraph 1, Clause 3 of the BOD regulations to the

Business Management Committee in order to improve the efficiency in operating the BOD. At the same

time, matters subject to resolution by the Business Management Committee are notified to each director

as stipulated in Article 13 of the Business Management Committee regulations in order for the BOD to

control such matters. In addition, in the event that matters deliberated and decided by the Business

Management Committee are considerably out of the scope assigned by the BOD or are against the purpose

of the delegation, the directors can request for a BOD meeting to re-deliberate and re-decide the matters

that have already been resolved by the Business Management Committee in accordance with Article 14 of

the Business Management Committee regulations. Refer to Table 4-1-3 below for matters to be delegated

to each committee under the BOD.

22

D) Effective Functioning of BOD

As stated above, the BOD of our company is effectively performing the functions of making management

decisions and supervising management through clarifying deliberation and decision matters on the Articles

of Incorporation and BOD regulations, installing and operating committees based on the committee policies

stipulated by the related laws and providing overall support through the BOD Secretariat.

(Principle 3-②)

The BOD should establish and operate a CEO succession policy (including emergency appointment policy) and an internal

control policy (risk management, compliance management, internal accounting management, etc.) and continuously

improve and supplement them.

A) CEO Succession Policy

Our company stipulates that the BOD has the right to appoint the CEO through Article 31 of the Articles

of Incorporation and the BOD regulations. In the event that the CEO cannot perform his/her duties due to

an accident, etc., one of the next level executives (chairman, vice chairman, president, vice president,

executive director, and managing director), a non-executive director or a person separately chosen by the

BOD takes over and continues the duty by proxy in order to fill the vacancy. For general CEO succession,

the BOD recommends and selects candidates for the CEO position after thoroughly reviewing their

capability to determine their abilities to lead the company in the direction in line with the interests of the

company and the shareholders and to efficiently implement the core values and visions of the company.

B) Risk Management and Compliance Management Policies and Organizations and System for Public

Disclosure

In response to the various possible risks during the management processes, the related departments use

systematic and effective measures and report important issues or make relevant proposals to the BOD.

The BOD stipulates, as matters to deliberate, the BOD resolutions based on the Commercial Act and the

Articles of Incorporation, proposals for agenda items for the general shareholders’ meetings, important

financial affairs, mid/long-term strategies and business policies, personnel issues, other matters stipulated

by the laws and the Articles of Incorporation, issues delegated by the general shareholders’ meetings, and

other matters acknowledged by the BOD chairperson to be necessary, in order to manage the risks that

may arise in various areas of businesses. The BOD receives reports on execution results of matters

delegated to committees, the Audit Committee’s acknowledgments of board directors’ violation of the laws

or the Articles of Incorporation or concerns for such possible violation, results of compliance management

evaluation by the compliance officer, and matters regarding the company’s fulfillment of social

responsibilities, in order to effectively monitor possible risks.

Especially, in response to compliance risks, our company appoints a legal affairs executive as the

compliance officer in accordance with 542-13 of the Commercial Act to assess observance of the legal

compliance standards and has a compliance monitoring team set up within the legal affairs group to

perform legal compliance inspection and conduct preventive education. In accordance with the

Commercial Act, the company stipulates enactment, revision and abolition of legal compliance standards as

well as appointment and dismissal of compliance officers as resolution items of the BOD in Article 14,

Paragraph 1 of the BOD regulations. Also, the results of inspecting observance of the legal compliance

standards are reported to the BOD once a year.

23

Besides, the IR planning team within the IR department takes charge of public disclosure tasks and

manages public disclosure risks through the operation system of chief/assistant public disclosure managers.

The company receives reports through the public disclosure management system as to whether there are

public disclosure review requests from the related departments and its subsidiaries to assess in the early

stages the need to make public disclosures when necessary.

C) Internal Accounting Management

Our company’s CEO and internal accounting manager assess effectiveness of the design and operation of

the company’s internal accounting management policy to produce and notify reliable financial statements

by preventing and discovering errors or fraudulent acts that distort or may distort the financial statements.

The CEO and internal accounting manager use “Standards for Internal Accounting Management Policy”

notified by the Internal Accounting Management Policy Committee in order to assess the current status of

design and operation of the internal accounting management policy.

Based on the related laws such as “The Act on External Audit of Stock Companies” and “Financial

Investment Services and Capital Markets Act,” our company reports the current status of design and

operation of the internal accounting management policy to the Audit Committee in January, and the Audit

Committee assess the report and provides resolution in February. (Refer to Table 9-2-1 (a).)

24

(Key Principle 4) Structure of BOD

The BOD should be structured to be able to efficiently make decisions and supervise the management, and the board

directors should be appointed through transparent procedures that reflect a wide range of shareholders’ opinions.

(Principle 4-①)

The BOD should be structured to enable effective, prudent discussions and decision making and to have an enough

number of independent directors so that it can function independently of the management and controlling shareholder.

A) Organizational Chart of BOD

The BOD has three committees under it for more specialized operation. The related departments within the

company support the committees according their different tasks.

Business Management Committee BOD Secretariat

(2 executive directors,

1 non-executive director) (3 persons)

General

Shareholders’

Meeting

Board of Directors

(2 executive

directors, 1 non-

executive director, 4

independent

directors)

Independent Director Candidate

Recommendation Committee

(2 independent directors,

1 executive director)

Audit Committee

Internal accounting

audit part

(4 persons)

(3 independent directors)

25

B) Structures of BOD and Committees Under BOD

Our company’s BOD is composed of three to seven directors as stipulated in Article 28 of the Articles of

Incorporation. In accordance with Article 383 of the Commercial Act, the BOD is made up of at least three

directors, and the number could increase up to seven for efficient operation and decision-making process.

As it is composed of seven directors with two executive directors, one non-executive director and four

independent directors as of the end of 2018, it complies with the requirements stated in Article 542-8 of

the Commercial Act, which stipulates that there should be at least three independent directors and that

they should hold a majority of the BOD. The following is the status of board directors of the company as of

December 31, 2018, which is the date of report.

(Table 4-1-2) Status of BOD

Classification Name Title

Initial

Appointment

Date

Term

Expiration

Date

Area of

Expertise Career

Executive

director Jo Seong-jin

BOD Chairperson2)

President of the

Business Management

Committee

President of the


Candidate

Recommendation

Committee

2016.3.18 2021.3.15

General

company

management

CEO of LG

Electronics Co., Ltd.

Executive

director

Jeong Do-

hyeon

Member of the

Business Management

Committee

2008.3.14 2022.3.14 Financial

affairs

CFO of LG

Electronics Co., Ltd.

Non-executive

director

Koo Bon-

joon1)

Member of the

Business Management

Committee

2017.3.17 2020.3.16

General

company

management

Vice chairman of LG

Group

Independent

director

Lee Chang-

woo1)

President of the Audit

Committee

Member of the


Candidate

Recommendation

Committee

2013.3.15 2019.3.15

Accounting,

auditing

(certified

accountant)

Professor of Seoul

National University

Business School

Independent

director

Choi Jun-

keun

Member of the Audit

Committee 2015.3.19 2021.3.15

General

company

management

CEO of Hewlett-

Packard Korea

Independent

director

Kim Dae-

hyung

Member of the Audit

Committee

Member of the


Candidate

Recommendation

Committee

2016.3.18 2019.3.163).

Accounting,

auditing

(certified

accountant)

GE Plastics China

CFO, GE Plastics

Asia/Pacific CFO

Independent

director

Baek Yong-

ho - 2017.3.17 2020.3.16 Administration

Chairman of the

Korea Fair Trade

Commission

1) Non-executive director Koo Bon-joon resigned on March 14, 2019, and the term in office of independent director Lee Chang-

woo expired on the next day.

Also, during the general shareholders’ meeting held on March 15, 2019, Kwon Young-su was appointed as non-executive

26

director, and Lee Sang-gu was appointed as independent director.

2) On March 15, 2019, Kwon Young-su, who was appointed as a director of the board in the general shareholders’ meeting on the

same day, was appointed as the chairperson of the BOD.

3) He was re-appointed during the general shareholders’ meeting held on March 15, 2019, and his term in office was extended to

March 14, 2022.

(Table 4-1-3) Structure of Committees under BOD

Committee Composition

Main Responsibilities of Committee Title Classification Name

Independent

Director Candidate

Recommendation

Committee

(3 persons)

President Executive

director Jo Seong-jin

- Recommending independent directors after verifying

independence, diversity and capability of a group of

candidates for independent directors

- Managing and verifying groups of candidates for

independent directors on a regular basis

Committee

member

Independent

director

Lee Chang-

woo1)

Committee

member

Independent

director

Kim Dae-

hyung1)

Business

Management

Committee

(3 persons)

President Executive

director Jo Seong-jin - Approving individual loans within the annual limit and

issuance of company bonds and CP (corporate bills)

- Certifying payments under certain amount limits and

signing or extending credit limit agreements

- Installing, relocating and closing branches

- Approving businesses in general, financial issues and

other matters delegated by the BOD

Committee

member

Executive

director

Jeong Do-

hyeon

Committee

member

Non-

executive

director

Koo Bon-

joon2)

Audit Committee

(3 persons)

President Independent

director

Lee Chang-

woo2)

- Auditing overall company businesses including financial

status

- Supervising jobs carried out by directors and the

management

- Approving selection of external auditors and

supervising their audit work

- Assessing the actual operation status of the internal

accounting management system and the operational

status of the internal supervision system

Committee

member

Independent

director Choi Jun-keun

Committee

member

Independent

director

Kim Dae-

hyung

1) During the BOD meeting on January 29, 2019, independent directors Choi Jun-keun and Baek Yong-ho were appointed as

members of the Independent Director Candidate Recommendation Committee.

2) Non-executive director Koo Bon-joon resigned on March 14, 2019, and the term in office of independent director Lee Chang-

woo expired on the next day. During the general shareholders’ meeting on March 15, 2019, independent director Baek Yong-ho

was appointed as a member of the Audit Committee. During the BOD meeting held on the same day, non-executive director Kwon

Young-su was appointed as a member of the Business Management Committee. As of June 3, 2019, which is the submission date

of this report, the Independent Director Candidate Recommendation Committee is composed of executive director Jo Seong-jin

(president), independent director Choi Jun-keun and independent director Baek Yong-ho, the Business Management Committee is

composed of executive director Jo Seong-jin (president), independent director Jeong Do-hyeon, non-executive director Kwon

Young-su, and the Audit Committee is composed of independent director Kim Dae-hyung (president), independent director Choi

Jun-keun, and independent director Baek Yong-ho.

C) Status of Independent Directors

Our company’s BOD, as the highest standing decision-making body, has the power to appoint and dismiss

the CEO and is operated with independent directors at its center. As of the date of the report, out of seven

board members, the number of independent directors stands at four (accounting for 57% of the total),

thus comprising a majority. Outside experts from various areas of expertise and backgrounds are recruited

as board members to improve efficiency of the BOD. Also, with multiple independent directors with verified

27

independence, the board’s function of keeping the management in check is strengthened. Lee Chang-woo’s

tenure as independent director has expired after his serving two consecutive terms. Choi Jun-keun was

reappointed as independent director to serve another term.

D) Separation of CEO and Chairperson of BOD, etc.

The company’s BOD regulations stipulate that the chairperson of the BOD should be selected among the

existing directors, and the executive directors including the CEO and the non-executive directors are not

the only ones that are eligible to be candidates for the chairperson. As of December 31, 2018, which is the

date of the report, a CEO was serving as the chairperson of the BOD, who was appointed based on the

assessment made after provision of sufficient information on the independent directors that he is capable

of operating the BOD smoothly and of executing the roles and responsibilities based on the related laws

and internal regulations. However, as of June 3, 2019, the date of submission of the report, a non-

executive director is serving as the chairperson of the BOD, and therefore the CEO and chairperson of the

BOD are separated.

dndOur company has the first-appointed independent director to lead the rest of the independent directors

in adjusting their opinions, represent the independent directors, and act as a senior independent director.

E) BOD Composition for Efficiency, Independence, etc.

As stated above, our company’s BOD is composed of directors with various backgrounds and careers. The

company established sound committees and internal support organizations within the BOD so that the

BOD can hold discussions and make decisions effectively and prudently. Also, four members of the BOD,

which is a majority, are independent directors. The Audit Committee is entirely composed of independent

directors, and a majority of the Independent Director Candidate Recommendation Committee are

independent directors, so that the BOD can function independently of the management and controlling

shareholder.

(Principle 4-②)

The BOD should be composed of competent persons in terms of knowledge and careers with different areas of expertise

and responsibilities who can actually contribute to management of the company.

A) Company Policy for Securing Expertise, Responsibilities and Diversity (appointing female directors, etc.)

Our company complies with the "principle of diversity” in forming the BOD in order to prevent it from

having a majority of members from a specific common background or representing certain interests. In

actual operation of the BOD, our company is trying to recruit people from various areas of expertise

without any restriction on ages or genders so as to prevent the BOD from tilting towards specific

backgrounds or professions. As the independent directors are composed of experts from industrial,

financial/accounting and administrative fields, the BOD can perform sound deliberation of the agendas

suggested to it based on various personal backgrounds and areas of expertise and effectively monitor how

the management conducts its business.

B) Director Appointments and Changes Between Start of Previous Business Year and Present

(Table 4-2-1) Director appointments and changes

28

Classification Name

Initial

Appointment

Date

Term Expiration

Date Change Date

Change

Reason*

Currently Active

or Not

Independent

director

Ju Jong-nam 2010.3.19 2019.3.15 2017.3.16 Resigned Retired

Lee Chang-woo 2013.3.15 2019.3.15 2019.3.15 Term expired Retired

Baek Yong-ho 2017.3.17 2020.3.16 2017.3.17 First term Active

Choi Jun-keun 2015.3.19 2021.3.15 2018.3.16 Reappointed Active

Lee Sang-gu 2019.3.15 2022.3.14 2019.3.15 First term Active

Kim Dae-hyung 2016.3.18 2022.3.14 2019.3.15 Reappointed Active

Non-executive

director

Koo Bon-joon 2017.3.17 2020.3.16 2019.3.14 Resigned Retired

Kwon Young-su 2019.3.15 2022.3.14 2019.3.15 First term Active

Executive director

Jeong Do-hyeon 2008.3.14

2017.3.16 2017.3.15 Reappointed Active

2019.3.16 2019.3.15 Reappointed Active

Jo Seong-jin 2016.3.18 2018.3.17 2018.3.16 Reappointed Active

Jo Joon-ho 2016.3.18 2019.3.17 2017.3.16 Resigned Retired

C) Securing Competitiveness of BOD Members

As the BOD is composed of experts from industrial, financial/accounting and administrative fields, the BOD

can perform sound deliberation of the agendas suggested to it based on various personal backgrounds and

areas of expertise and effectively monitor how the management conducts its business.

(Principle 4-③)

During the processes of recommending and appointing directors, fairness and independence should be ensured.

A) Status of Independent Director Candidate Recommendation Committee

For our company to ensure fairness and independence in appointing its independent directors, the

Independent Director Candidate Recommendation Committee strictly inspects the candidates for their

appropriateness in executing the given tasks in terms of independence, expertise, etc. based on stipulations

of the related laws such as Article 382, Paragraph 3 and Article 542-8, Paragraph 2 of the Commercial Act

and the regulations of the Independent Director Candidate Recommendation Committee, and then the

independent directors are appointed in the general shareholders’ meeting. The Independent Director

Candidate Recommendation Committee is composed of executive director Jo Seong-jin, independent director

Lee Chang-woo, and independent director Kim Dae-hyung. One committee meeting was held during the public

disclosure period.

29

However, on June 3, 2019, which is the report submission date, the Independent Director Candidate

Recommendation Committee is composed of executive director Jo Seong-jin (president), independent

director Choi Jun-keun, and independent director Baek Yong-ho.

B) Providing Shareholders with Director Candidates’ Information

Our company provides the shareholders with detailed information of director candidates through official

notification at least three weeks before the general shareholders’ meeting in order to secure an enough

amount of time for review and consideration.

(Table 4-3-1) Director candidate information provided before general shareholders’ meeting

Date of

Providing

Information

Date of

General

Shareholders’

Meeting

Director Candidate

Information Provided Classification Name

2018.2.22

(22 days

before

general

shareholders’

meeting)

2018.3.16

Executive Jo Seong-jin

1. Candidate’s name, date of birth, recommender,

relationship with the largest shareholder,

executive/independent director status

2. Candidate’s main business, outline of career,

transactions with the corporation in the past three

years

Independent Choi Jun-keun

2019.2.18.

(25 days

before

general

shareholders’

meeting)

2019.3.15

Executive Jeong Do-hyeon

Independent Lee Sang-gu

Kim Dae-hyung

Non-executive Kwon Young-su

C) Providing Past BOD Activities of Director Candidates for Reappointment

The past BOD activities of the director candidates can be found on the quarterly business reports, and the

BOD attendance records of the reappointed independent and non-executive directors have been notified in

the general shareholders’ meeting notification. Especially the BOD activity information of reappointed

independent directors is sufficiently provided including BOD attendance rate, votes for/against rates on BOD

agendas, and activities in committees under the BOD.

D) Adoption of Concentrated Voting System

Our company does not adopt the concentrated voting system but guarantees the rights of minority

shareholders to recommend director candidates in accordance with the Commercial Act. However, there

has been no recommendation of director candidates from minority shareholders in the general shareholders’

meetings in the past three years.

Since adoption of the concentrated voting system may end up deteriorating the business performance

through pursuit of personal gains such as domination of the BOD by speculative funds rather than

strengthening the rights of minority shareholders, the company currently does not plan to implement the

system.

30

E) Fairness and Independence in Appointing Directors

With the Independent Director Candidate Recommendation Committee performing its functions and the

shareholders receiving sufficient information of director candidates an appropriate amount of time before

the shareholder meetings, the fairness and independence in the processes of recommending and appointing

director candidates are secured.

(Principle 4-④)

Anyone who is responsible for damaging company values or violating the rights of shareholders should not be appointed

as a director.

A) Director Status (including unregistered directors)

The following is the status of directors as of May 1, 2019.

Classification No. of Persons

Registered director

CEO 2

Non-executive

director 1

Audit member 3

Independent

director 1

Subtotal 7

Unregistered director 327

Total number of directors 334

For detailed status of directors, refer to First Quarter Report VIII. Details of Executives and Employees, - 1.

Status of Executives and Employees, - A. Status of Executives. (The above numbers take into account all

the directors who were appointed or resigned after the first quarter and before May 1.)

B) Policy of Preventing Appointment of Those Responsible for Damaging Company Values or Violating

Shareholders’ Rights

In appointing directors (including unregistered directors) in accordance with the internal regulations, the BOD

carries out collective deliberation of quantitative/qualitative outcomes, capacity/expertise, growth potential,

etc. The company excludes any candidates from such deliberation who have issues in the area of Jeong Do

Management (ethical/regulatory) or have caused a quality or environmental problems in order to prevent

appointment of those responsible for harming the company values or violating the shareholders’ rights. Also,

those who have been penalized with a more severe action than penitentiary seclusion according to the

disciplinary policies are banned from promotion or any appointments within a certain period.

Especially, for independent directors, the Independent Director Candidate Recommendation Committee only

recommends candidates who meet the requirements stipulated in the related laws such as Article 382,

Paragraph 3 and Article 542-8, Paragraph 2 of the Commercial Act and the regulations of the Independent

Director Candidate Recommendation Committee. Through such a policy, only those who have been verified

to have the qualifications and capabilities are considered to become directors in the general shareholders’

meetings. Also, since Article 542-8, Paragraph 2, Clause 3 of the Commercial Act stipulates that those for

31

whom two years have not elapsed since full execution of or exemption from a sentence of imprisonment or

a more severe one cannot be an independent director of a listed company, any possibility for persons who

have been criminally charged with embezzlement, breach of trust, or other acts of harming the company’s

values or violating the shareholders’ rights is fundamentally blocked.

C) History of Persons with Records of Embezzlement or Breach of Trust Being Appointed as Director

Since the internal regulations stipulate that “degrading the company’s reputation by being indicted or causing

other social disruptions” is a justified cause of a heavy penalty, persons with such a charge cannot be

promoted or recommended as a candidate for director for a certain period of time and there is no precedent

of a person charged with embezzlement or breach of trust being appointed as a director.

D) Adoption of System of Executive Directors

Although the company does not adopt the system of executive directors stated in Article 408-2 of the

Commercial Act, it seeks efficiency through the collective exercise of executive authority such as decision-

making and supervision through the BOD and CEOs. Therefore, the company does not currently plan to

implement the system of executive directors.

(Key Principle 5) Responsibilities of Independent Directors

The independent directors should be able to independently participate in making decisions regarding the company’s

business management policies and supervise or support the management as a member of the BOD.

(Principle 5-①)

An independent director should not be in an important relation of interest with the company, and the company

should identify any such relation during the process of appointing directors.

A) History of Independent Directors Holding Office in Company (including affiliates)

The current active independent directors have no history of holding an office in our company or its

affiliates.

B) History of Transactions (past three business years) Between Independent Directors and Company

(including affiliates)

(Table 5-1-1) Relationship between independent directors and company and its affiliates as of the date of

submission of report

Name History of Holding Office Transactions in Past 3 Business Years

Company Company’s Affiliate Company Company’s Affiliate

Choi Jun-keun None None None None

Kim Dae-hyung None None None None

Baek Yong-ho None None None None

Lee Sang-gu None None None None

C) Procedure of Identifying Interests Between Independent Directors and Company and Related Internal

32

Regulations

Through conducting interviews with and asking questions from the director candidates, the company first

confirms the facts regarding the above-mentioned items, then by using the internal accounting system, it

checks for the transactions with the company.

D) Independent Directors’ Terms in Office

The following table shows the terms in office of the current active independent directors. There is no

independent director who has hold office for longer than six years as of the date of submission of the

report.

(Table 5-1-2) Terms in office of independent directors active as of submission date of the report and

reasons for holding office for longer than 6 years

Name Term in Office Reasons for Holding Office for Longer

than 6 Years

Choi Jun-keun 4 years and 2 months

Not applicable Kim Dae-hyung 3 years and 2 months

Baek Yong-ho 2 years and 2 months

Lee Sang-gu 2 months

E) Important Relationship of Interest Between Independent Directors and Company and Policy for

Appointing Those with No Relationship of Interest in Company

The human resources and legal affairs departments of our company thoroughly verify qualifications of

candidates for independent directors (Article 382 and Article 542-8 of the Commercial Act and Article 28-

2 of the Articles of Incorporation) so that no persons with interests in the company can be appointed as a

director.

According to the requirements for qualification, a candidate for independent director should not fall under

any of the reasons for disqualification in the Commercial Act, and the company should ensure independence

of the management through verification of the candidates including transactional relationships with the

company and kinship with the management members and provide the conditions necessary for the

independent directors to do their jobs.

(Principle 5-②)

The independent directors should put in enough time and efforts to fulfill their duties faithfully, and the company should

provide the independent directors with the information, resources, etc. necessary for them to execute their jobs.

A) Regulation for Independent Directors’ Holding Office in Another Company

Our company permits independent directors to hold office of independent director in one additional

company other than our company in accordance with Article 34 for the Commercial Act. Regarding this

matter, there is no separate internal policy.

B) Status of Independent Directors Holding Offices in Multiple Companies as of Submission Date of Report

(Table 5-2-1) Status independent directors holding offices in multiple companies as of the date of

submission of report

33

Name

(audit

member)*

Initial

Appointme

nt Date

Term

Expiration

Date

Current Office

Status of Holding Offices in Multiple Companies

Institution Job in

Institution

Term in Office

in Institution

Listing Status

of Institution

Choi Jun-

keun

(audit

member)

2015.3.19 2021.3.15 - - - - -

Kim Dae-

hyung

(audit

member)

2016.3.18 2022.3.14 - Nasol Systems

Co., Ltd.

Executive

director

Jan. 18,

2017-Present Unlisted

Baek Yong-

ho

(audit

member)

2017.3.17 2020.3.16

Professor of

Graduate School of

Policy Sciences in

Ehwa Woman’s

University

- - - -

Lee Sang-gu 2019.3.15 2022.3.14

Professor of

Department of

Computer Science

and Engineering in

Seoul National

University

SK Gas Ltd. Independent

director

Mar. 26,

2018-Present

Listed

(KOSPI)

C) Holding Regular and Extraordinary Meetings for Independent Directors Only and History

Our company holds meetings exclusively for independent directors and without executive directors for prior

report of agendas of regular BOD meetings or the Audit Committee, where the directors are briefed on the

agendas by the relevant executives or on-site members to discuss the matters. The following are the

details of meetings held exclusively for the independent directors from the start of the business year

immediately before the public disclosure period up to the disclosure filing date.

(Table 5-2-2) Meeting history with only independent directors

Nth Meeting Regular/Extraordinary Date and

Time

No. of

Directors

Who

Attended

Major Discussion Points

1st Regular 2018.1.19 1 Agendas of the BOD meeting and Audit Committee

meeting in January 2018.1.22 2

2nd Regular 2018.2.20 3 Agendas of the BOD meeting and Audit Committee

meeting in February

3rd Regular 2018.3.14 3 Agendas of the BOD meeting in March

4th Regular 2018.4.23 3 Agendas of the BOD meeting and Audit Committee

meeting in April

5th Extraordinary 2018.5.18 3 Agendas of the BOD meeting in May


meeting in July


meeting in October

8th Regular 2018.11.26 3 Agendas of the BOD meeting in November

9th Extraordinary 2018.12.20 3 Agendas of the BOD meeting in December

1st Regular 2019.1.28 3 Agendas of the BOD meeting and Audit Committee

meeting in January

2nd Regular 2019.2.15 3 Agendas of the BOD meeting and Audit Committee

34

Nth Meeting Regular/Extraordinary Date and

Time

No. of

Directors

Who

Attended

Major Discussion Points

meeting in February

3rd Regular 2019.3.13 2 Agendas of the BOD meeting and Audit Committee

meeting in March 2019.3.14 1


meeting in April 2019.4.26 2

D) Independent Directors’ Investing Enough Time and Efforts for Faithful Execution of Jobs

As stated above, our company does not allow its independent directors to hold offices in three or more

companies at a time. The independent directors are investing enough amounts of time and efforts to

sincerely execute their jobs such as in discussing necessity and adequacy of the agenda items to be

proposed in the BOD meeting and Audit Committee.

E) Procedure of Providing Information of Independent Directors and Personal and Physical Resources and

Detailed Status of Such Provision

Our company informs the newly appointed independent directors of its business performance status

through an orientation. The company holds an internal orientation on the overall status of the company and

matters related to operation of the BOD, etc. under the supervision of the BOD Secretariat. Besides, LG

Economic Research Institute holds external education sessions on the roles and legal responsibilities of the

directors. For independent director Lee Sang-gu, who was appointed in March, 2019, the company held an

internal orientation in last February and an external education session in April. After the orientation, the

independent directors are continuously provided with data on the company’s business status and reported

on the main agenda for their better understanding of the company’s businesses. For the independent

directors to experience the sites first-hand, the company annually gives them the opportunity to go on

observation visits of the major domestic and overseas business sites. In October, 2018, the independent

directors visited Austria to have an opportunity to understand the business status of Austria’s ZKW, which

our company had acquired, share the management principles of the head office, review the outcomes in the

European region, and inspect the current status of subsidiary management. For explanations and

discussions of agendas for independent directors prior to the BOD meeting, refer to table C) above.

F) Designating Departments Responsible for Responding to Independent Directors’ Request for Information,

etc.

Our company has the BOD Secretariat installed to support smooth operation of the BOD and committees

under the BOD in accordance with Article 17 of the BOD regulations. The BOD Secretariat of the company

is composed of one executive and two on-site managers and performs tasks such as giving prior

explanations of the BOD agendas to the independent directors and providing support for the requests of

the independent directors necessary for them to execute their jobs.

G) Provision of Information and Resources Needed for Independent Directors to Execute Their Jobs

As stated above, our company supports the independent directors so that they can make decisions that

conform to the benefits of the company and its shareholders, by providing newly appointed directors with

the business status early on, giving the independent directors an opportunity to make an observation visit

of domestic and overseas business sites, explaining the BOD agendas in advance through a designated

department (BOD Secretariat), etc. to provide sufficient information and resources needed for executing

35

their jobs.

(Key Principle 6) Assessment of Independent Directors’ Activities

To motivate the independent directors to execute their jobs more actively, their activities should be fairly evaluated,

and their compensations and reappointment should be determined according to the assessment results.

(Principle 6-①)

Assessment of the independent directors should be based on their individual performance, and their compensations

should be determined at an appropriate level by taking into account the responsibilities, risk levels, amount of time

invested in carrying out the jobs.

A) Assessment of Independent Directors’ Activities

The activities of an independent director approaching expiration of the term in office are evaluated in order

to determine the confidence level in the person for reappointment. The current assessment method is to

reflect opinions of the executive directors on each assessment item. Specifically, the personnel department

or BOD Secretariat conducts collective assessment on attendance at the board meetings, whether or not

the director has made practical suggestions on the agendas presented at such meetings, whether or not

he/she has provided proper advice on major business decisions as an expert in the field, ability to internally

control important financial risks of the company as an auditor, and contribution to operation of the

supervision system in order to make internal decision on reappointment.

Our company regularly conducts collective assessment of independent directors’ activities based on the

internal criteria such as meeting attendance, activities status, independence, etc. and does not hold

separate external assessment.

B) Compensation to Independent Directors

Compensations to the independent directors are determined through proposals made in the BOD meetings

and general shareholders’ meetings in accordance with the laws and do not include stock option. Our

company does not pay “allowances (including bonuses and severance pay)” but makes a fixed amount of

payment for holding meetings and carrying out other tasks as an independent director.

The compensation to an independent director in 2018 was 84 million won, which was equally applied to

every independent director. The company maintains the policy of making compensations at an appropriate

level considering the industry average and contribution levels.

(Principle 6-②)

The independent directors assessment results should be reflected in compensation calculation and reappointment

determination.

The results of independent directors assessment are used as a basis for determining reappointments.

However, since every independent director should be treated equally and fairly, the company does not apply

the assessment results in discriminatory ways.

36

(Key Principle 7) Operation of BOD

The BOD should be operated in efficient and reasonable manners so that the best management decisions can be made

for the benefits of the company and shareholders.

(Principle 7-①)

In principle, the BOD should be held regularly, and BOD operation rules should be established which stipulate the BOD’s

roles and responsibilities and operation procedures in detail.

A) Regulations on Regular BOD Meetings (the Article of Incorporation and the BOD regulations)

In accordance with Article 8 of the company’s BOD regulations, the BOD should hold a meeting once a

quarter. However, a general shareholders’ meeting is held every month from January to March, considering

the duty to submit financial statements to the Audit Committee six weeks before the general shareholders’

meeting, and receive approval for the statements, as stipulated in Article 447, Paragraph 3 of the

Commercial Act, obtain prior approval of the BOD for agendas to be approved by the general shareholders’

meetings, and notify the regular general shareholders’ meeting held in March. Also, whenever necessary,

such as when a proposal is made in a irregular BOD meeting, an extraordinary BOD meeting may be held.

The chairperson convenes every BOD meeting in accordance with Article 9, Paragraph 1 of the BOD

regulations. According to Article 10, Paragraph 1 of the BOD regulations, the chairperson should announce

meeting to each director 12 hours before the BOD meeting. If agreed upon by the entire BOD, such a

procedure of convening the board may be skipped. Also, any director unable to physically attend the

meeting may attend it via a remote communication means.

B) Regular/Extraordinary BOD Meetings, etc.

(Table 7-1-1) BOD meetings from the start of the business year immediately before the public disclosure

period up to the disclosure filing date

` Regular/

Extraordinary Meeting Date

Agenda

Notification

Date

No. of

Attendees/Quorum

Agenda Passed/

Rejected Classification Description

1st Regular 2018.1.23 2018.1.17 7/7 Approval

1. Approving the 16th financial

statements and business report

Passed

2. Approving the business plan

of 2018

3. Approving the limit amount of

total transactions with affiliate

persons for 2018

4. Approving the annual loan

amount limit for 2018

5. Approving the royalty with an

overseas production

subsidiary

6. Approving self-dealings by

directors, etc. (annual

performance∙plan)

7. Appointing members of the



8. Appointing the compliance

37

` Regular/


Agenda

Notification

Date

No. of

Attendees/Quorum

Agenda Passed/


officer

9. Approving appointment of

executive officers

10. Approving maintenance of a

consultant advisor contract

Reporting

1. Reporting the business

performance of the 4th quarter

of 2017 Reporting

2. Reporting the operation

status of the internal accounting

management policy

2nd Regular 2018.2.22 2018.2.14 7/7

Approval

1. Resolutions of the regular

general shareholders’ meeting

Passed

2. Resolution on the proposed

agenda of the regular general

shareholders’ meeting

(1) Approving the 16th financial

statements

(2) Appointing directors

(3) Appointing members of the

Audit Committee

(4) Appointing the director

compensation limit



Reporting

1. Reporting the result of

evaluating the operation status

of the internal accounting

management policy Reporting


inspecting observance of the

compliance standards

3. Reporting CSR activities

3rd Regular 2018.3.16 2018.3.14 7/7 Approval

1. Appointing the chairperson

of the BOD

Passed

2. Appointing the CEO


Business Management

Committee

4. Approving the amendment of

the human resources

management regulations for

executive officers

5. Approving the director

compensations for 2018

6. Approving the fund for

payment of special bonuses to

executive officers

7. Approving full-time

advisor/consultant

appointments

8. Approving goals for special

prizes (short-term) to executive

officers for 2018

38

` Regular/


Agenda

Notification

Date

No. of

Attendees/Quorum

Agenda Passed/


9. Approving LG Electronics

Fund I investments

10. Approving the lease

contract of LG Twin Tower

4th Regular 2018.4.26 2018.4.25 7/7

Approval

1. Approving the guarantee of

payment for a subsidiary

Passed

2. Approving

transfer/acquisition of shares

3. Approving conclusion of a

contract between shareholders



Reporting


performance of the 1st quarter

of 2018

Reporting

5th Extraordinary 2018.5.29 2018.5.25 7/7 Approval

1. Approving

transfer/acquisition of shares

Passed

2. Approving

transfer/acquisition of

businesses



6th Regular 2018.7.24 2018.7.16 6/7

Approval

1. Approving participation in

recapitalization of LG Fuel Cell

Systems Approval



Reporting


performance of the 2nd quarter

of 2018 Reporting

2. Reporting the outcome of

self-dealings by directors, etc.

(half-year performance report)

7th Regular 2018.10.23 2018.10.19 6/7

Approval

1. Approving share acquisition

from establishment of JV

Passed


recapitalization of the

subsidiary in Turkey


recapitalization of the

subsidiary in Argentina

4. Approving personnel affairs

of executive officers



Reporting


performance of the 3rd quarter

of 2018

Reporting

8th Regular 2018.11.28 2018.11.22 6/7 Approval

1. Approving renewal of the LG

trademark use contract

Passed 2. Approving renewal of the

lease contract of LG Twin

Tower

3. Approving the regular

39

` Regular/


Agenda

Notification

Date

No. of

Attendees/Quorum

Agenda Passed/


personnel affairs of executive

officers for 2019

Reporting

1. Reporting the status of

recruiting special service

officials for 2018

Reporting

9th Extraordinary 2018.12.21 2018.12.20 6/7

Approval

1. Approving disciplinary

dismissal of executive officers

Passed 2. Approving appointment of

executive officers

3. Approving the lump-sum

payment to retiring executives

Reporting


liquidation of LG Fuel Cell

Systems

Reporting

1st Regular 2019.1.29 2019.1.24 6/7

Approval

1. Approving the 17th financial

statements and business report

Passed

2. Approving the business plan

of 2019

3. Approving the limit amount

of total transactions with

affiliate persons for 2019

4. Approving the annual loan

amount limit for 2019

5. Approving self-dealings by

directors, etc. (annual

performance∙plan)


the Audit Committee

regulations


the Independent Director

Candidate Recommendation

Committee regulations


the internal accounting

management regulations




Reporting


performance of the 4th quarter

of 2018 Reporting

2. Reporting the operation

status of the internal

accounting management policy

2nd Regular 2019.2.18 2019.2.13 6/7 Approval

1. Resolutions of the regular

general shareholders’ meeting

Passed

2. Resolution on the proposed

agenda of the regular general

shareholders’ meeting

(1) Approving the 17th financial

statements

(2) Approving the amendment

of the Articles of Incorporation

40

` Regular/


Agenda

Notification

Date

No. of

Attendees/Quorum

Agenda Passed/


(3) Appointing directors

(4) Appointing members of the

Audit Committee

(5) Appointing the director

compensation limit

Reporting


evaluating the operation status

of the internal accounting

management policy Reporting


inspecting observance of the

compliance standards

3rd Regular 2019.3.15 2019.3.11 7/7 Approval

1. Appointing the CEO

Passed


Business Management

Committee


the human resources

management regulations for

executive officers

4. Approving the director

compensations for 2019

5. Approving the fund for

payment of special bonuses to

executive officers


advisor/consultant

appointments




the BOD operation-related

regulations

9. Approving the purchase of

shares in airplanes

10. Appointing the chairperson

of the BOD

4th Regular 2019.4.29 2019.4.26 7/7

Approval

1. Approving change of the

basis for providing special

bonuses to executive officers

Passed

2. Approving goals for special

prizes (short-term) to executive

officers for 2019


consultant appointments


consultant contract

Reporting


performance of the 1st quarter

of 2019

Reporting

C) Notifying BOD Meeting Early Enough Before Meeting

In order for the directors to make the best decisions during deliberation and approval processes of the

proposed agendas, our company provides prior explanations on each agenda item and conducts face-to-

41

face questioning before the day of BOD meeting and sincerely responds to the directors’ requests for

additional data. The company is making its best efforts to achieve soundness in deliberation of the BOD

agendas and efficient operation of the BOD.

D) Holding Regular BOD Meetings and BOD Operation Regulations

For the regular BOD meetings mentioned above, our company applies a systematic BOD operation

regulations.

(Principle 7-②)

The BOD should write detailed meeting minutes in each meeting and disclose the activity details such as the attendance

rate of the directors and votes for/against rates for each agenda item.

A) Writing and Preserving Detailed BOD Minutes and Transcripts

Regarding the proceeding of the BOD meetings, in accordance with Article 391-3, Paragraph 1 of the

Commercial Act, the BOD Secretariat should write minutes which include the agenda, deliberation results,

objections and reasons for the objections, and the present directors should sign or seal the document.

However, the directors are not obligated to write transcripts of the meetings.

B) BOD Meeting Attendance of Each Director

(Table 7-2-1) Attendance of Each Director

Classific

ation

Nth

Meeting 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 1st 2nd 3rd 4th

Meeting

Date

Jan., 23,

2018

Feb.,

22,

2018

Mar.,

16,

2018

Apr.,

26,

2018

May,

29,

2018

Jul., 24,

2018

Oct., 23,

2018

Nov., 28,

2018

Dec., 21,

2018

Jan., 29,

2019

Feb., 18

2019

Mar., 15,

2019

Apr., 29,

2019

Executi

ve

Jo Seong-

jin

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend

ed Attended Attended Attended Attended Attended Attended Attended

Jeong Do-

hyeon

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend


Indepen

dent

Lee

Chang-

woo

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend

ed Attended Attended Attended Attended Attended

Not

applicable

Not

applicable

Choi Jun-

keun

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend


Kim Dae-

hyung

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend


Baek

Yong-ho

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend


Lee Sang-

gu

Not

applica

ble

Not

applica

ble

Not

applica

ble

Not

applica

ble

Not

applica

ble

Not

applica

ble

Not

applicable

Not

applicable

Not

applicable

Not

applicable

Not

applicable Attended Attended

Other

Non-

executi

ve

Koo Bon-

joon

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend

ed

Attend

ed Absent Absent Absent Absent Absent

Not

applicable

Not

applicable

Kwon

Young-su

Not

applica

ble

Not

applica

ble

Not

applica

ble

Not

applica

ble

Not

applica

ble

Not

applica

ble

Not

applicable

Not

applicable

Not

applicable

Not

applicable

Not

applicable Attended Attended

(Table 7-2-2) Attendance rates and vote-for rates of each director in past three business years

42

Name Classification Term in Office

Attendance Rate (%) Vote-for Rate (%)

Average

During

Term in

Office

Recent 3 Years* Average

During

Term in

Office

Recent 3 Years

2018 2017 2016 2018 2017 2016

Hong Man-

pyo

Independent

2015.3.19

∼

2016.5.31

100 - - 100 100 - - 100

Ju Jong-

nam

2010.3.19

~

2017.3.16

100 - 100 100 100 - 100 100

Lee Chang-

woo

2013.3.15

~

2019.3.15

100 100 100 100 100 100 100 100

Choi Jun-

keun

Mar. 19, 2015-

Present 100 100 100 100 100 100 100 100

Kim Dae-

hyung

Mar. 18, 2016-

Present 100 100 100 100 100 100 100 100

Baek Yong-

ho

Mar. 17, 2017-

Present 100 100 100 - 100 100 100 -

Lee Sang-

gu

Mar. 15, 2019-

Present 100 - - - 100 - - -

Jo Seong-jin

Executive

Mar. 18, 2016-

Present 100 100 100 1000 100 100 100 100

Jeong Do-

hyeon

Mar. 14, 2008-

Present 100 100 100 100 100 100 100 100

Jo Joon-ho 2016.3.18 ~

2017.3.16 100 - 100 100 100 - 100 100

Koo Bon-

joon

Executive

2011.3.18

~

2017.3.17

100 - 100 100 100 - 100 100

Non-

executive

2017.3.17

~

2019.3.14

65 56 100 - 100 100 100 -

Kwon

Young-su

Mar. 15, 2019-

Present 100 - - - 100 - - -

*Among the recent three years, the years not included in the director’s term in office are marked with “-”.

C) Recording Main Discussion Points and Resolutions for Each Director

Our company collectively organizes the overall discussed issues and resolutions from the BOD meetings on

the meeting minutes, but does not record such issues for each director.

(Key Principle 8) Committees Under BOD

For its efficient operation, the BOD should install committees under it which perform certain functions and roles.

43

(Principle 8-①)

More than half of each committee under the BOD should be composed of independent directors. The Audit Committee

and Compensation Committee should each be entirely composed of independent directors.

A) Installation, Main Roles and Composition of Committees Under BOD

Our company’s BOD has three committees installed under it, namely the Audit Committee, Independent

Director Candidate Recommendation Committee and Business Management Committee. Among them,

installation of the Audit Committee and Independent Director Candidate Recommendation Committee is

mandatory as stipulated by the related laws such as the Commercial Act. Installation of the Business

Management Committee was decided by the BOD at its discretion in order to enhance the expertise,

independence and efficiency of the BOD.

a. Audit Committee

Our company has the Audit Committee installed in accordance with Article 542-11 of the Commercial Act.

All of the three auditing members of the committee are independent directors. For details of the Audit

Committee’s rights, operation status and supporting auditing bodies, refer to 4. Auditing Bodies - 1)

Internal Auditing Bodies.

b. Independent Director Candidate Recommendation Committee

Our company has the Independent Director Candidate Recommendation Committee installed and operates

it in accordance with Article 542-8, Paragraph 4 of the Commercial Act and Article 28-2 of the Articles of

Incorporation in order to recommend candidates for independent directors. In order to secure fairness and

independence in appointing independent directors and operating the Independent Director Candidate

Recommendation Committee, more than half of the committee is composed of independent directors—two

independent directors and one executive director—in accordance with the Commercial Act and the

Independent Director Candidate Recommendation Committee regulations.

c. Business Management Committee

In accordance with Article 33 of the Articles of Incorporation and Articles 13 and 14 of the BOD

regulations, the company entrusts the Business Management Committee with matters to be delegated by

the BOD and other usual business matters in order to flexibly respond to changes in the business

environment and interest rates and promote concentrated and efficient operation of the BOD.

B) Appointing Independent Directors for Majority of Each Committee (entirety of Audit Committee and

Compensation Committee) Under BOD

The Audit Committee is entirely composed of independent directors, and more than half of the Independent

Director Candidate Recommendation Committee is composed of independent directors. However, the

Business Management Committee is entirely composed of executive or non-executive directors due to its

nature of making every day business decisions.

(Principle 8-②)

All matters regarding organization, operation and rights of each committee should be expressly stipulated in writing,

and each committee should report its resolutions to the BOD.

A) Installation Purposes, Rights and Responsibilities of Committees, Committee Activities During Public

44

Disclosure Periods and Performance Assessment, Composition of Committees, and Qualifications and

Appointments/Dismissal of Committee Members

The Audit Committee audits the accounts and businesses of the company, for which it may request

business reports from the directors or investigate the status of businesses and assets of the company at

any time it wishes. During the public disclosure period, the Audit Committee meeting was held five times in

which the main business tasks were audited, the operation status of internal accounting management

policy was evaluated, and the operation status of the internal supervision system was inspected in order to

supervise execution of duties by the directors and management. Members of the Audit Committee are

appointed in general shareholders’ meetings, and they should meet the qualifications stipulated in the

Commercial Act.

The Independent Director Candidate Recommendation Committee has the right to recommend candidates

for independent directors. During the public disclosure period, the Independent Director Candidate

Recommendation Committee meeting was held once, where independent director candidates’ qualifications

and capabilities were evaluated and recommendations were made. Members of the Independent Director

Candidate Recommendation Committee are appointed in general shareholders’ meetings, and they should

meet the qualifications stipulated in the Commercial Act.

The Business Management Committee has the right to carry out deliberations and voting on matters

delegated by the BOD and other usual management issues. The Business Management Committee meeting

was held 15 times during the public disclosure period in order to improve quickness of making usual

business decisions. The BOD appoints members of the Business Management Committee, and the members

should be appointed among the board directors.

B) Reporting Resolutions by Committees to BOD

In accordance with Article 393-2, Paragraph 4 of the Commercial Act; Article 12 of the Audit Committee

regulations; Article 12 of the Independent Director Candidate Recommendation Committee regulations;

and Article 13 of the Business Management Committee regulations, all resolutions of all the committees

should be reported to the board directors.

C) Meetings Held by Each Committee and Attendance Rate of Each Director in Past Three Business Years

Table 8-2-1 provides the meetings held by the committees between January 1, 2018 and June 3, 2019 as

well as the attendance rate of each director in the past three business years.

(Table 8-2-1) Meetings held by committees under BOD

(A) Independent Director Candidate Recommendation Committee

(i) Meetings held from the start of the business year immediately before the public disclosure period up to

the disclosure filing date

Nth

Meeting

Meeting

Date

No. of

Attendees/Quorum

Agenda Passed/Rejected

Classification Description

1st 2018.2.22 3/3 Approval Recommendations of independent director

candidates Passed

1st 2019.2.18 3/3 Approval Recommendations of independent director

candidates Passed

(ⅱ) Attendance rate of each director in the past three business years

45

Classification Name Term in Office

Attendance Rate (%)

Average

During Term

in Office

Recent 3 Years*

2018 2017 2016

Independent Hong Man-pyo

2016.1.29

∼

2016.5.31

100 - - 100

Independent Choi Jun-keun

2015.3.19

~

2018.1.23

100 - 100 100

Independent Kim Dae-hyung

2017.1.24

~

2019.1.29

100 100 100 -

Independent Lee Chang-woo

2018.1.23

~

2019.3.15

100 100 - -

Executive Jo Seong-jin

2018.1.23

~

Present

100 100 - -

Independent Baek Yong-ho Jan. 29, 2019-

Present 100 - -


(B) Business Management Committee

(i) Meetings held from the start of the business year immediately before the public disclosure period up to

the disclosure filing date

Nth

Meeting

Meeting

Date

No. of

Attendees/Quorum

Agenda Passed/R

ejected Classification Description

1st 2018.1.1

7 3/3 Resolution

(Shinhan Bank) Agreement on the corporate credit

limit transactions Passed

2nd 2018.1.3

0 3/3

Resolution

(Woori Bank) Agreement on the limit on

guarantees in a foreign currency for overseas

subsidiaries

Passed

Resolution LG Electronics Co., Ltd. Issuance of the 88th

unguaranteed private placement bond Passed

3rd 2018.2.14 3/3 Resolution (Kookmin Bank) Agreement on the corporate

credit limit transactions Passed

4th 2018.3.15 3/3

Resolution (Shinhan Bank) Extension of the agreement on

payment guarantee limit for overseas subsidiaries Passed

Resolution LG Electronics Co., Ltd. Issuance of the 89th


Resolution (Korea Development Bank) Extension of the

agreement on the export bond-secured loan limit Passed

5th 2018.3.29 3/3 Resolution LG Electronics Co., Ltd. Issuance of the 90th


46

Nth

Meeting

Meeting

Date

No. of

Attendees/Quorum

Agenda Passed/R


6th 2018.4.19 3/3

Resolution (Standard Chartered Bank Korea) Extension of the

credit line agreement Passed

Resolution

(Australia and New Zealand Banking Group)

Extension of the agreement on the export bond-

secured loan limit

Passed

7th 2018.5.10 3/3

Resolution LG Electronics Co., Ltd. Issuance of the 91-1, 91-2,

and 91-3 unguaranteed public placement bonds Passed

Resolution (Kookmin Bank) Extension of the agreement on

the export bond-secured loan limit Passed

Resolution (Crédit Agricole CIB) Extension of the agreement

on the export bond-secured loan limit Passed

8th 2018.5.16 3/3

Resolution (KEB Hana Bank London Branch) Variable interest

rate foreign currency loans Passed

Resolution (KEB Hana Bank) Extension of the credit line

agreement Passed

Resolution

(Woori Global Markets Asia Limited) Issuance of

foreign currency-denominated private placement

bonds based on variable interest rates

Passed

9th 2018.6.14 3/3

Resolution (KEB Hana Bank) Agreement on the corporate


Resolution (Industrial Bank of Korea) Agreement on the

corporate credit limit transactions Passed

Resolution (Export-Import Bank of Korea) Loan agreement Passed

10th 2018.7.3 3/3 Resolution (MUFG Bank) Credit limit agreement Passed

11th 2018.7.24 2/3 Resolution (Shinhan Bank) Credit limit agreement Passed

12th 2018.8.1 2/3

Resolution (MUFG Bank) Credit limit agreement Passed

Resolution (The Bank of Nova Scotia) Credit limit agreement Passed

Resolution (Woori Bank) Credit limit agreement Passed

13th 2018.10.8 2/3

Resolution (KEB Hana Bank) Credit limit agreement Passed

Resolution (NH Bank) Credit limit agreement Passed

14th 2018.11.21 2/3 Resolution (Societe Generale) Credit limit agreement Passed

15th 2018.12.21 2/3

Resolution (Bank of China) Credit limit agreement Passed

Resolution (ING Bank) Credit limit agreement Passed

Resolution (Deutsche Bank) Credit line agreement Passed

Resolution Foreign currency loan Passed

47

Nth

Meeting

Meeting

Date

No. of

Attendees/Quorum

Agenda Passed/R


1st 2019.1.4 2/3 Resolution (Shinhan Bank) Agreement on the corporate credit


2nd 2019.1.29 2/3 Resolution

LG Electronics Co., Ltd. Issuance of the 93-1, 93-2,

93-3, and 93-4 unguaranteed public placement

bonds

Passed

3rd 2019.2.11 2/3

Resolution (Kookmin Bank) Agreement on the corporate


Resolution (Woori Bank) Extension of the agreement on

payment guarantee for overseas subsidiaries Passed

4th 2019.3.8 2/3

Resolution (Korea Development Bank) Credit limit agreement Passed

Resolution (Shinhan Bank) Extension of the agreement on

payment guarantee limit for overseas subsidiaries Passed

5th 2019.4.1 3/3

Resolution Issuance of unguaranteed private placement bonds Passed

Resolution Extension of the agreement on export bond-

secured loan limit Passed

Resolution Foreign currency loan Passed

Resolution Extension of the credit line agreement Passed

6th 2019.5.9 3/3

Resolution (Crédit Agricole CIB) Credit limit agreement Passed

Resolution (Kookmin Bank) Credit limit agreement Passed

Resolution (Woori Bank) Agreement on the corporate credit


(ⅱ) Attendance rate of each director in the past three business years


Attendance Rate (%)

Average

During Term

in Office

Recent 3 Years*

2018 2017 2016

Executive Jo Seong-jin Mar. 18, 2016-

Present 100 100 100 100

Executive Jeong Do-hyeon Mar. 14, 2008-

Present 100 100 100 100

Executive Jo Joon-ho

2016.3.18

~

2017.3.16

100 - 100 100

Executive Koo Bon-joon

2011.3.18

~

2017.3.17

100 - 100 100

48


Attendance Rate (%)

Average

During Term

in Office

Recent 3 Years*

2018 2017 2016

Non-executive

2017.3.17

~

2019.3.14

73 66 100 -

Non-executive Kwon Young-su Mar. 15, 2019-

Present 100 - - -


49

4. Audit Bodies

(Key Principle 9) Internal Audit Bodies

Internal audit bodies should sincerely perform auditing from an independent position from the management or controlling

shareholder, and the main activities of internal audit bodies should be publicly disclosed.

(Principle 9-①)

Internal audit bodies should have independence and expertise.

A) Statuses of Internal Audit Bodies, Member Appointments, and Accounting/Financial Affairs/Audit

Specialists

The related laws stipulate that two thirds of the Audit Committee should be composed of independent

directors and that at least one member of the committee should be an expert in accounting or financial

affairs. (Article 415-2 and Article 542-11 of the Commercial Act and Article 4 of the Audit Committee

regulations) As of the submission date of the report, our company’s Audit Committee is entirely composed

of independent directors— three independent directors with one accounting expert —and Table 9-1-1

shows their careers and qualifications.

(Table 9-1-1) Composition of internal audit bodies (as of submission date of report)

Status of Audit Committee Members Auditing Career and Qualifications Remarks

Title Classification Name

President Independent

director

Kim Dae-

hyung

The University of Chicago MBA

KICPA, USCPA

Ahn Kwon & Co., 1975

Director of Finance in Signetics Korea, 1984

CFO of GE Korea in 1989

CFO of GE Lighting China, 1993

CFO of GE Lighting Asia/Pacific, 1997

FP&A and Accounting Ops Manager of GE Lighting Global, 1998

CFO of GE Plastics China and CFO of GE Plastics Asia/Pacific, 2000

CFO of SABIC IP Asia/Pacific, 2007

Financial Services Director of SABIC Asia, 2009

Commercial Finance Director of SABIC IP Asia/Pacific, 2013-2015

PT, Finance Director of The Sevenedu Indonesia, 2015-2017

President of the

Audit

Committee

Committee

member

Independent

director

Choi Jun-

keun

Bachelor of Electrical Engineering from Pusan National University

Executive director and head of the management headquarters in

Samsung Hewlett-Packard, 1994

CEO and president of Hewlett-Packard Korea, 1995

Head of International Corporation Committee of The Federation of

Korean Industries, 2000

Governor of The American Chamber of Commerce in Korea, 2001

Chairman of Korea Linux Council, 2003

President of Global IT Corporation Committee under the Ministry of

Science and ICT, 2006

Independent director of The Jeonbuk Bank Ltd., 2012-2014

Independent director of JB Financial Group Co., 2013-2014

50

Status of Audit Committee Members Auditing Career and Qualifications Remarks

Title Classification Name

Committee

member

Independent

director

Baek

Yong-ho

Ph.D. in Economics from State University of New York

Head of the Seoul Institute, 2002

Chairperson of Fair Trade Commission, 2008

Head of the National Tax Service, 2009

Chief Secretary to the President for National Policy, Blue House,

2010

The President’s Chief Policy Advisor, 2012

Professor of The Graduate School of Policy Sciences in Ehwa

Woman’s University, 2013-Present

Newly

appointed in

March, 2019

*During the general shareholders’ meeting on March 15, 2019, Lee Chang-woo resigned as independent director upon expiration of

his term, and Kim Dae-hyung was reappointed as independent director (three-year term), and independent directors Kim Dae-

hyung and Baek Yong-ho were appointed as members of the Audit Committee. Also, independent director Kim Dae-hyung was

selected as president of the Audit Committee during the committee meeting held on the same day.

B) Policy for Independence and Expertise of Internal Audit Bodies

In accordance with the requirements of the Commercial Act, at least one of the Audit Committee members

is an expert in accounting or financial affairs designated as such by the presidential decree. (As of

December 31, 2018, the Audit Committee includes two accounting experts.)

C) Audit Committee Regulations

The company has set in place separate Audit Committee regulations in order for the committee to be able

to maintain objectivity from a point of view independent of executing organizations such as the BOD or

management in performing its jobs. The Audit Committee is operated in accordance with the regulations. In

accordance with Articles 3 and 11 of the Audit Committee regulations, the committee audits the accounts

and major business operations, evaluates operation status of the internal accounting policy and inspects

operation status of the internal supervision system. It supervises execution of duties so that the BOD and

management can make reasonable business decisions. Also, the committee can appoint, replace and dismiss

external auditors in accordance with Articles 16, 17 and 18 of the Audit Committee regulations.

D) Providing Education Necessary for Executing Tasks and Supporting Advisory System by External Experts

Our company uses external experts to provide education to the members of the Audit Committee, and the

following is the status of education.

Education Date/Time Agency Providing

Education

Participating Audit

Committee Member Main Education Contents

Jan. 19, 2018

(1 hour) Samil PwC Choi Jun-keun

Main auditing review areas, implementation of the KAM

(Key Audit Matters), etc.

Jan. 22, 2018

(1 hour) Samil PwC

Lee Chang-woo, Kim Dae-

hyung

Main auditing review areas, implementation of the KAM

(Key Audit Matters), etc.

Apr. 23, 2018

(1 hour) Samil PwC

Lee Chang-woo, Choi Jun-

keun, Kim Dae-hyung

Revised Standards for Internal Accounting Management

Policy, etc.

Jul. 23, 2018

(1 hour) Samil PwC


keun, Kim Dae-hyung Audit Committee Standards

Oct. 22, 2018

(1 hour) Samil PwC


keun, Kim Dae-hyung

Additional amendments to Standards for Internal

Accounting Management Policy, revised external auditing

standards and enforcement of the revised external auditing

51

Education Date/Time Agency Providing

Education

Participating Audit

Committee Member Main Education Contents

laws

Jan. 28, 2019

(1 hour) Samil PwC


keun, Kim Dae-hyung Recent trend in accounting supervision

Apr. 26, 2019

(1 hour) Samil PwC

Kim Dae-hyung, Choi Jun-

keun Recent trend in accounting supervision, etc.

E) Procedure of Investigation into Management’s Fraudulent Acts and Management’s Support of Internal

Audit Bodies with Information and Funds

When the Audit Committee gets notified by an external auditor of a violation of the company’s accounting

management standards, it can appoint external auditors at the company’s expense to investigate the issue,

be reported on the investigation result, and request corrective actions to the CEO of the company.

The Audit Committee can at any time request the board directors to provide a business report or

investigate the company’s status of business and assets to audit the company’s accounts and businesses

and has the right to request relevant executives or employees or external auditors to participate in the

meeting to receive sufficient information. Also, the Audit Committee can seek advices from experts at the

company’s expense according to Article 21 of the Audit Committee regulations.

F) Installation of Organizations Supporting Internal Audit Bodies

Our company operates the internal accounting audit part (4 members in total, affiliated to Jeong Do

Management, consists of on-site workers with many years of experience in accounting/auditing) in order to

evaluate operation conditions of the internal accounting management policy and support effective

inspection of operation status of the internal supervision system.

As the operating department of the internal accounting management system, the accounting policy team

(7 members in total, under CFO, consists of on-site accountants with many years of experience) supports

the Audit Committee in evaluating operation status of the company’s internal accounting management

policy with specific task execution.

G) Internal Audit Bodies’ Accessibility to Information

If the Audit Committee acknowledges it to be necessary for carrying out its tasks, it can at any time

request the directors to provide a report about the company's business or investigate the company’s

business or asset status in accordance with Article 3 of the Audit Committee regulations.

H) Audit Committee Members Compensation Policy

Our company provides the same amount of compensation to the independent directors regardless of their

status as a member of the Audit Committee. The company does not plan to compensate the independent

directors who are not audit committee members differently from those who are.

I) Independence and Expertise of Internal Audit Bodies

As mentioned above, our company sufficiently ensures independence and expertise of the internal audit

bodies and operates the bodies by meeting all the requirements of the related laws.

52

(Principle 9-②)

Internal Audit Bodies should sincerely perform the auditing tasks through regular meetings, etc. and transparently

disclose its activities.

A) Internal Audit Bodies’ Auditing Activities, History of Appointing External Auditors, Operation Status

Review Records of Internal Accounting Management Policy

Table 9-2-1 (a) summarizes the auditing activities of the internal audit bodies in 2018 and up to the

present in 2019.

The history of external auditor appointment shows that the Audit Committee approved Samil PwC, which is

an external auditor selected by the company, during the BOD in January 2018. However, as explained in

Principle 10-① a), the revised Act on External Audit of Stock Companies came into effect in November,

2018, and the company changed its system so that the Audit Committee selects external auditors. The

revised stipulation will be applied in appointment of external auditors in 2021, which is when the auditors

appointed in 2018 complete its auditing of the three consecutive business years.

As Table 9-2-1 (a) explains, the internal audit bodies were reported on the operation status of the internal

accounting management policy (January of 2018 and 2019) and assessed the report and provided

resolution on the operation status (February of 2018 and 2019). On February 18, 2019, the Audit

Committee assessed the operation status of the internal accounting management policy and reported to

the BOD as follows.

The committee assessed the design and operation status of the company’s internal accounting

management policy for the fiscal year that ends on December 31, 2018. The CEO and the company’s

management including the internal accounting manager are responsible for the design and operation of the

internal accounting management policy. Referring to the operation status report of the internal accounting

management policy submitted by the company’s CEO and internal accounting manager to the Audit

Committee, the committee assessed effectiveness of the design and operation of the company’s internal

accounting management policy to produce and notify reliable financial statements by preventing and

discovering errors or fraudulent acts that distort or may distort the financial statements. The committee

also assessed if the internal accounting management system actually contributes to the writing and

disclosure of reliable accounting information. Also, the Audit Committee inspected the report for any false

statements or indications and any omission of statements or indications, and reviewed if the plan to revise

the operation status report of the internal accounting management policy can actually contribute to

improvement of the company’s internal accounting management policy. The Audit Committee used

“Standards for Internal Accounting Management Policy” as the yardstick to assess the status of the design

and operation of the internal accounting management policy.

It is the committee’s opinion that the company’s internal accounting management policy as of December

31, 2018 is effectively designed and operated from the perspective of importance, when assessed based

on the “Standards for Internal Accounting Management Policy.”

B) Audit Committee Meetings, Attendance of Each Director and Attendance of Each Director in Past Three

Business Years

(Table 9-2-1) Audit Committee meetings held, attendance and attendance rates from the start of the

business year immediately before the public disclosure period up to the disclosure filing date

(A) Meetings held and activities

53

Year Nth

Meeting

Meeting

Date

No. of

Attendees/Quorum

Agenda Passed/R


2018

1st 1.23 3/3

Reporting

Reporting the financial statements of the 4th

quarter of 2017

Reporting the operation status of the internal


Reporting the auditing progress by the external

auditor

Approval Appointing the external auditor Passed

2nd 2.22 3/3 Resolution

Resolution of the audit report Passed

Resolution of the assessment report of the

internal supervision system’s operation status Passed

Resolution of the result of evaluating the

operation status of the internal accounting

management policy

Passed

3rd 4.26 3/3 Reporting

Reporting the financial statements of the 1st

quarter of 2018

Reporting the auditing progress by the

external auditor

4th 7.24 3/3 Reporting

Reporting the financial statements of the 2nd

quarter of 2018


external auditor


Reporting the financial statements of the 3rd

quarter of 2018


external auditor

2019

1st 1.29 3/3

Reporting

Reporting the financial statements of the 4th

quarter of 2018

Reporting the operation status of the internal



external auditor

Approval

Approving the enactment of the Audit

Committee regulations Passed

Approving the amendment of the internal

accounting management policy Passed

2nd 2.18 3/3 Resolution

Resolution of the audit report Passed

Resolution of the assessment report of the

internal supervision system’s operation status Passed

Resolution of the result of evaluating the

operation status of the internal accounting

management policy

Passed

3rd 3.15 3/3 Resolution Appointing the president of the Audit

Committee Passed


Reporting the financial statements of the 1st

quarter of 2019


external auditor

54

(B) Attendance of each director

Classific

ation

Year 2018 2019

Remarks Nth

Meeting 1st 2nd 3rd 4th 5th 1st 2nd 3rd 4th

Meeting

Date 1.23 2.22 4.26 7.24 10.23 1.29 2.18 3.15 4.29

Indepen

dent

Lee Chang-

woo

Attende

d

Attende

d

Attende

d

Attende

d

Attende

d Attended Attended

Not

applicable

Not

applicabl

e

Term expired

in March,

2019

Choi Jun-

keun

Attende

d

Attende

d

Attende

d

Attende

d

Attende

d Attended Attended Attended

Attende

d

Kim Dae-

hyung

Attende

d

Attende

d

Attende

d

Attende

d

Attende

d Attended Attended Attended

Attende

d

Baek

Yong-ho

Not

applicabl

e

Not

applicabl

e

Not

applicabl

e

Not

applicabl

e

Not

applicabl

e

Not

applicable

Not

applicable Attended

Attende

d

Newly

appointed in

March, 2019

(c) Attendance rate of each director in past three business years


Attendance Rate (%)

Average During

Term in Office

Recent 3 Years

2018 2017 2016

Independent

Lee Chang-

woo 2013.3 ~ 2019.3 100 100 100 100

Choi Jun-keun March 2015-Present 100 100 100 100

Kim Dae-hyung March 2017-Present 100 100 100 -

Ju Jong-nam 2015.3 ~ 2017.3 100 - 100 100

C) Writing and Preservation of Auditing Procedures, Meeting Minutes and Audit Report, and Procedure of

Report in General Shareholders’ Meetings

The above are the activities of the Audit Committee, and the points discussed during the meeting are

recorded on the Audit Report in accordance with Article 15 of the Audit Committee regulations. Also, the

committee members attend the general shareholders’ meeting to report the auditing results of accounts

and businesses.

D) Internal Audit Bodies’ Faithful Execution of Their Jobs

As stated above, the internal audit bodies (Audit Committee) faithfully execute their auditing jobs.

(Key Principle 10) External Auditors

The external auditor should perform audits fairly from a perspective that is independent of the company being audited

and its management and controlling shareholder so that the company’s accounting information is trusted by the

shareholders and its users.

55

(Principle 10-①)

The internal audit bodies should establish and operate policies for securing independence and expertise of external

auditors in appointing them.

A) Standards and Procedures for Securing Independence and Expertise of External Auditors

According to Article 4-2 of The Act on External Audit of Stock Companies (appointing auditors of listed

corporations) before revision, our company appointed the same auditor for the three consecutive business

years from 2018, and in accordance with Article 4 of the same law (appointment and dismissal of

auditors), the Audit Committee discussed matters regarding the auditor’s independence, expertise, audit

plans, audit schedule, and compensation for the audit work and approved the appointment of Samil PwC as

the external auditor. After the enforcement of the revised version of The Act on External Audit of Stock

Companies in November of 2018, the company has revised the Audit Committee regulations to stipulate

that the Audit Committee should select external auditors according to Article 10 (appointment of auditors)

of the same law and plans to newly establish “Standards and Procedures for Appointing External Auditors”

as a part of the Audit Committees regulations and apply it in appointment of the external auditors in 2021.

B) Installation of Auditor Appointment Committee (if there are auditors instead of the Audit Committee)

This is not applicable since there is the Audit Committee.

C) Number of Meetings Held for Appointing External Auditors and Discussed Points in Each Meeting

The Audit Committee meeting was held once in 2018 for appointment of the external auditor (Refer to

Table 9-2-1 (a).), where the committee collectively evaluated the auditor’s performance in auditing and

non-auditing tasks, the auditor’s interests in the company, auditing strategies, audit quality management

plan, accounts audit supervision and lawsuit history, number of participants in auditing, level of expertise,

etc. when appointing the external auditor.

D) Evaluation of External Auditors and Details

The Audit Committee evaluates the auditing activities of the external auditor every year and considers

appropriateness of the auditing methodologies, cooperation level with internal audit departments,

restriction status by the regulators and periodic replacement of audit managing partners.

E) Receiving of Non-audit Services

For the purpose of maintaining independence as an external auditor, Samil PwC performs non-auditing

tasks that external auditors are allowed to perform in accordance with the related laws such as duty

restriction in the Certified Public Accountant Act and are judged not to undermine the independence of the

external auditor, after receiving a prior agreement of or reaching a negotiation with the Audit Committee.

The Audit Committee collectively reviews whether such tasks are in compliance with Article 21 (duty

restriction) of the Certified Public Accountant Act and Article 14 (duty restriction) of the enforcement

decree of the same law, and reviews the possibility of harm on independence, need for contract,

appropriateness of the contract amount, etc.

In 2018, there was one non-audit contract formed with Samil PwC, which was an advisory service for tax

matters. Our company does not receive non-auditing services such as business advisory service through

subsidiaries of the external auditor.

The external auditor Samil PwC attends the company’s general shareholders’ meeting to provide opinions

and answer questions of shareholders, etc. in accordance with Article 24 (attendance in the general

shareholders’ meeting) of The Act on External Audit of Stock Companies.

F) Policy for Securing Independence and Expertise of External Auditors in Appointing Them

56

As stated above, our company complies with the related laws and faithfully executes its duties to secure

independence and expertise of external auditors in appointing them.

(Principle 10-②)

The internal audit bodies should periodically communicate with external auditors in every step of the external audit and

audit reporting.

A) Discussion of Main External Audit Matters At Least Once a Quarter Without Management's Participation

After reviewing the company’s important accounting standards and financial statements of each quarter or

half-year and auditing the end-of-year financial statements to identify any critical violations in execution by

the management or any other violations of the laws or the Articles of Incorporation, the Audit Committee

exchanges opinions without participation of the management on the main matters after receiving a report

by Samil PwC after its audit (review) of the settlement for the half-year. (Refer to Table 9-2-1 (a).)

B) Main Discussion Points and Procedure of Applying Them in Internal Audit Work

The external auditor reports the result of reviewing the financial statements of each quarter or half-year

and auditing the end-of-year financial statements to the Audit Committee for further discussion.

Specifically, the external auditor periodically reports key audit items, identified violations in the half-

year/quarter review results or end-of-year audit, result of internal accounting management policy review,

etc. to the Audit Committee for discussion. (Refer to Table 9-2-1 (a).)

C) External Auditor’s Procedure of Notifying Internal Audit Bodies and Roles and Responsibilities of Internal

Audit Bodies

As stated in B), the external auditor is obligated to report key audit results to the Audit Committee every

quarter. Once being reported of the key issues discovered by the external auditor, the Audit Committee

should investigate violations, etc. by appointing external experts at the company’s expense or through the

internal audit department, and then it can request the CEO of the company to take corrective actions, etc.

based on the result of the investigation. If necessary (critical violation of the accounting standards, etc.),

the investigation result, result of the company’s corrective actions, etc. should be immediately submitted to

Securities and Futures Commission and the auditor.

D) Reasons of Insufficient Periodic Communication Between Internal Audit Bodies and External Auditor and

Future Measures to Take Accordingly

As stated above, the internal audit bodies and external auditor are having sufficient periodic

communications in order to promote efficiency in auditing.

57

5. Other Key Matters (when necessary)

1. Fulfillment of Social Responsibilities, etc. Our company makes utmost efforts to fulfill its social responsibilities by actively responding to the

demands of the internal and external interested parties including the shareholders, customers and

localities. For this, the company publishes the Sustainability Report every year that contains corporate

governance, corporate ethics, safe environments, etc. The report can be viewed on the company’s website.

LG Electronics Sustainability Report:http://www.lge.co.kr/lgekor/company/sustainability/report.do

Also, our company shares its business philosophies of “creating values for customers” and “respecting

human dignity” among its members according to LG Code of Ethics,

promotes autonomous management based on autonomy and responsibility according to the spirit of our

Management Charter, respects the free market system that pursues free and fair competitions, and

pursues benefits of all interested parties based on mutual trust and cooperation to develop into a world-

class company. Especially, as LG Code of Ethics stipulates the responsibilities toward the country and

society, our company will continue its reasonable business development to grow into a more solid company

that protects the shareholders’ interests and contributes to the nation’s prosperity and growth of the

society.

LG Code of Ethics: http://www.lge.co.kr/lgekor/company/about/ethics.do

Note that our company has not been subjected to official restrictions or involved in lawsuits regarding

corporate governance in the past three years.

http://www.lge.co.kr/lgekor/company/sustainability/report.do

58

Classification Index Compliance

O Ⅹ

Shareholders

① Notify the general shareholders’ meeting four weeks before the

meeting.* Ⅹ1)

② Implement electronic voting.* Ⅹ2)

③ Hold general shareholders’ meetings on dates other than major

shareholders’ meeting dates.* O

④ Notify the shareholders of the dividend policy and dividend payout

plans at lease once a year.** Ⅹ3)

Board of

Directors

⑤ Establish and operate a CEO succession policy (emergency

appointment included). O

⑥ Establish and operate an internal control policy. O

⑦ Separate the BOD chairperson and CEO. O

⑧ Implement the concentrated voting system. Ⅹ4)

⑨ Establish a policy to prevent appointment of those responsible for

damaging corporate values

or violating shareholder rights as a director

O

⑩ Absence of independent directors holding office for longer than 6

years O

Audit Bodies

⑪ Provide education to internal audit bodies at lease once a year.** O

⑫ Install an internal audit department (internal audit support

organization). Ⅹ5)

⑬ Whether accounting experts exist in the internal audit bodies O

⑭ The internal audit bodies meet with external auditors without the

management at least once a quarter.** O

⑮ Establish a policy that allows the internal audit bodies to access

important information related to management. O

○ This document was created on the date of its submission.

Items marked with *apply to the regular general shareholders’ meeting immediately before the date of submission

of the report.

Items marked with ** are for determining if the item has been complied with within the public disclosure period.

○ ③ Cautions: Applicable if scattered holding of general shareholders’ meetings is allowed through participation in

“Auto-compliance Program for Scattered General Shareholders’ Meeting” by Korea Listed Companies Association.

(Other issues)

1) It is currently not easy to adopt the 4-week prior notification method recommended by Korea Stock Exchange due

to difficulties in preparation such as having to advance the February board meeting by more than one week or make a

meeting notification in January and other reasons such as having to avoid the settlement days, board meetings and

major shareholders’ meeting days on the fourth week of March. We cannot say with certainty that our company will

adopt the 4-week prior notification method sometime in future, but we will continue to consider adopting methods to

more quickly provide information related to general shareholders’ meetings.

2) As our company has in place a proxy solicitation system (power of attorney system) to enable shareholders to

exercise voting rights by proxy without attending a shareholders’ meeting, the same goal can be attained from the

perspective of voting participation without introducing a vote in writing or electronic vote system. Although our

company has reviewed the necessity to introduce an electronic voting system, it has decided that such adoption is

premature, considering that electronic voting is not popularized yet and that the rate of participating in general

shareholders’ meetings via electronic voting is still low and has little impact on the resolution process.

Attachment Corporate Governance Index Status

59

3) Our company has in place a dividend payout policy to confirm the annual dividend payouts through the BOD by

comprehensively considering the annual net profit, future investments, expected cash flow and improvement of

shareholders’ values in the market. Every year, the dividend payout amounts are determined by the BOD in January

and announced through an official notification before the general shareholders’ meeting notification. The payout

amounts are finalized in the general shareholders’ meeting and dividends are paid out to the shareholders within one

month after the meeting. Our company may announce the above-mentioned dividend policy along with dividend

implementation plans in the form of public disclosure.

4) Since adoption of the concentrated voting system may end up deteriorating the business performance through

pursuit of personal gains such as domination of the BOD by speculative funds rather than strengthening the rights of

minority shareholders, the company currently does not plan to implement the system.

5) The internal accounting audit part, which is our company’s internal audit department (internal audit support

organization), has a system that ensures independence by directly reporting to the Audit Committee, but it is under

the CEO in the organizational structure, and thus the Audit Committee does not have authority over matters

regarding human resources or budgets. Therefore, this item was judged not to meet the condition for complete

independence as required by the guideline and was marked as “non-compliant.”

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