The Seoul Metropolitan Government is adopting the “Employee Director” system in a bid to establish a management paradigm focusing on win-win relationships and collaboration, which will be the first system of its kind adopted by a local government. Under the system, which will be adopted at 15 SMG-run or invested corporations, industrial complexes, and institutions, one or two representatives of employees will take part in a session of the Board of Directors.

Mayor Park Won-soon disclosed the plan for the system when he announced how to innovate SMG-invested institutions in November 2014. Since May 2015, the SMG, jointly with the Korea Labor Institute, has carried out research on how to adopt an employee-management relations model for SMG-invested institutions, and has listened to the opinions of individuals in labor, business management, and academic circles.

The system will be adopted at 15 SMG-run or invested corporations, industrial complexes, and institutions with 30 or more employees, with one or two (equal to roughly a third of the number of non-standing directors) employee representatives taking part in a session of the Board of Directors.

The representatives of employees will be allowed to exercise their voting rights on major items of deliberation, including business plans, budget, and amendments to articles of incorporation, as well as asset disposition as stipulated in the laws and articles of incorporation. It is expected that they will express the opinions of employees based on their experience and knowledge, as opposed to those of executive members.

The representatives of employees are required to comply with the relevant laws and articles of incorporations, as executive members are. They will be subject to the Criminal Act if they are found to have received bribery, for example.

The representatives of employees will be appointed through an open process and by the recommendation of the Directors Recommendation Committee. Members of the labor union appointed as the representatives of employees are required to withdraw from the labor union. Their term will be for three years under the Local Public Enterprises Act.

One of the merits of the adoption of the new system is the expected reduction of expenses related to social conflict, including labor-management conflicts, which are said to amount to 24.6 trillion won every year. The SMG expects that the adoption of the system will go a long way to reduce such conflicts.

The adoption of the the employee director system is stated in the OECD Guidelines on Corporate Governance of State-Owned Enterprises (enacted in 2005 and amended on 2015). Its effects are recognized by the European Parliament and the World Economic Forum.

The SMG will hold relevant policy discussion sessions to make the new system one that fits comfortably into the country’s situation and obtain a broad consensus on its features, with consideration that it is the first system of its kind adopted in the country.

Commenting on the plan for adoption of the said system, Mayor Park Won-soon said, “We will realize the goal of collaborative governance in public businesses so that their management may be carried out more transparently, and their main goal may be service for people, bearing in mind that all stakeholders are the owners and consumers of public businesses. No system can get optimal results without participants’ devoted efforts. It is hoped that this system will make solid progress through the blessings and positive participation of all parties concerned.”