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[Alpha Biz=(Chicago) Reporter Kim Jisun] In the future, companies will have to inform major shareholders of the details of Restricted Stock Unit (RSU) on a quarterly basis.
The Financial Supervisory Service announced on the 19th a plan to improve the stock standard compensation disclosure system. Stock standard compensation means that a company gives stocks or stock-based assets to executives and employees as compensation. Recently, in addition to stock options (stock purchase options), RSU, a method of promising to pay stocks if certain conditions are met, is also on the rise. Nevertheless, investors are not fully protected due to lack of regulations and disclosures under commercial law except stock options, the FSS pointed out.
First of all, the overall operation status of each stock standard compensation system was to be disclosed every six months. The name, grounds, and procedures for each system shall be stated in the business report and the semi-annual report, and the number of executives and employees who have received compensation, the conditions for stock payment, etc. shall be notified. For example, it is necessary to write down how many employees have been granted by date, what the conditions are for receiving shares, and how many shares have already been paid after the conditions are met. Individual details of executives and employees do not have to be disclosed. Currently, only some of these contents are published in the financial statements.
Where the largest shareholder or a related person is compensated for the standard stock price, detailed details shall be notified quarterly. Unlike in the case of general executives and employees, individual details should also be recorded. It was taken into account that stock standard compensation such as RSU could be used as a means of strengthening control or succession of major shareholders. In fact, major affiliates of Hanwha Group have been found to have granted RSU worth 30 billion won to Vice Chairman Kim Dong-kwan in recent years.
The FSS also clarified the criteria for applying the "5% rule" of such stock-based compensation. For example, if it meets the stock payment conditions after receiving RSU, it is believed that it owns the stock even before it actually receives the stock. The 5% rule is a system that requires the disclosure of the details of listed companies' stocks if they own more than 5%.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
