More than half of financial company boards will be made up of outside directors who meet stricter qualifications, according to a new bill.

The government reviewed and approved on Tuesday a proposal regarding the governance structure of financial companies at a Cabinet meeting presided over by President Lee Myung-bak.

If the bill passes into law, financial companies will have to fill more than 50 percent of their boards with directors that come from outside the company. The role of the board will be strengthened as well, as the members will get to deliberate and decide on management goals, exercise rights to budgets and settling accounts, and also have the power to appoint and dismiss executives.

Full-time executives of the financial firm or its affiliate cannot serve as outside directors, according to the bill.

To enhance the expertise of outside directors, the bill reforms the list of qualifications so that the directors should have ample experience or professional knowledge of finance, economy, law or accounting. Appointment procedures were also strengthened.

The bill also provides that internal regulations should be made in terms of governance structure and mandatorily announced.

By Park Min-young  (claire@heraldcorp.com)