Following the release of artificial intelligence (AI) service beta in the U.S. market next month, Ha..

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*It has been translated using AI
Following the release of artificial intelligence (AI) service beta in the U.S. market next month, Hancom will launch a global commercial launch in March next year. As the business stage has expanded overseas, the reform of the board of directors has emerged as a task. Chairman Kim Sang-chul of Hancom Group, who serves as chairman of the board of directors, was recently found guilty of embezzlement of funds from affiliates by the court. As overseas customers and investors consider the supervisory system of suppliers along with technology, analysts say that global expansion will be strengthened only when the board of directors structure is shown to prevent recurrence beyond reimbursement of damages.

According to the information technology (IT) industry on the 8th, Seongnam Branch of the Suwon District Court sentenced Chairman Kim to one year and six months in prison and three years of probation on the 5th. He was found guilty of embezzlement in business by spending 490 million won of funds from four affiliates on stock purchases and false salaries of affiliates. He was acquitted of charges of breach of trust worth 9 billion won. The deadline for appeal is the 12th, and Chairman Kim said, “We will consult with our lawyers to decide on the appeal.”

Chairman Kim has been an in-house director since he took over Hancom in 2010 and is currently chairman of the board of directors. He was also fined 20 million won by the appeals court on charges of failing to report changes in his stake in Hancom With, a separate case.

The first trial ruling does not immediately lead to a change in the chairmanship. The conviction is embezzlement for work under the criminal law, and the amount of embezzlement is less than 500 million won, the standard for the law on aggravated punishment of specific economic crimes, so employment restrictions do not apply. In accordance with the Act on Corporate Governance of Financial Companies, fines alone limit executive qualifications for five years, but general listed companies do not affect director qualifications. The weight of the chairman’s seat remained up to the board of directors and shareholders.

Hancom announced its transition to a global AI company in July by removing ‘Korean and computers’ from its mission. Following the U.S., Sovereign AI business will also be promoted in Europe. It also supports its performance. Last year, sales of 175.3 billion won and operating profit of 50.9 billion won were all the largest on a separate basis, and the operating profit ratio reached 29%. In the first half of this year, sales in the AI sector amounted to 13.47 billion won, exceeding 8.91 billion won annually last year in half a year.

The next gateway is trust. AI service is a business where customers hand over work data and authority, so the criteria for selecting suppliers are strict. The security verification report ‘SOC 2’ required by U.S. corporate customers contains the ethics of the organization and the supervision of the board of directors independent of management as common criteria. The same goes for capital markets. The National Pension Service considers violations of laws such as embezzlement and breach of trust as a key management issue, and global voting rights advisor ISS also cites the embezzlement conviction as a serious governance failure case.

Industry sources say that Hancom needs to reform its board of directors in order to become a global company. However, it is pointed out that as the effect is small only when the chairmanship is changed, it will be substantial improvement only when the number of independent directors is increased and the review of funds and related transactions of affiliates is entrusted to the independent committee.

The stage for discussion is the regular general shareholders’ meeting in March next year. Currently, Hancom’s board of directors has four internal directors and two independent directors, and the proportion of independent directors is at the level of one-third of the legal standard. The shareholders’ meeting, which will be held in the same month as the global commercial launch, is the first opportunity to increase the independence of the board of directors beyond the legal minimum.

A governance expert said, “Following the recovery of the damage, the reform of the board of directors, the expansion of independent directors, and strengthening supervision of related companies’ transactions will make it clear to overseas customers and investors.”

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