Procedural Legitimacy of Director Remuneration Decisions and Corporate Legal Risk Management Strategies

1. Overview of the Issue
Article 388 of the Commercial Act provides that where the amount of remuneration for directors is not fixed in the articles of incorporation, it shall be determined by a resolution of the general meeting of shareholders. The Supreme Court has held that the scope of "remuneration" under this provision includes all consideration paid in return for a director's performance of duties—regardless of its designation, such as annual salary, allowances, bonuses, or special performance-based pay—and that retirement pay likewise constitutes "director's remuneration" as a payment made in consideration of the performance of duties during tenure. This functions as a mandatory provision intended to protect the interests of the company, its shareholders, and its creditors by preventing the abuse whereby directors pursue their personal interests in relation to their own remuneration.

2. Major Types of Disputes and Key Response Points
A. Payment of Director Remuneration Without a Shareholders' Meeting Resolution
In its ruling of April 9, 2020 (Case No. 2018Da290436), the Supreme Court held that where a "special performance bonus" paid to a representative director constitutes "director's remuneration" under the Commercial Act but lacks a shareholders' meeting resolution, it must be treated as unjust enrichment and is subject to an obligation of return. In addition, the Supreme Court, in its ruling of September 10, 2015 (Case No. 2015Da213308), made clear that the burden of proving that a shareholders' meeting resolution existed rests with the director asserting the right to remuneration.

Where the shareholders' meeting approves a ceiling on director remuneration while delegating the determination of the specific remuneration to the board of directors, and there is no board resolution, the Supreme Court held that it is lawful for the articles of incorporation or the shareholders' meeting to fix only the total amount or ceiling of officers' remuneration and to delegate the specific calculation matters, such as the amount payable to individual directors, to the board of directors (Supreme Court ruling of June 4, 2020, Case Nos. 2016Da241515, 241522).

However, while recognizing the lawfulness of such delegation to the board, the Supreme Court restricted this by holding that a "comprehensive" delegation of matters concerning director remuneration to the board is not permitted (Supreme Court ruling of June 4, 2020, Case No. 2016Da241515), and further took the view that comprehensively delegating to the representative director the matter of director remuneration—which the articles of incorporation stipulate as a matter for shareholders' meeting resolution—is even more unlawful (see Seoul Central District Court ruling of October 20, 2022, Case No. 2020Gahap585514).

In a case where the shareholders' meeting had approved only the ceiling of the total annual remuneration to be paid to all directors, no resolution whatsoever had been made regarding the specific remuneration payments to individual directors, and even a board resolution was absent, the lower courts held that such remuneration payments constituted unjust enrichment (Seoul Western District Court ruling of November 4, 2021, Case No. 2020Gadan306634; Seoul Southern District Court ruling of December 15, 2022, Case No. 2022Gadan237856).

Restriction on Voting Rights When Resolving on the Remuneration of a Director-Shareholder: The Supreme Court recently held that not only with respect to individual remuneration amounts but also in resolutions setting the remuneration ceiling for all directors, the shareholder who is the director concerned qualifies as a person with a special interest and is therefore restricted from exercising voting rights (Supreme Court ruling of April 24, 2025, Case No. 2025Da210138). This is because the director remuneration ceiling determined at the shareholders' meeting inevitably has a significant impact on the subsequent determination of specific remuneration amounts for individual directors, and the calculation of remuneration for a director-shareholder is directly connected to that shareholder's private interests rather than being a matter concerning control of the company.

B. Responding to Shareholder Derivative Suits to Hold Directors Liable
Meaning of a Shareholder Derivative Suit: Where a company fails to hold a director liable of its own accord even though it has suffered damage due to the director's neglect of duty or the like, a shareholder may, in subrogation of the company, directly bring an action against that director.

Requirements for Filing: Under Article 403, Paragraphs 1 and 2 of the Commercial Act, a shareholder holding shares equivalent to 1% or more of the total number of issued shares may, by a document stating the reasons therefor, demand that the company file an action to hold a director liable. If the company fails to file the action within 30 days from the date of receiving such demand, the shareholder concerned may file the action directly on behalf of the company (Article 403, Paragraph 3 of the Commercial Act).

Shareholder Derivative Suit Regarding the Payment of Director Remuneration: Where the shareholders' meeting approved only the total ceiling of director remuneration and delegated the calculation of specific remuneration for individual directors to the board of directors, but a board resolution is absent, a shareholder may demand that the company file an action for damages arising from the unlawful remuneration payment; and if the company fails to file within 30 days, the shareholder may, in subrogation of the company, bring an action against the director concerned.

3. Implications and Response Measures
Disputes concerning director remuneration, arising from the mandatory nature of Article 388 of the Commercial Act, raise the question of whether subsequent ratification or implied consent is valid; and in particular—since, unless the company is a one-person company, a shareholders' meeting resolution cannot be replaced by the approval of a controlling shareholder alone—the inherent legal risks when a dispute arises are considerable.

Even if an explicit board resolution regarding the payment of remuneration to an individual director was lacking, it is necessary to closely examine whether an increase rate or bonus payment guideline based on the same standards applied to ordinary employees was discussed and approved through an official corporate body such as the shareholders' meeting or the labor-management council, and to actively exercise the right of legal defense regarding the establishment and scope of any obligation to return unjust enrichment.

Therefore, at the internal corporate level, proactive legal review that periodically checks whether all procedures related to director remuneration conform to the Commercial Act and the articles of incorporation is essential; and should a dispute materialize, one must respond promptly by establishing an optimized defense strategy through professional legal analysis of corporate law as a whole.

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