A June 2025 Korean Supreme Court ruling arising from a price-fixing cartel among cement makers closed two ways a company director can escape liability for the firm’s wrongdoing: claiming he did not take part, and pointing to the profit the wrongdoing produced. For a foreign investor weighing Korean boards, the upshot is narrow but real — a functioning compliance system is now a source of personal director liability, not a formality.

Liability without participation. The court held that directors who neither ordered nor knew of a price-fixing cartel were still personally liable to their company for failing to build and operate a working internal-control system. The case arose from a cement cartel that ran from 2010 to 2013, for which the company paid roughly 42.9 billion won in surcharge and fine. When the company declined to act, minority shareholders brought a derivative action under article 403 of the Commercial Act to pursue the directors’ liability under article 399; a listed company’s holders can sue derivatively with as little as a 0.01% stake held for six months. A director discharges the monitoring duty, the court held, only through an internal-control system that actually detects and corrects high-legal-risk conduct; the mere existence of a compliance structure does not suffice. This is an application of an established line, not a new peak — earlier decisions had already imposed the internal-control duty and placed the burden on the director to show the system worked. The implication is a governance one: the compliance function is where director liability now attaches.

The profit defense, barred. The sharper holding is the second. A company “must not use crime as a means” in its business, the court reasoned, so even if the wrongdoing earned the company a gain, that gain cannot be set off against the directors’ damages — and the same applies to a director who merely failed to supervise. Two weeks earlier, a companion decision had stated the rule for a director who broke the law directly; the June ruling extends it to the passive overseer, closing the second exit. The court also refused the defendants’ request for an appraisal to quantify the cartel’s profit. One caveat keeps this honest: the court did not rest on policy alone — it also found insufficient proof that the cartel produced a corresponding gain, so the no-offset rule sits alongside an evidentiary finding rather than standing entirely on its own.

How Korea prices this differently from the US. Korea reaches the passive director through a lower liability threshold than US law, but softens the individual bill through a discretionary reduction doctrine that Delaware lacks — so which system exposes a director more is not obvious. In Delaware, oversight (Caremark) claims sound in the duty of loyalty (Stone v. Ritter) and cannot be exculpated under section 102(b)(7) of the Delaware General Corporation Law; the threshold is bad faith, “possibly the most difficult theory … upon which a plaintiff may hope to win a judgment”: a plaintiff must show the board either utterly failed to implement any oversight system, or implemented one and then consciously ignored it. Marchand v. Barnhill (Del. 2019) tightened that standard for risks essential to a company’s core business, holding that management-level monitoring is not enough — the board itself must have a system that funnels compliance information directly to it. Korea’s duty turns on intent or negligence, not the bad faith Delaware requires, and it shifts the burden to the director; but Korean courts apply a discretionary doctrine that routinely reduces director damages below the full loss — here, the largest individual award was about 4.5 billion won against a company loss near 42.9 billion won, roughly a tenth. A cross-system comparison of expected recovery is therefore ambiguous — the lower threshold and the discretionary reduction pull in opposite directions. The distinctively Korean feature is neither of those but the no-offset floor, for which Delaware has no clean analog.

What this does to boards. By raising the cost of a hollow compliance function, the ruling strengthens the case for giving compliance real board-level standing — though whether Korean boards act on it is untested. US boards moved this way after Caremark and Marchand — direct board reporting for the compliance officer, board-level compliance committees, reinforced by the U.S. Department of Justice’s compliance-program guidance. In Korea there is no such evidence yet, and the derivative-suit channel that carries this liability has historically been thin — fewer than ten suits a year, about 29% dismissed outright between 1997 and 2017 — and slow, this case having run from 2020 to 2025. It fits a recurring pattern in which Korea’s standards for who is accountable rise faster than the channels to enforce them, a gap I traced in an earlier piece on market-abuse penalties. The immediate effect here is a stronger risk signal, not a wave of suits.

Signals to watch.

  • Whether Korean boards elevate the compliance and legal function toward the US board-oversight posture.
  • How deeply courts reduce liability for a director who neither took part in the wrongdoing nor could point to a gain it brought the company — in Korea, director risk is set less by the threshold than by judicial discretion over the size of the award.
  • Whether the oversight line extends beyond antitrust into other high-legal-risk areas.