2018 Corporate Governance Report_lge.pdf

2018 Corporate Governance Report

LG Electronics Inc.

Our company has compiled this Report to help investors understand the current status of our corporate governance in accordance with Clause 7-2 of Article 8 of the Regulations on Issuance, Public Disclosure, etc. of Securities. The status of corporate governance in the Report was stipulated as of April 2, 2018. Any changes in the Report as of the date of its submission will be separately stated. In addition, unless otherwise mentioned, the details of activities related to corporate governance in the Report were prepared from January 1, 2017 up to the date of submitting the Report.

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I.

Corporate Governance in General

(1) Corporate Governance Principle and Policy Our company strives to secure transparency, stability, and soundness of the corporate governance and to establish corporate governance that shows our company’s growth path and its organizational culture so as to increase shareholder value and protect the rights and interests of its shareholders. In order to realize transparent corporate governance, our company is aiming to help our stakeholders understand how it operates the corporate governance by disclosing explanations on the overall corporate governance structure, including the Articles of Incorporation and the status of operating the BOD, through the homepage. More than 50% of the board members (Four Independent Directors out of the seven board members in total) are comprised of Independent Directors in order for the BOD to actually carry out its function of keeping the management’s business-conducting rights in check. Furthermore, our Independent Directors are transparently and fairly elected by the Outside Director Candidate Recommendation Committee (where Independent Directors have a majority). Our company complies with the "principle of diversity” in forming the BOD in order to prevent it from having a specific common background or represent certain interests. In actually operating the BOD, our company is trying to recruit people experienced with various professions as the board members so as to prevent the BOD from tilting towards a specific background and profession. As the board members are comprised of experts from industrial, financial/accounting and administrative fields, the BOD could take an in-depth look at the agendas suggested to it based on various personal backgrounds and expertise and efficiently monitor how the management conducts its business. At the same time, our company supports the board members to make the best business-related decisions by holding a preliminary briefing session about the BOD prior to a BOD meeting and providing sufficient information on details of agendas through the BOD Secretariat. Moreover, our company has established a business management committee under the BOD. The committee is entrusted with power to approve any of the issues that do not require collective decision-making by all of the board members so as to efficiently implement corporate governance. Our company has set up a corporate governance structure where there are mutual checks and balances among the BOD, the management and Independent Directors based on such systems and mechanisms.

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(2) Organizational Chart Related to Corporate Governance

General Shareholders’ Meeting

BOD (Two executive directors, 1 nonexecutive director, 4 independent directors)

The BOD Secretariat (Three persons)

Audit Committee (Three independent directors) Consolidated Accounting Team (Three persons)

Ethics Secretariat (Four persons)

Business Management Committee (2 executive directors, 1 nonexecutive director)

Outside Director Candidate Recommendation Committee (2 executive directors, 1 non-executive director)

Executive Personnel Team (Three persons)

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Domestic Accounting Team (Three persons)

Accounting Policy Team (Two persons)

(3) Corporate Governance Features A) The Structure of the BOD with Independent Directors Having a Majority Our company’s BOD, as the highest standing decision-making body, has the power to appoint and dismiss the CEO and is comprised mainly of Independent Directors. At present, out of seven board members, the number of Independent Directors stands at four (accounting for 57% of the total) thus comprising a majority. To improve the efficiency of the BOD outside experts with various professions and backgrounds are recruited as board members, and to strengthen its function of keeping the management in check through a number of Independent Directors with verified independence. B) The BOD led by its Committees Our company’s BOD has three committees in total: the Audit Committee, the Business Management Committee and the Outside Director Candidate Recommendation Committee. Among them, the establishments of the Outside Director Candidate Recommendation Committee and the Audit Committee are obligated by relevant laws, and the Business Management Committee is carrying out deliberations and decision-making jobs on matters delegated by the BOD. C) Strengthening Expertise of Independent Directors Our company’s Independent Directors are comprised of experts from industrial, financial/accounting and administrative fields. Our company is selecting a group of candidates for Independent Directors with very strict standards through interviews and pre-verification processes made by relevant divisions in order to recruit the most suitable Independent Directors. The BOD Secretariat is supporting Independent Directors to carry out their jobs. Specifically, the Secretariat holds a preliminary briefing session before a BOD meeting in order for the directors to review main issues in detail beforehand, and provides internal and external training for newly appointed Independent Directors to swiftly adapt to our company’s BOD-led corporate culture.

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(4) Current Status of the Corporate Governance (Summary) Structure (No. of Independent Directors/No. of board members)

Internal Bodies

Chairperson(Committee President) (Executive director/Independent Director)

Main Responsibilities

Approving BOD resolutions in accordance with laws and the Articles of Incorporation Seong-Jin Jo BOD 4/7

Approving agendas to be proposed to a general shareholders’ meeting

(Executive director)

Approving main financial issues Approving mid/long-term strategies and business policies Approving personnel issues and others

Auditing overall company businesses including financial status Chang-Woo Lee Audit Committee 3/3

Supervising jobs carried out by directors and the management

(Independent Director)

Approving the selection of outside auditors and their audit work Assessing the actual status of operating an internal accounting management system and the operational status of the internal supervision system

Outside Director Candidate

2/3

Managing and verifying a group of candidates for Independent Directors on a regular basis

(executive director)

Recommendation Committee

Business Management Committee

Recommending Independent Directors after verifying the independence, diversity and capability of a group of candidates for Independent Directors

Seong-Jin Jo

0/3

Approving individual loans within the annual limit and the issuance of company bonds and CP (corporate bills)

Seong-Jin Jo

Certifying payment of a certain amount and less, signing and extending an agreement on credit limits

(Executive director)

Establishing, relocating or closing branches Approving businesses in general, financial issues and others delegated by the BOD

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II. Shareholders 1. Shareholder Rights (1) Status of Holding a General Shareholders’ Meeting Our company officially announces the date, place and agenda, results, and so forth related to a general shareholders’ meeting through DART. A regular general shareholders’ meeting is held within three months after closing each business year, and an extraordinary shareholders’ meeting is held when necessary. For the past three years, our company has held three general shareholders’ meetings in total but did not hold an extraordinary shareholders’ meeting. Our company’s status and details of holding general shareholders’ meetings for the past three years are as shown in the table below. Classification

The 14th Regular General Shareholders’ Meeting

The 15th Regular General Shareholders’ Meeting

The 16th Regular General Shareholders’ Meeting

Meeting Decision Date

Feb. 25, 2016

Feb. 23, 2017

Feb. 22, 2018

Meeting Announcement Date

Feb. 25, 2016

Feb. 23, 2017

Feb. 22, 2018

Meeting Date

Mar. 18, 2016

Mar. 17, 2017

Mar. 16, 2018

Meeting Time

9 a.m.

9 a.m.

9 a.m.

East Wing of LG Twin Tower, 128, Yeoui-daero, East Wing of LG Twin Tower, 128, Yeoui-daero, East Wing of LG Twin Tower, 128, Yeoui-daero, Yeongdeungpo-gu, Seoul, Korea

Meeting Venue

Yeongdeungpo-gu, Seoul, Korea

Yeongdeungpo-gu, Seoul, Korea

Main Auditorium in B1

Main Auditorium in B1

About 25 minutes

About 26 minutes

Main Auditorium in B1

Details

Time spent

About 25 minutes

Agendas

Agenda 1: Approving the 14th financial statement Agenda 1: Approving the 15th financial statement

Agenda 1: Approving the 16th financial statement

Agenda 2: Approving the amendment of the Agenda 2: Approving the amendment of the Articles of Agenda 2: Appointing directors (One executive director Articles of Incorporation

Incorporation

and 1 Independent Director)

Agenda 3: Appointing directors (Two executive Agenda 3: Appointing directors (One non-executive Agenda 3: Appointing audit committee members (One directors and 3 Independent Directors)

director, one executive director and 1 Independent audit committee member out of the Independent Directors) Director)

Agenda 4: Appointing audit committee members

Agenda 4: Approving directors’ compensation limits

(Two audit committee members out of the Agenda 4: Appointing audit committee members (One Independent Directors)

audit committee member out of the Independent Directors)

Agenda 5: Approving directors’ compensation Agenda 5: Approving directors’ compensation limits limits

Attendance

of

the Attended

Attended

Attended

board members

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(2) Regarding Resolutions of a General Shareholders’ Meeting and Exercising Voting Rights Our company has in place a solicitation system to exercise voting rights by proxy in order to secure a quorum for resolution and facilitate the exercise of voting rights. In accordance with the Capital Market Act, our company draws up the relevant documents (including a copy of a letter of attorney) and discloses them on DART up to two days before starting proxy solicitation. And, the copy of a letter of attorney is also made public on the company's homepage. The number of shares, including those by proxy through letters of attorney, that attended the 16 th general shareholders’ meeting held on March 16, 2018 was 120,814,942, accounting for 74.2% of all outstanding shares (162,884,642 of them) with voting rights. All agendas of the 16th general shareholders’ meeting were subject to ordinary resolutions and were approved as they were since all voting results fulfilled relevant resolution qualifications. The status of votes on each of the agendas is as shown in the table below. Agendas

Resolution Type

Agenda 1

Ordinary

Agenda 2

Ordinary

Meeting Purposes Approving the 16th financial statement Appointing directors

Voted for

Voted against

93.3%

6.7%

94.4%

5.6%

98.6%

1.4%

62.0%

38.0%

(One executive director, 1 Independent Director) Agenda 3

Ordinary

Appointing audit committee members (One audit committee member out of the Independent Directors)

Agenda 4

Ordinary

Approving directors’ compensation limits

※ In case of the appointment of audit committee members, those shareholders that have an excess of 3% of the voting shares are restricted from exercising their voting rights related with the shares in excess under Clause 12 of Article 542 of the Commercial Law. Therefore, the number of shares in excess of 3%, which cannot exercise relevant voting rights, is not counted in the number of total shares present at the meeting. For your reference, there have been no shareholders’ proposals at our company’s general shareholders’ meetings for the past three years, and consequently our company did not separately state the status of implementing shareholders’ proposals. March 16, the date the general shareholders’ meeting for 2018 was held, was not designated as the date of the general shareholders’ meeting. (3) Regarding Dividends Our company can distribute profits in money and shares based on the Articles of Incorporation. Our company determines dividends after comprehensively considering investments to improve shareholder value and to expand returns for shareholders, cash flow, financial structure and distribution stability. Distribution stability means that downward adjustment of dividends per share is avoided. However, it could be flexibly applied to increase growth and continue to improve shareholder value from a long-term point of view after considering business-related environmental changes, business strategies including future investment plans, and so forth. Our company has continued to pay cash dividends and has never paid difference dividends and interim dividends during the past three years. Details of dividends for the past three years are as shown in the table below.

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Business Years

Cash Dividends

Share Dividends Dividends per share (won)

(Consolidated) dividend

Total dividend amount (won)

Dividend yield

Payout date

payout ratio 2017

None

400 won per ordinary share

72,885,442,700 won

4.2%

450 won per preferred share

2016

None

400 won per ordinary share

72,885,443,100 won

94.8%

450 won per preferred share

2015

None

400 won per ordinary share

0.4% for the ordinary shares

2018-04-16

1.0% for the preferred shares

0.8% for the ordinary shares

2017-04-14

1.85% for the preferred shares

72,885,443,100 won

58.6%

450 won per preferred share

0.8% for the ordinary shares

2016-04-15

1.6% for the preferred shares

※ The (consolidated) dividend payout ratio is the percentage of total dividends as for the consolidated current net income based on the dominant company owner’s equity; and the dividend yield is the percentage of dividends per share as for the numeric mean price of the final prices created at the exchange market for the past week from two trading days before the closing date of shareholders list related to the dividends for the current year. (4) Deviations and Reasons (Vote in Writing / Electronic Vote Not in Place ) Although Article 368-3 of the Commercial Law stipulates the introduction of a vote-in-writing system through which shareholders can exercise their voting rights via written letters without attending a general shareholders’ meeting as defined in the Articles of Incorporation, our company does not have any grounds related to vote in writing in its Articles of Incorporation, and has never introduced an electronic vote system in accordance with Article 368-4 of the Commercial Law. As our company has in place a solicitation system to exercise voting rights by proxy in order to facilitate the exercise of voting rights, the same goal can be attained through a proxy solicitation system without introducing a vote in writing and electronic vote. Our company is planning to come up with various measures for shareholders to exercise their voting rights more easily.

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2. Fair Treatment of Shareholders (1) Status of Outstanding Shares Under our company’ Articles of Incorporation, the total number of issuable shares is 600,000,000 (5,000 won per share), and the total number of shares issued by our company so far stands at 180,833,806. Out of them, our company has issued 163,647,814 registered ordinary shares and 17,185,992 registered preferred shares. For your reference, our company’s preferred shares have no voting rights, but they do receive dividends in money annually by 1% more compared with what is paid to ordinary shares on the basis of the face value. In addition, there have been no separately-held general meetings of any specific class of shareholders for the past three years. (2) Status of Holding IR Our company holds regular conference calls for quarterly performance explanations in January, April, July and October every year, and each of the calls is webcast live via our company’s homepage (http://www.lge.co.kr/lgekor/company/ir/irMain.do) in order for all investors to have fair access. Relevant business outcome materials are made public and provided through the homepage. In addition, IR activities are suspended after the end of each quarter and before announcing the performance in order to secure fairness in providing information. For your reference, our company has disclosed performance calculated tentatively three weeks before a conference call in order to increase investors’ understanding since the 1st quarter performance announcement in 2016. Moreover, our company is frequently carrying out IR activities by attending conferences held by stock firms, holding meetings with investors, holding conference calls, and so forth.

(3) Status of Disclosing Corporate Information Furthermore, information on our company is made public through the homepage (http://www.lge.co.kr), DART (http://dart.fss.or.kr) and KIND (http://kind.krx.co.kr). Via our company’s homepage, the Sustainability Report, the Business Report, the Audit Report, and others are available; and business-related information on the status of the board members and how the BOD is operated, the status of shares and shareholders and financial information is also accessible. And, our company’s electronic announcements are also posted on the homepage.

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(4) Status of Internal Control Measures against Internal Transaction s and Personal Transactions Our company stipulates that "approval of transactions between a director and the company" is subject to the BOD resolution in Article 14 of the BOD regulations in order to prevent any of the management members and dominant shareholders from making internal transactions and transactions for him/herself for the purpose of his/her own personal benefit. And, our company is also -reinforcing the controls against internal transactions and personal transactions by prohibiting any of the directors that have a specific interest as to the BOD resolution from exercising his/her voting rights. In accordance with Clause 3 of Article 542-9 of the Commercial Law, prior approval from the BOD is necessary when the size of annual transactions with LG (the largest shareholder), its affiliate persons and our company’s affiliate persons stands at more than 5% of total assets/sales, or if the size of each transaction is more than 1% of total assets/sales. Furthermore, under Article 398 of Commercial Law, any of the transactions made with LG as a major shareholder, LG’s subsidiary and its subsidiary where LG holds more than 50% of the shares respectively, and a company where the CEO holds another position causing concerns over a conflict of interest should be approved by the BOD. As mentioned above, our company is taking steps to control internal transactions and personal transactions. In addition, as the Fair Trade Act stipulates that large-sized internal transactions worth more than 5 billion Korean won with its affiliated company should be approved by the BOD and be made public, our company, as one of the LG Group companies, is disclosing any of the relevant transactions after legitimately passing through the BOD approval process, and related disclosures are available on DART.

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Ⅲ. Board of Directors 1. Functions of BOD (1) Issues to Be Deliberated and Decided by the BOD Our company’s BOD, as the highest standing decision-making body of the company established based on the Commercial Law, makes decisions on major issues subjected to the BOD approval in accordance with relevant laws and the Articles of Incorporation, important financial matters exceeding a certain amount of money, mid/long-term strategies and business policies, personnel issues and other main issues related to committees under the BOD. Details of matters that should be deliberated and decided by our company’s BOD are stipulated in Article 32 of the Articles of Incorporation and Article 14 of the BOD regulations. Relevant main contents are as shown in the table below. Classification

Main issues to be approved

Convoking a general shareholders’ meeting Approving a business report Approving a financial statement Issues to be resolved by the BOD under Commercial Law and the Articles of Incorporation

Appointing and dismissing the CEO Appointing and dismissing managers [delegating jobs to the business management committee] Establishing, relocating or closing branches [delegating jobs to the business management committee] Deciding matters of issuing new shares, taking care of forfeited shares and fractional shares Approving a transaction made by and between a director and the company Establishing, operating and closing committees and appointing and dismissing committee members

Transferring all or an important part of a business Lending all business or delegating the business management Signing, amending or cancelling a contract on which all operating profits and losses are shared with others or a similar contract equivalent to the former Purchasing all or a part of a business that has an important effect on the company’s business Issues to be presented at a

Paying out share dividends

general shareholders’ meeting

Reducing capital Amending the Articles of Incorporation Exempting a director from liability for the company

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Classification

Main issues to be approved

Providing assurance and security for others (However, in the event that surety and security are provided for a subsidiary, only cases worth more than 100 billion won are subject to approval.) Acquiring and selling a business and assets (Only cases worth more than 100 billion won are subject to approval.) Selling investments and shares (Only cases worth more than 100 billion won are subject to approval.) Investing in facilities (Only cases worth more than 100 billion won are subject to approval.)

Important financial issues

Setting and increasing the annual limit of loans (excluding loans secured by receivables) and of issuing corporate bonds and CP (corporate bills) Large-sized internal transactions under Fair Trade Act Approving a transaction made with the company’s largest shareholder (his/her affiliated person) and an affiliated person or approving the total amount of transactions Selling investments or shares that would be used to incorporate, establish or exclude a subsidiary under Fair Trade Act

Mid/long-term business policies

strategies

and

Strategic business directions Assessing the current year business performance and planning the next year business, agreeing on goals

Personnel issues (excluding assignment to a position) on executives and issues on their compensations Personnel issues Others

Appointing the chief financial officer I Issues defined by other laws or the Articles of Incorporation, issues delegated at a general shareholders’ meeting and issues that the BOD chairperson acknowledges to be necessary

(2) Regarding the Delegation of BOD Powers Clause 1 of Article 33 of our company’s Articles of Incorporation and Clause 1 of Article 13 of the BOD regulations stipulate that the Audit Committee, the Outside Director Candidate Recommendation Committee and other committees needed to operate the BOD should be established. Furthermore, some of the BOD powers can be delegated to the committees within the BOD to the extent that it does not breach relevant laws and the Articles of Incorporation in accordance with Clause 2 of Article 13 of the BOD regulation. Therefore, our company has assigned some of the important financial matters defined in Item 3 of Clause 1 of Article 14 of the BOD regulations to the business management committee in order to improve the efficiency in operating the BOD. At the same time, matters subject to the resolution of the business management committee are informed to each of the directors as stipulated in Article 13 of the business management committee regulation in order for the BOD to control such matters. In addition, in the event that matters deliberated and decided by the business management committee considerably exceed the scope assigned by the BOD or are against the purpose of the assignment, directors can request for a BOD meeting to re-deliberate and re-decide such matters that have already resolved by the business management committee in accordance with Article 14 of the business management committee. Please refer to "III. BOD – 5. Committees within the BOD" stated below for matters to be assigned to each of the committees within the BOD.

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(3) Regarding Succession to the CEO Our company stipulates that the BOD has a right to appoint the CEO in accordance with Article 31 of the Articles of Incorporation and the BOD regulations. In the event that the CEO cannot perform his duties due to his/her absence, one of the next level executives (chairperson, vicechairperson, president, vice-president, executive director, managing director), a non-executive director or a person separately chosen by the BOD takes over and continues the duty by proxy in order to fill the vacancy. For general succession to the CEO, the BOD selects and recommends a candidate for the CEO position after thoroughly reviewing his/her capability to see if he/she is able to lead the company in the direction that is in line with the interests of the company and the shareholders and to efficiently implement the core values and vision of the company. (4) Risk Management and Supervision System of the BOD Our company’s internal risk management and control are conducted mainly by the audit committee in order to secure objectivity and expertise. The audit committee i) sets, executes and evaluates internal audit plans; reports on our company’s financial statement on a quarterly basis; has an audit process done by external auditors; identifies financial risks and relevant corrections and offers its advice to the management members. In addition, the committee ii) thoroughly monitors business management activities by evaluating and approving the internal accounting management system and internal audit system in accordance with the Act on External Audit of Stock Companies, the Financial Investment Services and Capital Markets Act, and other relevant laws.

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2. Structure of the BOD and Appointment of Directors (1) Regarding the BOD Structure Our company’s BOD is comprised of more than three and less than seven directors as stipulated in Article 28 of the Articles of Incorporation. In accordance with Article 383 of the Commercial Law, the BOD is made up of at least three directors and the number could increase up to seven for efficient operation and decision-making process of the BOD. As it is comprised of seven directors as of 2018 (two executive directors, one non-executive director and four Independent Directors), it is complying with requirements stated in Article 542-8 of Commercial Law, which stipulates that there should be at least three Independent Directors and they should hold a majority of the total BOD members. The current status of our company’s BOD as of the date of submitting the report is as shown in the table below. Name

Classification

Position

Initial

Term Expiration Date

Committee

Appointment Date Seong-Jin Jo

Executive director

CEO President

Mar.18, 2016 of

the

business management

March, 2021 when a

The business management committee

general shareholders’

The Outside Director Candidate recommendation

meeting is held

committee

March, 2019 when a

The business management committee

committee President of the outside

director

candidate recommendation committee

Do-Hyun Jung

Executive director

CEO

Mar.14, 2008.

CFO

general shareholders’ meeting is held

Bon-Joon Koo

Non-executive

-

Mar.17, 2017

March, 2020 when a

director

The business management committee

general shareholders’ meeting is held

Chang-Woo Lee

Independent Director

President of the audit

Mar.15, 2013

committee

Joon-Keun Choi

Independent Director

-

Mar.19, 2015

March, 2019 when a

The audit committee

general shareholders’

The Outside Director Candidate recommendation

meeting is held

committee

March, 2021 when a

The audit committee

general shareholders’ meeting is held

Dae-Hyung Kim

Yong-Ho Baek

Independent Director

Independent Director

-

-

Mar.18, 2016

Mar.17, 2017

March, 2019 when a

The audit committee

general shareholders’

The Outside Director Candidate recommendation

meeting is held

committee

March, 2020 when a

-

general shareholders’ meeting is held

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Main career details of each of the directors are as shown in the table below. Name

Seong-Jin Jo

Main careers

Yongsan Technical High School

Name

Do-Hyun Jung

Main careers

Bachelor of business management from Seoul National University

President and HA Company President in LG Electronics

Vice-President and Head of Finance Team of LG

President and H&A Company President in LG Electronics

CFO and Vice-President of LG Electronics

CEO and H&A Company President in LG Electronics

(Currently) CEO, CFO and President of LG Electronics

(Currently) CEO and Vice Chairman of LG Electronics Bon-Joon Koo

MBA from the University of Chicago

Chang-Woo Lee

Ph.D. in business management from the University of California,

CEO and Vice-Chairperson of LG Philips LCD

Berkeley

CEO and Vice-Chairperson of LG International Corp.

KCPA

CEO and Vice-Chairperson of LG Electronics

USCPA

Head of LG New Growth Business Drive

Chairperson of the BOD of the Korean Accounting Institute

(Currently) Vice-Chairperson of LG

Vice-Chairperson of SNU Foundation (Currently) Professor of business management at SNU

Joon-Keun Choi

Bachelor’s degree in Electrical Engineering at Pusan National

Dae-Hyung Kim

MBA from the University of Chicago

University

An-Kwon Accounting Firm, KCPA, USCPA

Vice President of Administrative Management Team at Samsung

CFO of GE Korea

Hewlett-Packard

GE Lighting Asia/Pacific CFO

CEO of Hewlett-Packard Korea

GE Plastics China CFO

Chief of Committees of International Enterprise at the Federation of

GE Plastics Asia/Pacific CFO

Korean Industries

SABIC IP Asia/Pacific CFO

Chairman of Korea Linux Council Yong-Ho Baek

Doctor of Economics from the State University of New York The 14th Chairperson of the Fair Trade Commission The 18th Director of the National Tax Service (Currently) Professor at the graduate school of policy science of Ewha Womans University

(2) Appointment of Directors and Qualifications Our company complies with relevant laws such as Clause 3 of Article 382 and Clause 2 of Article 542-8 of the Commercial Law and the regulation of the Outside Director Candidate recommendation committee in order to secure fairness and independence in appointing Independent Directors and follows a strict screening process conducted by the Outside Director Candidate recommendation committee to see if a candidate is able to carry out his/her duty with independence and expertise as an Independent Director before finally appointing him/her as an Independent Director at a general shareholders’ meeting. Our company discloses and notifies its shareholders of information on the appointment of directors at least three weeks before holding a general shareholders’ meeting in order to provide detailed information on the director candidates and to secure sufficient time to examine them. In accordance with Clause 4 of Article 28 of the Articles of Incorporation, directors are appointed in an ordinary way where each of the shareholders exercises his/her one voting right per share. 15

(3) Deviations and Reasons (not separating the CEO and the Chairperson, not appointing a senior Independent Director and not introducing the executive office system) As our company’s BOD regulations stipulate that the BOD chairperson should be appointed among the existing directors, the executive directors including the CEO or the non-executive directors are not the only ones that are eligible to be candidates for the chairperson. However, one of the current chief executive officers, who is capable of properly fulfilling the roles and responsibilities defined in relevant laws and internal regulations, is appointed as the BOD chairperson, while Independent Directors are provided with sufficient information to efficiently run the BOD. Our company has the first-appointed Independent Director to lead and represent the rest of the Independent Directors and act as a senior Independent Director. Even without the executive officer system, our company’s decision-making process, supervision and execution authorities are comprehensively and efficiently conducted by the BOD and the CEO.

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3. Independent Directors (1) Appointment of Independent Directors and Qualifications In order to fairly and transparently appoint Independent Directors, our company has personnel/legal divisions thoroughly verify qualifications (as stated in Article 382 and Clause 8 of Article 542 of Commercial Law and Clause 2 of Article 28 of the Articles of Incorporation) of candidates for Independent Directors. Legal qualifications are checked as well as various matters to see if candidates have independence, expertise, and fairness to conduct their duties and ethical responsibilities. We also check if they are well-experienced in various fields before finally appointing them as Independent Directors. (2) Organization to Support for Independent Directors to Conduct Their Duties Our company is supporting the BOD and committees under the BOD for their smooth activities by establishing the BOD secretariat in accordance with Article 17 of the BOD regulations. The secretariat is comprised of one executive-level employee and two working-level employees and is carrying out such jobs as explaining BOD agendas on Independent Directors in advance and supporting requests needed for Independent Directors to conduct their duties. In addition, our company holds an orientation meeting for newly appointed Independent Directors to understand the business management status at an early stage and also give them opportunities for directly visiting business places at home and abroad in order to help them to gain clearer insights into our company’s business activities.

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4. Operation of the BOD (1) Summary of the BOD Operation In accordance with Article 8 of the BOD regulations, our company holds board meetings on a quarterly basis in principle. Considering, however, submission of a financial statement subject to the BOD approval to the audit committee six weeks before a general shareholders’ meeting in accordance with Clause 3 of Article 447 of the Commercial Law, prior approval from the BOD for agendas subject to approval from a general shareholders’ meeting and convocation of a general shareholders’ meeting in March, our company holds a board meeting every month from January to March. Furthermore, extraordinary board meetings are held as often as necessary, especially when irregular agendas that should be present at a board meeting occur. Each board meeting is convened by the chairperson in accordance with Clause 1 of Article 9 of the BOD regulations, and the convocation should be notified to each of the directors at least 12 hours before holding a meeting in accordance with Clause 1 of Article 10 of the BOD regulations. However, when there is a unanimous consent of all directors, such convocation procedures may be skipped. For those directors who cannot physically attend a meeting, it is still possible for them to join it through telecommunications means. Our company provides prior explanations and face-to-face responses to questions regarding each of the agendas until the very last day before holding each board meeting in order for directors to make the best decisions in deliberating and approving agendas. Our company is also working hard to faithfully provide materials requested by directors in order for them to take an in-depth look into each of the agendas and to efficiently run the BOD. As for proceedings of a board meeting, the BOD secretariat takes minutes of meeting agendas, deliberation results, directors that have voted against and their reasons why they have voted against. And, directors present at the meeting are required to append their seals and signatures to or sign their names on the minutes.

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(2) Status of Holding Board Meetings and Details of Each Director’s Decision s <2017 > 1) The 1st Board Meeting for 2017: Jan. 24, 2017 Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Jong-nam Ju

Voted for or against 1. Approving the 15th financial statement and the business

Approved

For

For

For

For

2. Approving business plans for 2017

Approved

For

For

For

For

3. Approving limits of total transactions made with affiliated

Approved

For

For

For

For

4. Approving limits of annual loads for 2017

Approved

For

For

For

For

5. Approving investments in new facilities

Approved

For

For

For

For

6. Appointing members of the Outside Director Candidate

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

-

-

-

-

-

-

-

-

-

-

report

For Approval

persons for 2017

recommendation committee 7. Approving the amendment of personnel regulations on executives 8. Approving the maintenance of contracts with advisers and consultants To Report

1. Reporting the business performance for the 4th quarter of 2016 2. Reporting the status of operating internal accounting management system

2) The 2nd Board Meeting for 2017: Feb. 23, 2017 Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Jong-nam Ju

Voted for or against 1. Convening a regular general shareholders’ meeting

Approved

For

For

For

For

-

-

-

-

-

(1) Approving the 15th financial statement

Approved

For

For

For

For

(2) Approving the amendment of the Articles of Incorporation

Approved

For

For

For

For

2. Deciding agendas to be present at a regular general shareholders’ meeting

For Approval

19

To Report

(3) Appointing directors

Approved

For

For

For

For

(4) Appointing members of the audit committee

Approved

For

For

For

For

(5) Approving limits of directors’ compensations

Approved

For

For

For

For

3. Approving transactions made by directors for themselves

Approved

For

For

For

For

4. Appointing the BOD chairperson

Approved

For

For

For

For

-

-

-

-

-

-

-

-

-

-

1. Reporting the evaluation of the status of operating internal accounting management system 2. Reporting the inspection result to see if compliance control norms are followed or not

3) The 3rd Board Meeting for 2017: Mar. 17, 2017 Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Yong-Ho Baek

Voted for or against 1. Appointing the CEO

Approved

For

For

For

For

2. Appointing members of the business management

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

6. Approving the maintenance of contracts with consultants

Approved

For

For

For

For

7. Approving the goal of special bonuses (short term) for

Approved

For

For

For

For

Approved

For

For

For

For

committee

For Approval

3. Approving the amendment of personnel regulations on executives 4. Approving the payment of compensations for directors for 2017 5. Approving financial resources to pay special bonuses for executives

executive for 2017 8. Approving lease/rental contracts on LG Twin Tower

20

4) The 4th Board Meeting for 2017: Apr. 25, 2017 Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Yong-Ho Baek

Voted for or against 1. Approving the participation in capital increase by issuing For

Approved

For

For

For

For

2. Approving change of special bonus norms for executives

Approved

For

For

For

For

3. Approving the maintenance of contracts with consultants

Approved

For

For

For

For

-

-

-

-

-

new stocks of LG Fuel Cell Systems

Approval

To Report

1. Reporting the business performance for the 1st quarter of 2017

5) The 5th Board Meeting for 2017: Jun. 10, 2017 Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Yong-Ho

Lee

Choi

Kim

Baek

Voted for or against For

1. Approving the personnel on executives

Approved

For

For

For

For

Approval

6) The 6th Board Meeting for 2017: Jul. 26, 2017 Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Yong-Ho Baek

Voted for or against

For

1. Approving investments in new facilities

Approved

For

For

For

For

2. Approving real estate sale

Approved

For

For

For

For

3. Approving payment guarantee for subsidiaries

Approved

For

For

For

For

4. Approving transactions made by directors for themselves

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

Approval

(increasing annual limits)

5. Approving transactions made by directors for themselves (construction) 6. Approving lump-sum treatment payment for retired executives

21

7. Approving the maintenance of contracts with consultants

To Report

1. Reporting the business performance for the 2nd quarter of

Approved

For

For

For

For

-

-

-

-

-

2017

7) The 7th Board Meeting for 2017: Oct. 24, 2017 Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Yong-Ho Baek

Voted for or against 1. Approving capital reduction of LG Holdings(HK)

Approved

For

For

For

For

For Approval

To Report

2. Approving disciplinary dismissal of executives

Approved

For

For

For

For

3. Approving the maintenance of contracts with consultants

Approved

For

For

For

For

-

-

-

-

-

1. Reporting the business performance for the 3rd quarter of 2017

8) The 8th Board Meeting for 2017: Nov. 30, 2017 Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Yong-Ho

Lee

Choi

Kim

Baek

Voted for or against 1. Approving the renewal of the contract to use LG For Approval

To Report

Approved

For

For

For

For

2. Approving the maintenance of contracts with consultants

Approved

For

For

For

For

3. Approving a periodic personnel of executive for 2018

Approved

For

For

For

For

trademark

-

1. Reporting the status of recruiting executives for special

-

-

-

-

positions for 2017 2. Reporting the result of reprimanding executives for 2017

-

22

-

-

-

-

<2018> 1) The 1st Board Meeting for 2018: Jan. 23, 2018 Approved or not

Independent Directors Chang-Woo Lee

Details of Agendas

Joon-Keun Choi

Dae-Hyung Kim

Yong-Ho Baek

Voted for or against 1. Approving the 16th financial statement and the business

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

report 2. Approving business plans for 2018 3. Approving limits of total transactions made with affiliated persons for 2018 For Approval

4. Approving limits of annual loans for 2018 5. Approving royalty transactions with overseas production branches 6. Approving transactions made by directors for themselves (annual outcome and plan) 7. Appointing members of the Outside Director Candidate recommendation committee 8. Appointing compliance officers 9. Approving appointment of executives 10. Approving the maintenance of contracts with consultants

To Report

1. Reporting the business performance for the 4th quarter of

-

-

-

-

-

-

-

-

-

-

2017 2. Reporting the status of operating internal accounting management system

23

2) The 2nd Board Meeting for 2018: Feb. 22, 2018 Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Yong-Ho

Lee

Choi

Kim

Baek

Voted for or against 1. Convening a regular general shareholders’ meeting

Approved

For

For

For

For

-

-

-

-

-

(1) Approving the 16th financial statement

Approved

For

For

For

For

(2) Appointing directors

Approved

For

For

For

For

(3) Appointing members of the Audit Committee

Approved

For

For

For

For

(4) Approving limits of compensations for directors

Approved*

For

For

For

For

3. Approving the maintenance of contracts with consultants

Approved

For

For

For

For

1. Reporting the evaluation of the status of operating

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

2. Deciding agendas to be present at a regular general For

shareholders’ meeting

Approval

To Report

internal accounting management system

2. Reporting the inspection result to see if law-abiding control norms are complied with or not

3. Reporting CSR activities

* Modification has been decided on. 3) The 3rd Board Meeting for 2018: Mar. 16, 2018 Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Yong-Ho

Lee

Choi

Kim

Baek

Voted for or against

For Approval

1. Appointing the BOD Chairperson

Approved

For

For

For

For

2. Appointing the CEO

Approved

For

For

For

For

3. Appointing members of the business management

Approved

For

For

For

For

Approved

For

For

For

For

committee 4. Approving the amendment of personnel regulations on executives

24

5. Approving the payment of compensations for directors for

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

Approved

For

For

For

For

9. Approving investments in LG Electronics FundⅠ

Approved

For

For

For

For

10. Approving lease/rental contracts on LG Twin Tower

Approved

For

For

For

For

2018 6. Approving financial resources to pay special bonuses for executives 7. Approving the appointment of full-time advisers and consultants 8. Approving the goal of special bonuses (short term) for executive for 2018

25

4) The 4th Board Meeting for 2018: Apr. 26, 2018 Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Yong-Ho

Lee

Choi

Kim

Baek

Voted for or against 1. Approving payment guarantee for subsidiaries

Approved

For

For

For

For

2. Approving stock transfer

Approved

For

For

For

For

3. Approving the signing of a contract between shareholders

Approved

For

For

For

For

4. Approving the maintenance of contracts with consultants

Approved

For

For

For

For

1. Reporting the business performance for the 1st quarter of

-

-

-

-

-

For Approval

To Report

2018

5) The 5th Board Meeting for 2018: 2018. 05. 29. Approved or not Details of Agendas

Independent Directors Chang-Woo

Joon-Keun

Dae-Hyung

Yong-Ho

Lee

Choi

Kim

Baek

Voted for or against

For

1. Approving stock transfer

Approved

For

For

For

For

2. Approving business transfer

Approved

For

For

For

For

3. Approving the maintenance of contracts with consultants

Approved

For

For

For

For

Approval

5. Committees under the BOD (1) Regarding the Establishment of Committees within the BOD Our company’s BOS has three committees: the audit committee; the Outside Director Candidate recommendation committee; and the business management committee. Out of these committees, it is mandatory to establish the audit committee and the Outside Director Candidate recommendation committee as required by Commercial Law. The business management committee has been created based on the autonomous decision made by the BOD in order to enhance the expertise, independence and efficiency of the BOD. (2) Structural Status of Committees under the BOD and Details of Their Duties A. The Audit Committee Our company has established the audit committee in accordance with Article 542-11 of Commercial Law, and all three members of the committee are Independent Directors. Please refer to "IV. Audit Organization – 1. Internal Audit Organization" below for details on the power of the audit committee, status of how the audit committee is operated and audit-supporting bodies. 26

B. The Outside Director Candidate Recommendation Committee In accordance with Clause 4 of Article 542-8 of the Commercial Law and Article 28-2 of the Articles of Incorporation, our company has established and has been operating the Outside Director Candidate recommendation committee in order to recommend candidates for Independent Director positions. This committee is comprised of two Independent Directors (Chang-Woo Lee, Dae-Hyung Kim) and one executive director (Seong-Jin Jo) with Independent Directors holding a majority in accordance with the same law and the regulation of the Outside Director Candidate Recommendation Committee in order to secure fairness and independence in appointing Independent Directors, and in running the committee. Details of the activities conducted by the committee are as shown in the table below. <2017> Independent Directors Meeting Date

Details of Agendas

Approved or not

Joon-Keun

Dae-Hyung

Choi

Kim

Voted for or against Feb.23, 2017

For Approval

1. Recommending candidates for Independent Directors

Approved

For

For

<2018> Independent Directors Meeting Date

Details of Agendas

Approved or not

Joon-Keun

Dae-Hyung

Choi

Kim

Voted for or against Feb.22, 2018

For Approval

1. Recommending candidates for Independent Directors

Approved

For

For

C. The Business Management Committee In accordance with Article 33 of the Articles of Incorporation and Articles 13 and 14 of the BOD regulations, our company’s business management committee is taking care of matters assigned by the BOD and ordinary business issues in order to flexibly respond to changes in the business environment and fluctuation in interest rates and to intensively and efficiently operate the BOD. The structural status of the business management committee and its main activities are as shown in the table below. 1) Structural Status

Committee

Structure

Names of Directors

Purpose of the establishment and details of its powers

Name

The Business Management

Two executive directors

Seong-Jin Jo (full-time) Do-Hyun

One non-executive director

Jung (full-time)

Deliberating and deciding on matters assigned by the BOD to the Business Management

Bon-Joon Koo (part-time)

Committee

Committee

27

2) Details of Main Activities <2017> Meeting Date Jan.12, 2017

Jan. 25, 2017

Feb.15, 2017

Details of Agendas

Approved or not

(Shinhan Bank) Signing an agreement on business credit transactions

Approved

(Citibank) Signing an agreement on Bank Guarantee C/L

Approved

(Credit Agricole Bank) Signing an agreement on Bank Guarantee C/L

Approved

(HSBC Bank) Signing an agreement on Bank Guarantee C/L

Approved

(ING Bank) Signing an agreement on Bank Guarantee C/L

Approved

(Shinhan Bank) Signing an agreement on Bank Guarantee C/L

Approved

Issuing floating-rate unsecured debentures in foreign currency

Approved

(WooriBank) Acceptances & Guarantees in foreign currency

Approved

(KookminBank) Signing an agreement on business credit transactions

Approved

Issuing the

81st

unsecured privately-placed bonds of LG Electronics

Approved

Feb. 20, 2017

(KookminBank) Extending the agreement on committed line

Approved

Mar.13, 2017

(Development Bank) Extending the term of the agreement on export-receivables-backed loan limits

Approved

(Shinhan Bank) Extending the agreement on payment guarantee limits for overseas branches

Approved

Issuing the 82nd unsecured privately-placed bonds of LG Electronics

Approved

(SC Bank) Extending the term of the agreement on comprehensive credit limits

Approved

(Novascotia Bank) Extending the term of the agreement on export-receivables-backed loan limits

Approved

Issuing of the 83-1st, 83-2nd and 83-3rd unsecured debentures of LG Electronics

Approved

Apr. 24, 2017

(Australia and New Zealand Bank) Extending the term of the agreement on export-receivables-backed loan limits

Approved

May 15, 2017

(Kookmin Bank) Extending the term of the agreement on export-receivables-backed loan limits

Approved

(Credit Agricole Bank) Extending the term of the agreement on export-receivables-backed loan limits

Approved

(MUFG Bank) Signing an agreement on payment guarantee limits for overseas branches

Approved

(The Exchange-Import Bank of Korea) Borrowing loans for facility funds

Approved

(KEB Hana Bank) Extending the term of the agreement on comprehensive credit limits

Approved

(Shinhan Bank) Signing an agreement on the HQs payment guarantee for loan lines of Shinhan Bank branch in Kazakhstan

Approved

(Woori Bank) Signing an agreement on business credit transactions

Approved

(Industrial Bank of Korea) signing an agreement on business credit transactions

Approved

(KEB Hana Bank) Signing an agreement on business credit transactions

Approved

(The Bank of Tokyo-Mitsubishi UFJ) Extending the term of the agreement on export-receivables-backed loan limits

Approved

Jun.26, 2017

(KEB Hana Bank) Extending the term of the agreement on comprehensive credit limits

Approved

Apr.03, 2017

May 30, 2017

Jun.15, 2017

Jul.26, 2017

(Shinhan Asia Ltd) Issuing floating-rate debentures in foreign currency

Approved

Aug.17, 2017

(Woori Bank) Extending the term of the agreement on export-receivables-backed loan limits

Approved

Sep.26, 2017

(Kookmin Bank) Extending the agreement on committed line

Approved

Oct.20, 2017

(KEB Hana Bank New York Branch) Borrowing floating-rate foreign currency loans

Approved

Nov.15, 2017.

(ICICI Bank) Guaranteeing payment of foreign currency for overseas branches

Approved

Issuing the

Dec.29, 2017.

Dec. 12, 2017

Dec.20, 2017

85th

unsecured privately-placed bonds of LG Electronics

Approved

(MUFG Securities) Issuing floating-rate privately-placed bonds in foreign currency

Approved

(Deutsche Bank) Extending the term of the agreement on export-receivables-backed loan limits

Approved

(Societe Generale Bank) Extending the term of the agreement on export-receivables-backed loan limits

Approved

(ING Bank) Extending the term of the agreement on export-receivables-backed loan limits

Approved

(Chinese Bank) Extending the term of the agreement on export-receivables-backed loan limits

Approved

Issuing the

87th

unsecured privately-placed bonds of LG Electronics

Approved

(The Export-Import Bank of Korea) Borrowing foreign currency loans for facility funds for US branches

28

Approved

<2018> Meeting Date

Details of Agendas

Approved or not

Jan. 17, 2018

(Shinhan Bank) Signing an agreement on business credit transactions

Approved

Jan. 30, 2018

(Woori Bank) Signing an agreement on foreign currency payment guarantee limits for overseas branches

Approved

Issuing the 88th unsecured privately-placed bonds of LG Electronics

Approved

Feb.14, 2018

(Kookmin Bank) Signing an agreement on business credit transactions

Approved

Mar.15, 2018

(Shinhan Bank) Signing an agreement on payment guarantee limits for overseas branches

Approved

Issuing the 89th unsecured privately-placed bonds of LG Electronics

Approved

(Development Bank) Extending the agreement on export-receivables-backed loan limits

Approved

Mar.29, 2018

Issuing the

Apr.19, 2018

(SC Bank) Extending the term of the agreement on comprehensive credit limits

Approved

(Australia and New Zealand Bank) Extending the agreement on export-receivables-backed loan limits

Approved

Issuing the May 10, 2018

May 16, 2018

90th

unsecured privately-placed bonds of LG Electronics

91-1st,

91-2nd

and

91-3rd

unsecured publically-placed bonds of LG Electronics

Approved

Approved

(Kookmin Bank) Extending the agreement on export-receivables-backed loan limits

Approved

(Credit Agricole Bank) Extending the agreement on export-receivables-backed loan limits

Approved

(KEB Hana Bank branch in London) Borrowing floatinf-rate foreign currency loans

Approved

(KEB Hana Bank) Extending the term of the agreement on comprehensive credit limits

Approved

Issuing floating-rate privately-placed bonds in foreign currency

Approved

(3) Deviations and Reasons (Compensation Committee Not in Place) Although there is no compensation committee separately established under the BOD, overall operation norms on the assessment of and compensation to the management members of our company are subject to the BOD approval. In addition, the assessment of the management members and payment of compensation to them are made only after all directors including Independent Directors have reviewed such issues and the BOD has approved them to make sure that the management members receive appropriate rewards. 6. Assessment and Compensation (1) Assessment of and Compensation to Independent Directors When an Independent Director is about to complete his/her term in office, our company’s personnel division and the BOD secretariat comprehensively assess him/her by looking into: His/her attendance at the board meetings; whether or not he/she has made practical suggestions on the agendas present at such meetings; whether or not he/she has provided proper advice on major business decisions; his/her ability to internally control important financial risks of the company as an auditor; his/her contribution to the operation of the supervision system and others in order to make an internal decision on his/her re-appointment. Our company conducts a qualitative assessment of each Independent Director by comprehensively considering each of his/her activities, but has not introduced a quantitatively-assessing method where separate items are configured. The same amount of compensation within the limit approved at a general shareholders’ meeting is paid to all our company’s Independent Directors. Performance-based bonuses that reflect the evaluation of an Independent Director’s activities, expenses needed to carry out his/her duties, transportation fees, meeting attendance pay and other actual expenses are not included in the compensation. (2) Deviations and Reasons (External Evaluation of Independent Directors Not Conducted) Our company is comprehensively assessing details of activities carried by each Independent Director based on internal criteria related to meeting attendance, status of activities, independency, and others on a regular basis, but is not separately conducting an external assessment. 29

Ⅳ. Audit Organization 1. Internal Audit Body (1) Roles and Powers of the Audit Committee The audit committee audits accounting and main business tasks including: assessing the status of operating an internal accounting management system; inspecting the status of operating the internal surveillance system; and supervising the implementation of duties of directors and the management members to help them make reasonable business decisions. In carrying out its audit-related jobs, the audit committee maintains objectivity, being independent from the BOD, the management and other business-executing bodies. When it is acknowledged to be necessary for the implementation of its duties, the audit committee can request relevant executives and external auditors to attend the committee in accordance with Article 14 of the audit committee regulation and ask for help from experts at the expense of the company in accordance with Article 21 of the audit committee regulation. Our company has defined specific roles of the audit committee members in Article 11 of the audit committee regulation as shown in the table below. Classification

Main Matters Subject to Approval

Issuing an injunction for a director’s illegal act Requesting directors to make a business report Matters related to directors and the BOD

Handling issues assigned by the BOD Requesting for a board meeting

Making corrective measures in accordance with a report of directors as stipulated in Article 412-1 of Commercial Law Making corrective measures in accordance with notifications from external auditors as stipulated in Article 10 of Act on External Audit of Stock Companies Reviewing financial statements Matters related auditors

Reviewing appropriateness and validity when changing important accounting standards or estimates Evaluating the status of operating internal accounting management system Evaluating the status of operating internal surveillance system Representing lawsuits between directors and the company Deciding to file a lawsuit against directors when requested by minority shareholders

30

Classification

Main Matters Subject to Approval

Matters other than audits

Approving the appointment, change and dismissal of external auditors

Making and submitting an audit report and stating opinions at a general shareholders’ meeting Matters related with a general shareholders’ meeting

Requesting for an extraordinary shareholders’ meeting

Taking care of matters defined by other laws or assigned by the Articles of Incorporation and the BOD Others

Taking care of important matters acknowledged by the CEO to be reported to the committee and necessary measures to handle such matters

(2) Structural Status of the Audit Committee The audit committee is comprised of more than three directors in accordance with Article 415-2 and 542-11 of the Commercial Law and Article 4 of the audit committee regulation. And, more than two-thirds of the members should comprise Independent Directors. And, at least one of them needs to be an accounting or financial expert as defined by relevant laws. Our company’s audit committee is made up of three Independent Directors including accounting experts to give independent opinions on reasonable business decisions made by the management. Name

Independent Director or

Position

Appointment Date

Term Expiry Date

Not

Chang-Woo Lee

Joon-Keun Choi

Independent Director

Independent Director

Accounting/ Financial Expert or Not

Chairperson

Member

Mar. 16, 2018

March, 2019 when a general

(re-appointed)

shareholders’ meeting is held

Mar. 16, 2018

March, 2021 when a general

Accounting expert

-

shareholders’ meeting is held (re-appointed) Dae-Hyung Kim

Independent Director

members

Mar. 17, 2017

March, 2019 when a general shareholders’ meeting is held

31

Accounting expert

(3) Status of Holding Audit Committee Meetings and Details of Activities of Each Auditor <2017> 1) The 1st Audit Committee Meeting for 2017: Jan. 24, 2017 Independent Directors Agenda Details

Approved or not

Chang-Woo

Joon-Keun

Lee

Choi

Jong-nam Ju

Voted for or against 1.Reporting the financial statement for the

4th

quarter of 2016

-

-

-

-

-

-

-

-

-

-

-

-

To Report 2.Reporting the status of operating internal accounting management system 3.Reporting the audit progress carried out by external auditors

2) The 2nd Audit Committee Meeting for 2017: Feb. 23, 2017 Independent Directors Agenda Details

Approved or not

Chang-Woo

Joon-Keun

Lee

Choi

Jong-nam Ju

Voted for or against

Resolution

1.Resolving the audit report

Approved

For

For

For

2.Resolving the evaluation report on the status of running

Approved

For

For

For

Approved

For

For

For

internal surveillance system 3.Resolving the evaluation of the status of operating internal accounting management system

3) The 3rd Audit Committee Meeting for 2017: Apr. 25, 2017 Independent Directors Agenda Details

Approved or not

Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Voted for or against To Report

1.Reporting the financial statement for the 1st quarter of 2017

-

-

-

-

2.Reporting the audit progress carried out by external

-

-

-

-

auditors

32

4) The 4th Audit Committee Meeting for 2017: Jul. 26, 2017 Independent Directors Agenda Details

Approved or not

Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Voted for or against To Report

1. Reporting the financial statement for the

2nd

quarter of

-

-

-

-

2. Reporting the audit progress carried out by external

-

-

-

-

2017

auditors

33

5) The 5th Audit Committee Meeting for 2017: Oct. 24, 2017 Independent Directors Agenda Details

Approved or not

Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Voted for or against To Report

1. Reporting the financial statement for the 3rd quarter of 2017

-

-

-

-

2. Reporting the audit progress carried out by external

-

-

-

-

auditors

<2018> 1) The 1st Audit Committee Meeting for 2018: Jan. 23, 2018 Independent Directors Agenda Details

Approved or not

Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Voted for or against For Approval

1. Appointing external auditors

Approved

For

For

For

1. Reporting the financial statement for the 4th quarter of 2017

-

-

-

-

2. Reporting the status of operating internal accounting

-

-

-

-

-

-

-

-

To Report

management system 3. Reporting the audit progress carried out by external auditors

2) The 2nd Audit Committee Meeting for 2018: Feb. 22, 2018 Independent Directors Agenda Details

Approved or not

Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Voted for or against

Resolution

1. Resolving the audit report

Approved

For

For

For

2. Resolving the evaluation report on the status of running

Approved

For

For

For

Approved

For

For

For

internal surveillance system 3. Resolving the evaluation of the status of operating internal accounting management system

3) The 3rd Audit Committee Meeting for 2018: Apr. 26, 2018 34

Independent Directors Agenda Details

Approved or not

Chang-Woo

Joon-Keun

Dae-Hyung

Lee

Choi

Kim

Voted for or against To Report

1. Reporting the financial statement for the

1st

quarter of 2018

-

-

-

-

2. Reporting the audit progress carried out by external

-

-

-

-

auditors

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(4) Audit Report Bodies Our company has appointed executives in charge of legal affairs as compliance officers in order to check if compliance control norms are followed or not in accordance with Article 542-13 of Commercial Law. And, a compliance surveillance team has been established within the legal division to inspect compliance with the law and to provide preventive training. In addition, compliance officers are making an assessment of the effectiveness of our company’s compliance control norms, an inspection to see if such norms are followed or not, and a report to the BOD every year in accordance with Clause 3 of Article 542-13 of the Commercial Law and Article 21 of compliance control norms. Moreover, our company is also running an accounting policy team as a control division for its internal accounting management system and ethics secretariat as an internal audit division in order to efficiently help the audit committee to evaluate the status of operating the internal accounting management system and to inspect the status of running the internal surveillance system. Our company’s accounting policy team is helping the audit committee conduct specific jobs, based on the internal accounting management system standard rules, in inspecting whether our company’s internal accounting management system is efficiently designed and operated to prevent or identify any errors and illegal acts that would result in the deterioration of the financial statement, while the ethics secretariat is carrying out actual tasks in assessing the appropriateness of the operation of internal accounting management system, internal audit activities and the BOD and the audit committee in order to help the audit committee make a relevant evaluation report.

2. External Auditors Our company, as a stock-listed corporation, has approved the very same auditor to conduct the audit process for three consecutive business years in accordance with Article 4-2 of Act on External Audit of Stock Companies (Appointment of Auditors for Stock-listed Corporations), and the audit committee is approving the appointment of external auditors for the company. When approving the appointment of external auditors for the company, the audit committee comprehensively assesses their audit and non-audit work outcomes, understanding of the company, audit implementation strategies, audit quality management plan, details of inspection and lawsuits related with accounting audit, the number of audit participants, expertise, and so forth. The audit committee assesses the results of audit activities conducted by external auditors every year after considering the appropriateness of audit methodology, the level of cooperation with the internal audit division, the status of sanctions levied by the supervisory authorities, periodic replacement of partners in charge of audit process and others. In order to manage the independence of an external auditor, Samil PwC, as an external auditor, is carrying out a part of non-audit jobs that an external auditor can carry out to the extent there are no specific concerns over the management of the independence of an external auditor after obtaining prior consent or approval from the audit committee in accordance with restrictions on duties and other relevant rules as stipulated in the Certified Public Accountants Act. The audit committee comprehensively reviews whether the contracted jobs are complying with Article 21 (Restrictions on Duties) of the Certified Public Accountants Act and Article 14 (Restrictions on Duties) of the enforcement ordinance of the same Act, if there is any chance of damaging independence and if the contract is necessary and the contractual price is proper. As of today, the non-audit tasks contracted by and between our company and Samil PwC are about due diligence and value evaluation and established regulations and questions on local taxes. Samil PwC, as an external audit, is stating its views or answering questions made by shareholders at our company’s general shareholders’ meetings in accordance with Article 11 (Attendance at General Shareholders’ Meetings) of Act on External Audit of Stock Companies. In addition, the audit committee is receiving quarterly audit result reports directly from Samil PwC and is exchanging views on main issues in order to check our company’s important accounting standards, results of auditing and reviewing quarterly (half-yearly) financial statement, illegal acts of the management in conducting their duties or significant issues that breach relevant laws or the Articles of Incorporation.

Ⅴ. Other Main Issues Related to Corporate Governance 1.

Corporate Social Responsibility

Our company strives to take its corporate social responsibility by actively responding to requests made by internal and external stakeholders including 36

shareholders, customers and local communities. To this end, our company is publishing Sustainability Report that contains corporate governance, corporate ethics, safe environment and others every year. And, the Report is made public through our company’s homepage.

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LG Electronics Sustainability Report: http://www.lge.co.kr/lgekor/company/sustainability/report.do

Moreover, our company is sharing "Value Creation for Customers" and "Business Management Based on Respect for People" as it business principles in accordance with LG ethics standards. Also, it is promoting autonomous business management based on autonomy and responsibility in accordance with its business management charter; is respecting free market economy orders that aim for free and fair competition; and is pursuing common benefits with all stakeholders based on mutual trust and cooperation to continue to grow as a world-renowned excellent company. In particular, as LG ethics standards stipulate corporate responsibilities for the nation and the society, our company is planning to grow as a sound company through reasonable business expansion in order to protect shareholders’ benefits, to enrich the lives of the people and to develop society.

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LG ethics standards: http://www.lge.co.kr/lgekor/company/about/ethics.do

For your reference, our company has not faced any pubic sanctions or lawsuits over the past three in relation to its corporate governance. 2.

Regarding Compensation System for Employees and Executives

Our company operates an annual salary system and is also paying differential annual salaries to each of the employees and executives based on their individual performance evaluations. In addition to basic annual salaries, our company is operating a separate incentive system (frequent incentives for performance, periodic incentives and project/task incentives). In particular, such differential incentives are paid according to individual goal achievements. If payable and necessary, differential performance-based bonus for each of the organizations is also paid once per year to each of them based on the company's business results. Meanwhile, our company has simplified wage items in order to rationalize its wage system in accordance with the payment regulations. Basic salaries are individually set based on each position, rank, performance evaluation/capability evaluation result and others, and the scope of individual annual salary increases all differ from each other. (Unit: Person/Million won) Classification

Total Compensation for Employees and

No. of Employees and Executives

Executives

Average Compensation for Employees and Executives

2016

2,830,292

37,952

75

2017

3,000,840

37,757

79

※ The number of employees and the amount of compensation are on the basis of the headquarters. The registered executives are excluded. ※ The number of employees and executives is based on the annual average.

Appendix: The Articles of Incorporation

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