Ruling and Opposition Parties Accelerate Amendments to Commercial and Fair Trade Laws... "Sufficient Discussion if Supplementation Needed"

Democratic Party "This Time for Sure" People Power Party "Exclude Toxic Clauses"

Chairman Park Yong-man of the Korea Chamber of Commerce and Industry is visiting the National Assembly on the 22nd. Chairman Park is scheduled to meet with Kim Jong-in, the Emergency Committee Chairman of the People Power Party, and Lee Nak-yeon, the leader of the Democratic Party of Korea, to express opposition to the "Three Corporate Regulation Laws."
Photo by Yoon Dong-joo doso7@

[Asia Economy Reporters Park Cheol-eung, Lee Ji-eun, Won Dara, Lee Chang-hwan] Amendments to the Commercial Act and the Fair Trade Act are rapidly gaining momentum in the National Assembly. The Democratic Party of Korea is expressing a strong determination to push through the long-standing main tasks of fair economy this time, while the People Power Party is also emphasizing economic democratization under the leadership of Emergency Committee Chairman Kim Jong-in. However, both ruling and opposition parties share the view that necessary supplements will be thoroughly discussed, considering the opposition from the business community.

Park Beom-gye, a Democratic Party member of the National Assembly’s Legislation and Judiciary Committee, said in a phone interview with Asia Economy on the 22nd, "The multiple derivative suit system included in the Commercial Act amendment targets criminal acts, so parent and subsidiary companies cannot be viewed separately," adding, "The business community worries about corporate burdens or attacks from foreign speculative capital, but isn’t it enough just not to commit crimes?"

He continued, "Since this is a bill targeting companies, it is difficult to push it unilaterally, but as Kim Jong-in, the People Power Party’s emergency committee chairman, supports it, I intend to persuade the party’s lawmakers well." He also indicated that, on a personal basis, supplementary measures such as court approval as a requirement for multiple derivative suits could be discussed.

Yoon Ho-jung, chairman of the Legislation and Judiciary Committee and a Democratic Party lawmaker, appeared on KBS Radio’s 'Kim Kyung-rae’s Strongest Current Affairs' on the same day and said, "The opposition leader also said, ‘Companies always say it’s difficult,’ and has shown commitment to the economic democratization law, so I expect cooperation between the ruling and opposition parties to process the three fair trade laws in this regular session of the National Assembly."

He added, "There is a need to make systems related to companies and stocks more aligned with global standards," emphasizing, "Although the movement of people and goods is heavily restricted, capital will move more actively. At such times, we need to enhance the attractiveness of our economy."

Choi Un-yeol, a former Democratic Party lawmaker and former member of the Bank of Korea’s Monetary Policy Committee, told Asia Economy in a phone interview, "This time, there is consensus between the ruling and opposition parties, so it is highly likely to pass as a product of cooperation," adding, "Chaebols have been complacent with the system, but it is not effective in an open society. This is an opportunity to revise it to meet global standards." He also added, "If labor reform bills had been discussed together, it would have received even more social support."

The People Power Party is consolidating its party stance. Chairman Kim Jong-in has called lawmakers from the Political Affairs Committee to emphasize the necessity of economic democratization, while holding public hearings to find common ground on contentious issues.

A key People Power Party official told Asia Economy, "Our party’s direction has been set as reform, and there are no lawmakers opposing this," but explained, "We want to remove parts that burden companies or toxic clauses." Since 'economic democratization' is already specified in the party’s platform and policies, the party intends to discuss the fair economy three laws led by the government and ruling party in a progressive manner.

However, he said, "Lawmakers have not yet reviewed the bills in detail, so the Policy Committee will share the bill materials," adding, "Afterwards, a public hearing will be held to gather opinions on which toxic clauses to remove."

On the 21st, Chairman Kim emphasized the importance of economic democratization during the emergency committee meeting and lunch with Political Affairs Committee members, urging them to "actively engage with related bills." This appears to reflect his awareness of the continuing opposition within the party to the fair economy three laws. He has shown strong determination to push forward, saying, "There is nothing inherently wrong with the fair economy three laws themselves."

However, there are still many lawmakers within the party hesitant to push regulatory bills while companies are facing crises due to the COVID-19 pandemic. A Political Affairs Committee member who attended the lunch said, "It was a meeting to reconcile opinions or to listen to each other," adding, "There are many divided opinions on the timing and effectiveness of the bills, so it is not a situation where the party stance can be decided quickly."

People Power Party lawmaker Jang Je-won criticized on Facebook that "The People Power Party, which accepted ‘economic democratization’ as a symbol of party change, has started to back away when faced with the ‘economic democratization’ bills," and asked, "Is our party, which went as far as basic income on the far left, ultimately just borrowing the shell of Chairman Kim Jong-in?"

He added, "I think specifying the value of ‘economic democratization’ as a core value in the party platform and policies was the best thing Chairman Kim did after taking office," calling it "our promise and a value that proves change." Lawmaker Jang also said, "It’s not about attacking chaebols. Is it normal for major shareholders to have audit rights? Is it normal to create subsidiaries to funnel work and have the chaebol heirs own all the shares of those subsidiaries?"

[Image source=Yonhap News]

Among the amendments to the Commercial Act, the issues that companies are most concerned about are the separate election of audit committee members and the 3% voting rights restriction for major shareholders. Audit committee members are key personnel in the board of directors, the highest decision-making body of a company, and can be involved not only in audits but also in corporate management. Until now, audit committee members were selected from directors appointed by major shareholders, so it was rare for them to raise strong voices within the board.

However, according to the government’s amendment to the Commercial Act, companies will have to elect at least one audit committee member separately from directors at the general shareholders’ meeting. This means that audit committee members must be elected separately at the shareholders’ meeting, not from directors appointed by major shareholders. Moreover, when electing, major shareholders can exercise only 3% of their voting rights.

Although ordinary shareholders can also exercise voting rights up to 3%, the regulations on special related parties are unclear, so if several minority shareholders form a coalition, their voting power could become much stronger than that of major shareholders. This has been criticized for potentially allowing hostile external forces such as speculative capital to enter the company’s board. The business community’s opinion is that if the National Assembly passes the amendment including the separate election of audit committee members, the minimum voting rights restriction should be revised.

Among the amendments to the Fair Trade Act, the expansion of the scope of self-dealing (work-funneling) regulations and the reform of the exclusive prosecution system are also major burdens for companies. According to the amendment, the criteria for regulating work-funneling have been strengthened from the current 30% or more ownership by the controlling family in listed companies and 20% or more in unlisted companies to 20% or more in all cases, which increases the number of companies subject to regulation.

Also, if the Fair Trade Commission’s exclusive prosecution system is reformed, indiscriminate accusations by civic groups or competitors may increase, making normal corporate management difficult. A representative of one of the top 10 conglomerates said, "If the bill is amended as per the government’s proposal, our companies will be greatly exposed to threats to management rights," adding, "If speculative capital causes difficulties for our companies, companies will manage more conservatively, which will ultimately have a negative impact on the entire economy."

This content was produced with the assistance of AI translation services.