Chairman Son Kyung-sik: Significant Adjustment Expected for Corporate Regulation 3 Laws' '3% Rule' (Comprehensive)

Democratic Party leader Lee Nak-yeon (right) and Sohn Kyung-shik, chairman of the Korea Employers Federation, held a meeting on the morning of the 6th at the Federation's headquarters to discuss the "Amendment to the Three Corporate Regulation Laws."

[Asia Economy Reporter Hwang Yoon-joo] Sohn Kyung-shik, Chairman of the Korea Employers Federation (KEF), expressed expectations on the exclusion of the controversial '3% rule' (amendment to the Commercial Act) from the revision of the 'Three Corporate Regulation Laws' on the 6th. The 3% rule is part of the recently announced 'Three Corporate Regulation Laws' by the government, included in the amendment to the Commercial Act, which limits the voting rights of major shareholders and related parties to a total of 3% when appointing corporate audit committee members.

Business Community Strongly Requests Exclusion of '3% Rule'... Meeting Ends Well Past Scheduled Time

Chairman Sohn said after meeting with Lee Nak-yeon, leader of the Democratic Party of Korea, at the KEF building in Mapo-gu on the morning of the same day, "I conveyed several concerns, including the most important '3% rule' in the amendment to the Commercial Act among the proposed Three Corporate Regulation Laws in the National Assembly."

He added, "I think the Three Corporate Regulation Laws will soon be concluded," and expressed satisfaction with the meeting, saying, "I believe the discussion to slow down the passage speed of the amendment and to weaken the regulatory intensity will make progress."

When asked by reporters whether differences with the ruling party were narrowed through the meeting, Chairman Sohn said, "The 3% rule is the biggest problem," and added, "I think it will be resolved within common sense."

The '3% rule' is part of the amendment to the Commercial Act, one of the Three Corporate Regulation Laws. It limits the total voting rights of major shareholders and related parties to 3% when appointing inside and outside directors (separate election of audit committee members).

Under the current system, owners and related parties who are board members can each exercise 3% voting rights, totaling 6%, when appointing inside and outside directors. However, if the amendment passes, both inside and outside directors will only be able to exercise a total of 3% voting rights. The business community is concerned that foreign speculative capital could use this voting rights restriction to place their representatives on the board and destabilize management control.

As the business community shows a united and strong stance against the passage of the 'Three Corporate Regulation Laws,' today's private meeting ended at 10:51 a.m., twice as late as the scheduled 17 minutes.

Regarding the extended meeting time, Chairman Sohn said, "Leader Lee explained that there has been frequent communication between the business community and the ruling party," and "that the amendment was not proposed with an anti-business attitude." He also said, "The Democratic Party of Korea is establishing the Democratic Research Institute, and through this organization, communication with the business community will be expanded," adding, "We agreed to have sufficient dialogue going forward."

Business Community Expects Exclusion of '3% Rule' in Commercial Act... KEF Likely to Communicate with Ruling Party's Democratic Research Institute

On the 6th, Sohn Kyung-shik, Chairman of the Korea Employers Federation, conveyed the business community's concerns regarding the passage of the 'Three Corporate Regulation Acts Amendment' to Lee Nak-yeon, leader of the Democratic Party, at the Korea Employers Federation building in Mapo-gu.

In the private meeting, it appears that the ruling party and the business community reached a consensus to pass the amendment to the Three Corporate Regulation Laws while excluding the application of the '3% rule.'

After the meeting, Leader Lee said, "It is a reasonable statement from the management's perspective," and "We want to prevent our companies from becoming targets of foreign hedge funds," hinting at the possibility of excluding the 3% rule.

Chairman Sohn held a tea time separately with the presidents of the four major groups: Lee In-yong of Samsung Electronics, Gong Young-woon of Hyundai Motor, Jang Dong-hyun of SK Inc., and Hwang Hyun-sik of LG Uplus. Unlike the somewhat stiff atmosphere before the meeting, laughter from the presidents occasionally echoed outside the KEF chairman's office, indicating their relative satisfaction with the meeting results.

After the tea time, Chairman Sohn said, "The '3%' rule must definitely be changed," and "I conveyed the opinion that if it does not change, it will be difficult for companies to operate and competitors may enter, making it difficult." He added, "Although Leader Lee did not mention it, I expect significant adjustments to the 3% rule."

Hyundai Motor President Gong Young-woon also expressed satisfaction as he left the KEF building, saying, "It was a meaningful occasion because we spoke frankly." When asked about the recent fire of Hyundai's electric vehicle 'Kona' in an underground parking lot of an apartment in Daegu the previous day, President Gong said, "We are preparing countermeasures well to ensure no inconvenience to customers."

Chairman Sohn also mentioned that he made recommendations regarding the amendment to the Fair Trade Act, including the abolition of exclusive prosecution rights and the increase of mandatory shareholding ratios for subsidiaries of holding companies.

He said, "Raising the mandatory shareholding ratio to over 50% (for unlisted companies) is too burdensome for companies," and "I conveyed the opinion that the cost of acquiring shares could be used for other businesses."

Going forward, KEF is expected to be the main communication channel for discussions on the amendment to the Three Corporate Regulation Laws. Chairman Sohn said, "Leader Lee emphasized communication," and "The Democratic Research Institute will study economic-related legislation and seems likely to communicate with us (KEF) in the future."

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