Business Leaders Urge "Reconsideration of Corporate Regulation Law"... Lee Nak-yeon Says "Difficult to Delay" (Comprehensive Report 2)

Appeal to Lee Nak-yeon by Businesspeople Holding Faint Hope for Three Major Corporate Regulation Laws
Lee Nak-yeon Meets with Heads of Six Major Groups at Korea Employers Federation but Differences Remain Large
Son Kyung-sik: "The National Assembly Increases Corporate Burdens"

Lee Nak-yeon, leader of the Democratic Party of Korea, and Sohn Kyung-shik, chairman of the Korea Employers Federation, attended the Democratic Party-Korea Employers Federation meeting held on the 6th at the Korea Employers Federation in Baekbeom-ro, Mapo-gu, Seoul, and posed for a photo before the meeting began. Photo by Yoon Dong-joo doso7@

[Asia Economy reporters Changhwan Lee, Yoonju Hwang, Jihee Kim] Presidents of leading domestic companies such as Samsung, Hyundai Motor, SK, and LG met with Lee Nak-yeon, leader of the Democratic Party of Korea, urging a reconsideration of the three corporate regulatory bills promoted by the government and ruling party, including the amendments to the Commercial Act, the Fair Trade Act, and the Financial Group Supervision Act. Although business leaders met with Lee holding onto a faint hope and appealed to him, the gap between the two sides' positions remains unresolved.

On the morning of the 6th, the presidents of the six major groups?including Sohn Kyung-shik, chairman of the Korea Employers Federation; Lee In-yong, president of Samsung Electronics; Gong Young-woon, president of Hyundai Motor; Jang Dong-hyun, president of SK Inc.; Hwang Hyun-sik, president of LG Uplus; Oh Sung-yeop, president of Lotte Holdings; and Kim Chang-beom, vice chairman of Hanwha Solutions?met with Lee at the Federation of Korean Industries building in Mapo-gu, Seoul, to convey the business community's concerns about the three corporate regulatory bills. This is the first time that presidents of major groups have directly appealed to the political sphere regarding these bills.

The six group presidents entered the Federation of Korean Industries building around 9:40 a.m. with stern faces. They remained silent in response to reporters' questions and took notes on key points during the public greetings by Chairman Sohn and Lee, organizing the companies' concerns to convey to Lee. It is reported that in the subsequent closed-door meeting, the presidents explained in detail the business community's concerns about the corporate regulatory bills to Lee.

Kwon Kyung-sik, Chairman of the Korea Employers Federation, is delivering opening remarks at a meeting between the Democratic Party and the Korea Employers Federation held on the 6th at the Korea Employers Federation in Baekbeom-ro, Mapo-gu, Seoul. Photo by Yoon Dong-joo doso7@

◆Chairman Sohn Kyung-shik: "Companies are struggling due to COVID-19, and corporate regulatory laws worsen the situation"

In his public remarks, Chairman Sohn said, "To quickly overcome the economic crisis caused by the novel coronavirus (COVID-19) and to lead the economy in the post-COVID era, it is essential to improve systems that revive companies and enhance competitiveness. However, more than 200 bills that impose restrictions and increase burdens on corporate management and investment activities have been submitted to the National Assembly, causing great concern in the business community."

He explained that among these 200 bills, companies are most concerned about the three corporate regulatory bills: amendments to the Commercial Act, the Fair Trade Act, and the Financial Group Supervision Act.

Chairman Sohn stated, "Regarding the amendment to the Commercial Act, it directly impacts the exercise of corporate management rights and strategic management initiatives, imposing regulations that are stricter than global standards. If audit committee members are separately appointed, speculative foreign funds or competing companies could intrude into core internal management matters, and the participation of external personnel in the board of directors could threaten the foundation of the management system."

He continued, "The multiple derivative suit system could lead to excessive management interference when companies invest in future new technologies and new businesses through unlisted companies, and it carries the risk of frivolous lawsuits against subsidiaries by minority shareholders of parent companies. Discussions on defensive measures for management rights, which our companies have continuously proposed, are completely absent. If only regulatory systems are introduced, corporate activities essential for economic recovery will inevitably shrink further."

Regarding the amendment to the Fair Trade Act, he conveyed companies' concerns about expanding the scope of companies subject to unfair profit appropriation regulations. Chairman Sohn argued, "The amendment to the Fair Trade Act could hinder securing a reasonable level of competitiveness to respond to fierce global competition and may cause adverse effects such as shifting volume to foreign companies. This could lead to management burdens due to large-scale share disposals to reduce regulatory burdens."

Regarding the Financial Group Supervision Act, he forecasted, "In the process of separately classifying and managing financial-related companies within groups, strict government soundness regulations could significantly increase burdens such as capital expansion and disposal of affiliate shares."

Chairman Sohn also publicly expressed concerns about the proposed amendments to the Labor Union Act related to ILO (International Labour Organization) conventions. He said, "The amendment to the Labor Union Act allowing dismissed workers and unemployed persons to join unions will deepen the imbalance in our labor-management relations, which are already confrontational and have the highest number of strikes among major advanced countries, imposing unbearable burdens on employers."

He added, "Along with strengthening the rights of workers and labor unions, systems that do not align with global standards and disrupt the balance of power between labor and management?such as prohibiting replacement labor during strikes and punishing unfair labor practices only against employers?must also be reviewed for improvement."

Lee Nak-yeon, leader of the Democratic Party of Korea, and Sohn Kyung-shik, chairman of the Korea Employers Federation, attended the Democratic Party-Korea Employers Federation meeting held on the 6th at the Korea Employers Federation in Baekbeom-ro, Mapo-gu, Seoul, and posed for a photo before the meeting began. Photo by Yoon Dong-joo doso7@

◆Chairman Sohn Kyung-shik: "Significant adjustments expected for the 3% rule" … Lee Nak-yeon: "Some issues can be supplemented, but delaying the schedule is difficult"

After the meeting, Chairman Sohn emphasized the problems with the '3% rule' for major shareholders in an interview with reporters. He said, "Several legislative bills, including the three corporate regulatory bills, are currently before the National Assembly. I conveyed concerns about several parts, especially the problematic '3% rule' in the Commercial Act." The amendment to the Commercial Act includes a provision limiting the voting rights of major shareholders to within 3% when electing audit committee members.

Chairman Sohn stressed, "I strongly insisted that this regulation must be changed. It is unreasonable and could allow competitors to enter, making it extremely difficult for companies." The Korea Employers Federation has actively proposed to the government and ruling party that this regulation could threaten management rights.

He added, "Although (Lee) did not respond with a clear yes or no, since there have been several discussions in the National Assembly, significant adjustments to the '3% rule' are expected. I believe it will be resolved within reasonable limits," expressing a positive outlook.

Regarding the concerns of business leaders, Lee responded at a general level. He said, "The three fair economy laws are long-standing issues aimed at enhancing the soundness of our companies, not to cause trouble. While some supplements are possible regarding concerns such as management rights disputes with foreign hedge funds, it is difficult to delay or change the direction of the legislative amendments."

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