[Exclusive] Democratic Party 3 Laws TF Leader "3% Ratio Adjustment & Supplementary Measures, All Options Open... Public Hearing Early Next Month"

Hong Ik-pyo, Director of the Democratic Research Institute, "Approaching with an Open Mind... No Change in Position Yet"
Yang Hyang-ja, "The Tech Hegemony War Should Not Be Seen as Mere Complaints"

Park Yong-man, Chairman of the Korea Chamber of Commerce and Industry, and Yoo Dong-su, Senior Deputy Chairman of the Policy Committee of the Democratic Party, are entering the meeting room to attend the 'KCCI-Democratic Party Fair Economy TF Policy Meeting' held on the 14th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Park Cheol-eung] The Democratic Party of Korea is considering all options regarding the so-called '3% rule,' including adjusting the ratio and supplementary measures against attacks by speculative capital. This is the biggest issue in the 'Economic 3 Laws,' which limit the voting rights of major shareholders when electing audit committee members separately. A related public hearing is planned for early next month, and the Democratic Party aims to finalize its plan before then.

Yoo Dong-soo, the senior deputy chairman of the Democratic Party's Policy Committee and head of the 'Fair Economy 3 Laws Task Force (TF),' said in a phone interview with Asia Economy on the 16th, "We are reviewing whether to adjust the combined voting rights ratio of major shareholders and related parties, currently set at 3%, and are also considering supplementary measures in light of concerns about speculative capital attacks."

He added, "After the national audit ends on the 26th, we will begin full deliberations, and we plan to hold a public hearing on the three laws in early next month. This will be done at the level of the party's Policy Committee or the relevant standing committees, such as the Judiciary Committee and the Political Affairs Committee. The party's plan will be finalized before the public hearing."

The Democratic Party's 3 Laws TF visited the Korea Employers Federation (KEF) and the Korea Chamber of Commerce and Industry (KCCI) on the 14th to hear opinions from the business community, and the Democratic Research Institute, the party's think tank, held meetings with large corporate research institutes and economic organizations on the 15th. Although some speculated that the Democratic Party had decided to stick to the '3%' rule, the party explained that it will maintain flexibility and continue reviewing the issue until the end of this month or early next month.

The business community is demanding an increase in the ratio. Hong Ik-pyo, a member of the National Assembly and head of the Democratic Research Institute, said on MBC Radio's 'Kim Jong-bae's Focus' on the same day, "Some in the business community have already mentioned 5%, and in extreme cases, up to 10%," adding, "Currently, there is no change in any plan, including the 3%. However, if the business community presents reasonable proposals and the issues are substantiated, we will approach modifications with an open mind."

Regarding concerns about attacks by foreign speculative capital, a plan is being considered to allow voting rights only for those who hold shares for a certain period or longer. This is because speculative capital generally exhibits short-term investment behavior.

According to the 'Activist Revolution' report published by global investment bank JP Morgan in 2015, about 47% of hedge funds hold stocks for less than six months, and approximately 70% do not hold them for more than a year. Under the current Commercial Act, a six-month holding period is a prerequisite for exercising minority shareholder rights such as convening extraordinary general meetings, inspecting company affairs and financial status, and proposing agenda items at shareholders' meetings. The question is whether this should also apply when exercising voting rights for the separate election of audit committee members.

Within the Democratic Party, many view the business community's concerns about threats to management rights as excessive. Representative Hong said, "The 3% limit applies only to the separate election of audit committee members and does not apply to all other decision-making. The claim that management rights will be lost is an exaggerated and untrue assertion," adding, "Regarding the possibility of technology leakage, which is an extreme case, we are discussing preparing supplementary measures."

Representative Lee Yong-woo, who is participating in the TF, said in a phone interview with Asia Economy, "If an audit committee member passes on information or technology, they become a conspirator, but realistically, is that likely to happen easily?" He added, "Looking at the distribution of foreign capital, there are many capital funds and pension funds, whose main interest is to improve performance through transparent management."

Opinions were also expressed at the Democratic Party's Supreme Council meeting that day. Representative Yang Hyang-ja said, "There are concerns that this legislation could become a channel for foreign capital to intervene in management and steal our precious core technologies," adding, "The outside director recommended by speculative capital to Hyundai Motor was from a competing company, and a speculative capital director who entered KT&G openly refused to sign a confidentiality agreement." She also said, "The technology hegemony war should not be seen as mere complaints."

On the other hand, Representative Park Hong-bae said, "We must stop the exaggerated agitation that foreign competitors colluding with speculative capital are elected as audit committee members, causing confidential information leaks and excessive lawsuits that interfere with corporate management," adding, "We should abandon outdated objections and promptly pass the Fair Economy 3 Laws based on common sense."

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