Final Negotiations Between Ruling Party and Business Community Over Three Major Corporate Regulation Laws

Public Debate Between Democratic Party TF and KCCI on Three Corporate Regulation Laws Today
Ruling Party Shows Strong Will for Legislation Within the Year
Business Community "Threat to Management Rights Is Obvious"

[Asia Economy Reporter Changhwan Lee] Discussions between the ruling party and the business community have reached the final stages regarding the so-called three corporate regulation laws: the amendments to the Commercial Act and the Fair Trade Act, and the enactment of the Financial Group Integrated Supervision Act.

Companies are demanding the removal of toxic provisions such as the separate election of audit committee members and the 3% cap on major shareholders' voting rights (the 3% rule) from the amendments, but the ruling party maintains that while some revisions and supplements are possible, complete abolition is not.

As discussions near their end and the ruling party is determined to push the legislation through within the year, there are concerns that the business community is being cornered.

According to political sources on the 3rd, the Democratic Party's Fair Economy Three Laws Task Force (TF) and the Korea Chamber of Commerce and Industry will hold a public legislative forum on these regulatory bills in the National Assembly Members' Office Building in Yeouido, Seoul, this afternoon.

The event will feature key figures from the Democratic Party and the Korea Chamber of Commerce and Industry, as well as experts such as Professor Janghyung Jeong, Emeritus Professor at Korea University Law School, Junmo Park, Head of the Legislative and Judiciary Team at the National Assembly Legislative Research Office, and Professor Hyuk Lee from Kangwon National University Law School, who will discuss the validity of the three corporate regulation laws.

The biggest issue is the 3% rule promoted by the government and ruling party through amendments to the Commercial Act. The business community fears that if this system is implemented, companies will be constantly exposed to threats to their management rights.

Currently, audit committee members are selected from among directors appointed by major shareholders, but if the Commercial Act amendments are enacted as is, companies will have to elect at least one audit committee member separately from directors at shareholders' meetings. This opens the door wide for audit committee members, who are key personnel on the board, to be taken over by speculative forces or merger and acquisition (M&A) groups aiming at corporate control.

Among the three corporate regulation laws, companies insist that the 3% rule must be either abolished or significantly revised and supplemented. Economic organizations such as the Korea Chamber of Commerce and Industry, the Korea Employers Federation, and the Federation of Korean Industries have met with lawmakers from both ruling and opposition parties several times since mid-year to request a review of these bills.

However, the ruling party is still perceived to have a strong will to push forward the three corporate regulation laws. For highly controversial issues like the 3% rule, some revisions and supplements may be possible, but abolition is unlikely. Regarding the 3% rule, it is known that they are considering alternatives proposed by the Korea Chamber of Commerce and Industry, such as relaxing the 3% cap on major shareholders' voting rights only in special cases where speculative funds attempt to enter the board through shareholder proposals.

A representative from an economic organization said, "Both economic organizations and individual companies have continuously pointed out the problems of the three corporate regulation laws to the government and ruling party, but the ruling party's determination to push the bills is stronger than expected," adding, "Before the final decision is made, today's forum may effectively be the last opportunity to gather opinions from the business and academic communities."

The Democratic Party is pushing to handle these three laws as the top legislative priority within this regular session of the National Assembly. With the national audit completed, they plan to soon convene the Legislative and Judiciary Committee, the responsible standing committee, and formally begin the legislative process.

It is expected that the original bill will be maintained with only supplementary measures added to some provisions. A ruling party official explained, "Although the schedule for the Legislative and Judiciary Committee has not yet been announced, starting from today's forum, the schedule and discussions related to the three laws are likely to accelerate."

With little time left to persuade the ruling party, economic organizations are individually meeting with as many lawmakers as possible to convince them to reconsider the three corporate regulation laws.

A business community official said, "Currently, representatives from economic organizations including the Korea Chamber of Commerce and Industry, the Korea Employers Federation, the Federation of Korean Industries, the Korea Federation of SMEs, the Korea Association of Mid-sized Enterprises, and the Korea Industrial Federation are contacting lawmakers related to the three corporate regulation laws to convey and persuade them of the business community's opinions," adding, "Even after the Legislative and Judiciary Committee begins, coordination of opinions will continue."

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