Final Debate on the Three Fair Economy Acts with the National Assembly... "Is Preventing Illegal Acts an Infringement on Management Rights?" vs "What If Lawsuits Are Abused?" Disagreements Persist

[Asia Economy Reporter Jeon Jin-young] The Fair Economy Task Force of the Democratic Party of Korea held a public legislative issue discussion forum with the Korea Chamber of Commerce and Industry on the 3rd. It was the final hearing session regarding the legislation of the Fair Economy 3 Acts. However, disagreements persisted over the amendment to the Commercial Act, which includes the ‘3% rule’ related to the separate election of audit committee members and the multiple derivative lawsuit system. The 3% rule proposes that when a company appoints audit committee members, the voting rights of the largest shareholder and related parties be capped at 3%, which has raised concerns in the business community.

Yoo Dong-su, Chairman of the Democratic Party's Fair Economy TF, Woo Tae-hee, Executive Vice President of the Korea Chamber of Commerce and Industry, and other participants attending the public discussion on the legislative issues of the Fair Economy 3 Acts held at the National Assembly on the 3rd are taking a commemorative photo before the start of the discussion. Photo by Yoon Dong-joo doso7@

Woo Tae-hee, the full-time vice chairman of the Korea Chamber of Commerce and Industry who participated in the forum, stated, “We need to consider whether the solution is really only through law, or if there are parts that can be revised in norms, various enforcement ordinances, or detailed regulations,” adding, “I hope there will be as much dialogue as possible to reduce the burden on companies.”

Kwon Jae-yeol, a professor at Kyung Hee University Law School, expressed concern during the discussion, saying, “There are no overseas cases that restrict the voting rights of audit committee members.” Professor Kwon pointed out, “It is an unacceptable point that one cannot freely elect directors they want,” and noted, “There are unconstitutional elements.”

Han Seok-hoon, a professor at Sungkyunkwan University Law School, argued, “The 3% rule restricts voting rights from the director appointment stage, infringing on the essence of shareholder rights, and speculative capital can appoint audit committee members by splitting shares to interfere with management,” adding, “The multiple derivative lawsuit system has a high potential for abuse of litigation.”

Kim Woo-chan, a professor in the Department of Business Administration at Korea University, countered, “There are countries with much stronger systems than Korea.” Professor Kim said, “Israel faced a similar issue in 2007 and launched a major reform when the chaebols’ private interests were severe,” and pointed out, “There is no need to worry about overseas speculative capital. The straightforward approach is to introduce the system and strictly punish cases of trade secret leakage. Is it reasonable to worry in advance about events with low probability?”

Attorney Myung Han-seok also said, “The requirements of this amendment, including the multiple derivative lawsuit system, have been considerably relaxed compared to the original draft,” and criticized, “If damages are compensated through the multiple derivative lawsuit system, the beneficiaries are subsidiaries. Shareholders of subsidiaries or parent companies only receive indirect benefits. Can such things really be seen as infringing on management rights? Is preventing illegal acts an infringement of management rights?”

Yoo Dong-soo, a Democratic Party lawmaker and head of the TF, said in his opening remarks, “We will safely collect opinions and ensure they are well reflected in legislation.”

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