Abolition of the 3% Rule and Introduction of Poison Pill... Korea Listed Companies Association Proposes Presidential Election Pledges

Publication of a Pledge Book Including Capital Market Regulation Improvements

Framework of Regulatory Improvement Proposals Suggested by the Korea Listed Companies Association (Provided by the Korea Listed Companies Association)

[Asia Economy Reporter Minwoo Lee] The Korea Listed Companies Association (KLCA) has urged presidential candidates to pledge key capital market regulatory improvements, including the abolition of the '3% rule' and the introduction of management defense mechanisms such as poison pills.

On the 28th, KLCA published a proposal booklet titled '3x3 Regulatory Improvement Tasks' containing these recommendations. The purpose is to convey concerns and worries from the perspective of listed companies about the widening gap between global standards and the domestic corporate environment to the political sphere.

The proposals are broadly organized into three categories: ▲Ensuring autonomous management ▲Restoring growth momentum ▲Improving outdated systems. First, under ensuring autonomous management, KLCA urged caution in proposing laws that could foster anti-business sentiment. They also called for improvements to the periodic auditor designation system and demanded the independence and expertise of the National Pension Service fund.

In the section on restoring growth momentum, KLCA emphasized abolishing the '3% rule,' which limits shareholders' voting rights to a maximum of 3% when appointing auditors, and introducing the 'poison pill' system to defend management rights. The poison pill grants existing shareholders call options to purchase new company shares at prices significantly below market value, making it difficult for hostile takeovers (M&A) to secure shares and thus protecting management control. They also advocated for the abolition of the vaguely defined crime of breach of trust.

Regarding the improvement of outdated systems, KLCA requested easing the excessive burden of inheritance and gift taxes and updating the definition of relatives in corporate and economic laws to reflect reality. They also pointed out the need to revise outdated corporate governance regulations, such as changing the total asset threshold from 2 trillion won to under 5 trillion won.

Jung Guyong, Chairman of the Korea Listed Companies Association, stated, "Most current regulations are based on the narrow and small domestic market, which traps and stunts the growth of domestic global companies that have grown as large as elephants. If we envy top-tier companies like Apple and Amazon and the jobs they provide, we must maintain regulatory standards similar to the environments they enjoy."

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