8 out of 10 Large Business Groups Report Increased Corporate Disclosure Burden in the Past 5 Years

Sangui, Comprehensive Survey of 76 Large Corporate Groups

Over the past five years, the workload burden felt by companies has increased as various corporate disclosure obligations have expanded. Corporate disclosure obligations refer to disclosure requirements under the Fair Trade Act, such as the status of corporate groups, disclosure obligations under the Capital Market Act, such as business reports, and ESG-related disclosure obligations.

According to a comprehensive survey conducted by the Korea Chamber of Commerce and Industry targeting 76 domestic corporate groups subject to disclosure, 81.6% of companies responded that their disclosure burden had "significantly increased" (29.0%) or "somewhat increased" (52.6%) over the past five years. In fact, following the introduction of disclosure obligations for overseas affiliates and public interest corporations under the Fair Trade Act in 2020, and the establishment of subcontract payment disclosure obligations under the Subcontracting Act in 2022, three new disclosure requirements have been implemented since last year, leading to a sharp increase in companies' disclosure burdens.

When asked how the disclosure burden is expected to change in the future, 73.7% of companies anticipated an increase, while only 11.8% expected a decrease. Although the Fair Trade Commission announced measures to reduce disclosure burdens earlier this year, such as converting eight quarterly disclosure items into annual disclosures, the Korea Chamber of Commerce and Industry explained that the three new disclosure systems implemented since last year and the soon-to-be-introduced ESG disclosure obligations* appear to have influenced this outlook.

The 76 large corporate groups identified the most burdensome disclosure obligations as ▲‘Large-scale internal transaction disclosure’ (31.6%), ▲‘Corporate group status disclosure’ (25.0%), and ▲‘Subcontract payment disclosure’ (14.5%) in that order.

These 76 corporate groups pointed out that unreasonable disclosures that do not align with the purpose of the system include ▲‘Subcontract payment disclosure’ (29.6%), ▲‘Corporate group status disclosure’ (21.1%), and ▲‘Overseas affiliate disclosure’ (12.7%).

When asked whether imposing subcontract payment disclosure obligations on primary contractors belonging to corporate groups is effective in improving transaction conditions for second-tier and lower-tier subcontractors, 7 out of 10 companies responded that it would either be of no help or would rather cause harm. The subcontract payment disclosure system requires primary contractors within corporate groups to disclose subcontract payment terms so that second-tier and lower-tier partners can utilize payment condition information between the primary contractor and first-tier partners during contract price negotiations.

Regarding difficulties in implementing the subcontract disclosure system, companies pointed out ▲‘The nature of the disclosure differs from existing disclosures, making it difficult for current disclosure personnel to handle’ (52.6%), ▲‘Increased administrative burden due to workforce expansion and system establishment’ (43.4%), and ▲‘Excessive disclosure obligations imposed beyond the information needed by second-tier and lower-tier partners’ (43.4%).

The areas most in need of improvement in disclosure systems were ▲elimination or simplification of unnecessary items (37.8%), ▲flexible system operation (35.1%), and ▲integration of overlapping disclosure obligations (16.2%) in that order.

Lee Su-won, head of the Corporate Policy Team at the Korea Chamber of Commerce and Industry, said, "While disclosure systems play a positive role in enhancing corporate transparency and strengthening compliance management, various disclosure obligations are being indiscriminately introduced under the assumption that they have fewer side effects than preemptive regulations. Rather than overusing disclosure systems like a family heirloom sword (傳家寶刀), it is necessary to improve unnecessary or overlapping disclosure obligations to reduce the burden on companies in the field."

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