[Manbo Jeongdam] Chairman Son Kyung-sik "After the General Election, Direct Talks with Ruling and Opposition Policy Committees... Labor Reform Urgent"

"21st National Assembly Focused on Protecting Labor Rights... New Assembly Must Listen to Both Labor and Management"
Korea Employers Federation Actively Communicates with Legislature, Labor, and Public
Reform Needed: Shift from CEO Punishment to Fines under Serious Accident Punishment Act

Son Kyung-sik, Chairman of the Korea Employers Federation, being interviewed by Asia Economy. Photo by Jo Yong-jun jun21@

"Once the general election is over, I plan to immediately reach out to the policy chiefs of both the ruling and opposition parties. There will likely be many lawmakers interested in labor reform and labor-management relations, so it’s important to have thorough discussions and communication. It’s not about giving up after one or two talks because things don’t go well; a consistent process of communication and adjustment is necessary."

The clock of Sohn Kyung-shik, Chairman of the Korea Employers Federation (KEF), was set toward the period following the 22nd National Assembly election scheduled a week later. Rather than gauging which party would have more or fewer seats, he had already begun contemplating the direction in which necessary policies should be pursued in the next National Assembly. In an interview with Asia Economy on the 2nd, Chairman Sohn urged, "In this global era where competition is fierce for everyone, I hope legislative activities will be carried out in a way that benefits the country and enhances the competitiveness of our companies."

KEF is an economic organization with corporate employers as its members. It expressed its intention to engage in more active communication not only with the legislature but also directly with the labor sector, its counterpart, and even the general public during the process of informing about policies and systems. Coincidentally, Chairman Sohn mentioned that he had a dinner meeting with Kim Dong-myung, Chairman of the Korean Confederation of Trade Unions (KCTU), the day before the interview to have a time of communication.

He pointed out as a regret the fact that discussions on system improvements stalled because the proposal to create conditions for flexible use of working hours was misunderstood due to clumsy rhetoric as "promoting 69-hour workweeks." This was a trigger for him to feel the need to strengthen communication further. He anticipated that if the reality is properly conveyed, reasonable decisions would be made during the process of modernizing laws and systems, backed by favorable public opinion. Regarding the Serious Accident Punishment Act, he said it should be revised to impose fines on corporations rather than punishing CEOs. Since attracting foreign companies is crucial, making CEOs criminals would not help our economy. Below is a Q&A with Chairman Sohn.

- You have been reappointed as KEF Chairman. How do you feel?

▲ This year, long-term low growth is a concern, and the business environment is highly uncertain due to the general election. Taking on the chairman role in such times feels heavy on my shoulders. I will review and supplement the roles and policies assigned to KEF to ensure that the voices of companies gain public understanding and support. I plan to focus especially on labor market modernization, industrial accident prevention, and tax system reform.

Son Kyung-sik, Chairman of the Korea Employers Federation, being interviewed by Asia Economy. Photo by Jo Yong-jun jun21@

- The so-called Yellow Envelope Act, an amendment to the Trade Union Act (expanding bargaining targets to primary contractors), was proposed but then discarded. There is a possibility it will be reintroduced in the 22nd National Assembly. What are your thoughts?

▲ Our labor market makes dismissals very difficult. Compared to advanced countries, employment flexibility is lacking. During strikes, labor unions can occupy workplaces and engage in indiscriminate violence, but employers’ use of replacement workers is prohibited. This imbalance of power between labor and management intensifies conflicts. The Yellow Envelope Act represents a very large setback. Last year, President Yoon Seok-youl exercised his veto power to block it. If it comes up again, KEF’s role is to inform the public well. It is important to explain and persuade the public in detail about labor-related laws. KEF plans to focus on public persuasion, explaining to the media and holding forums at various schools and institutions.

- Discussions on revising the 52-hour workweek system have not progressed. How should it be changed?

▲ Last March, the government announced a legislative proposal to expand the management unit for extended working hours from ‘week’ to ‘month, quarter, half-year, year,’ but it was not advanced because public opinion was distorted as a ‘69-hour workweek.’ It seemed as if the Ministry of Employment and Labor had made a wrong proposal, but labor laws are actually very complex and hard to explain in a single phrase. We need to persuade and explain well to ordinary people. Flexibility in working hours is a global standard. Orders don’t always keep coming to companies. Flexibility in such times is understandable to everyone. Which entrepreneur nowadays would exploit workers to make money? Realistically, the system should be improved to handle surges in orders and workloads. Social dialogue is starting, and labor, management, and government should work together to loosen rigid systems.

- Criticism of over-legislation regarding the Serious Accident Punishment Act remains. What improvements does KEF hope for?

▲ With the full application of the Serious Accident Punishment Act, the legal compliance burden on small businesses lacking safety capabilities has greatly increased. Since the Act’s introduction in 2022, the reduction in fatal accidents has not been significant. This means punishment-centered policies have limitations. Business leaders are also very dissatisfied with policies focused on criminal penalties.

Looking at systems in various foreign countries, hardly any have imprisonment or similar penalties that detain individuals like Korea does. Instead, many have adopted fines and other measures. The UK’s Corporate Manslaughter and Corporate Homicide Act imposes fines on corporations but does not punish individual executives when deaths occur. We should move in this direction. More efforts should be made for prevention. Since attracting foreign companies is important, many hesitate to come to Korea because they fear becoming criminals here. We need to ease such burdens to attract companies leaving China to Korea. We must listen carefully to voices from the field. The government once proposed an Industrial Safety Agency but then withdrew it. However, I believe an organization should be established to prevent accidents. Increasing specialized personnel for accident prevention and distributing and guiding various safety manuals are necessary roles.

- Some companies are struggling with inheritance tax issues. The public perception of ‘tax cuts for the rich’ seems to have somewhat softened compared to the past.

▲ The inheritance tax rate is truly problematic. Last week, I met local politicians in Japan who also worried about high inheritance taxes. Japan’s burden is heavy, but they said Korea’s is even heavier. We need to work on raising public awareness. It is noteworthy that the atmosphere has changed compared to two years ago. Now, many more people support easing inheritance tax. The top inheritance tax rate should be lowered to the OECD average of 25%, and the taxation method should be shifted to the global standard of estate acquisition tax (taxing the actual acquired property).

The top corporate tax rate should also be reduced to the OECD average of 22%, and tax support for investments should be further expanded. Even the US government makes great efforts. Korea should increase special tax discounts to compete with foreign companies. If competitiveness declines, it will be difficult for our companies to operate in an open market. Besides tax relief, subsidies for advanced industries like semiconductors should also be prepared.

- The government seems to be making efforts to ease excessive regulations. What is needed for regulatory reform?

▲ Thanks to government efforts such as killer regulation innovation and temporary regulatory exemptions, over 1,700 regulations have been improved since the current administration took office. However, due to positive regulations centered on traditional industries and conflicts between new and traditional industries, voices from the field still say regulations are excessive compared to major competing countries. There are regulations unique to Korea, such as designation of large business groups, prohibition of telemedicine, and ban on shared lodging, which do not exist abroad. To broadly recognize business activities in advance and prevent excessive or hasty legislation, regulatory impact analysis on lawmakers’ bills is necessary. Gaining public support for these activities is also important. Regulatory reform is not only beneficial to companies but also creates social consensus that it benefits the public through domestic demand expansion and job creation, enabling steady progress.

Son Kyung-sik, Chairman of the Korea Employers Federation, being interviewed by Asia Economy. Photo by Jo Yong-jun jun21@

- What do you hope for from the 22nd National Assembly?

▲ The 21st National Assembly focused only on strengthening labor rights and individual worker protections instead of the voices of companies hoping for bold regulatory improvements. Conscious of labor votes, it proposed discussions like introducing a 4.5-day workweek and extending retirement age without addressing the chronic issue of securing flexibility in our labor market. The re-legislation of the Yellow Envelope Act, which the President vetoed, is also being forecasted, causing great concern among companies. I worry that the political sphere’s pro-labor stance will deepen further after the general election. I urge the 22nd National Assembly to listen evenly to both labor and management opinions, find reasonable solutions for labor reform, and unite to prepare laws that revitalize the economy. I hope they will fulfill their role in completing labor reform, an urgent task that cannot be delayed any longer.

Interview by Choi Il-gwon, Head of Industrial IT Department

Compiled by Reporter Lee Min-woo

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