**[Seoul Economy]**
The Korean business community is protesting a recently passed amendment to the Commercial Act, which expands the fiduciary duty of directors to include shareholders. The community is urging interim President Choi Sang-mok to exercise his veto power over the amendment.
On the 19th, eight major economic organizations, including the Korea Chamber of Commerce and Industry, the Federation of Korean Industries, and the Korea Employers Federation, issued a joint statement at the National Assembly Press Center. They expressed concerns that the amendment presents several issues: it undermines the legal system, encourages frivolous lawsuits, poses constitutional risks, hampers corporate innovation, harms the growth ecosystem, and has drawbacks related to electronic general meetings.
The business community criticized the amendment for being legally flawed and not aligned with global standards, noting that countries like the U.S., U.K., Germany, Canada, and Japan limit the directors’ fiduciary duty to the company itself.
There are growing concerns about an increase in lawsuits against directors. Unlike the current shareholder derivative suits that compensate the company for damages, the new shareholder protection obligations base the compensation on shareholder damages. As a result, the likelihood of lawsuits against major domestic companies, such as Samsung Electronics and Hyundai, increases.
The business community argues that the amendment imposes abstract and simple legal language regarding directors’ duties without precise guidelines, potentially leading to constitutional ambiguities and management confusion. They further suggest that the broad imposition of duties on all companies violates the constitutional principle of prohibiting excessive legislation.
Concerns include the potential for prioritizing shareholder interests over other stakeholders like creditors, employees, and partners, which could conflict with the constitutional principle of balancing various economic entities.
The community emphasized that the amendment stifles the much-needed innovation and hampers the growth ecosystem, reducing the competitiveness of domestic companies in global markets. They stated that proactive business restructuring and decisive action for value creation are critical under the current economic uncertainties, but the amendment could limit bold and innovative managerial decisions.
Historical complaints from business leaders, aired during last year’s legislative discussions, highlighted concerns about the difficulty in convincing stakeholders about innovative ideas and the prolonged uncertainty in management after the amendment.
The business community also criticized the mandatory electronic shareholder meetings, stating that the lack of stable systems for simultaneous access could lead to security issues. They noted major countries like the U.S., Japan, and Germany have not mandated electronic meetings, advising careful consideration of the potential system inefficiencies and drawbacks.
While acknowledging the need for capital market development and shareholder rights improvement, the economic organizations emphasized that it would be better to amend the Capital Markets Act for specific issues, rather than resorting to the broader Commercial Act. They urgently requested the interim President to reconsider and veto the amendment.