On the 19th, Lee Jae-myung is set to chair a debate meeting aimed at reintroducing an amendment to the Commercial Act, which includes expanding the fiduciary duties of directors. The core goal is to break away from the company-centered board practices and enhance the protection of ordinary shareholders’ interests. The Democratic Party is gearing up to reignite discussions on the amendment through their internal task force, the “Korea Stock Market Revitalization Task Force (Director General TF),” as early as the 19th. This comes two weeks after the previously scheduled debate was indefinitely postponed due to the December 3 emergency martial law situation. Lee Jae-myung, the party leader, will personally preside over the debate, and last-minute negotiations are ongoing with major economic groups like the Korea Chamber of Commerce and Industry to incorporate business interests.
The Democratic Party’s move to expedite the delayed amendment is part of an effort to emphasize its proactive stance on revitalizing the people’s economy, positioning itself as a potential ruling party. On the 17th, Park Chan-dae, the party’s floor leader, stressed the immediate focus on economic recovery following the approval of Yun Seok-yeol’s impeachment proposal. There is also speculation that this is an opportune moment to address contentious bills and domestic stimulus legislation that President Yun had previously vetoed.
The key aspect of the proposed amendment, adopted by the Democratic Party as a party line, lies in strengthening directors’ duties to shareholders. This includes explicitly mentioning ‘shareholders’ in the directors’ fiduciary duties, expanding separate elections for audit committee members, and mandating cumulative voting. A specific concern is the potential revision of Article 382-3 of the Commercial Act concerning directors’ fiduciary duties, considering options like explicitly adding ‘shareholders’ to the duty or inserting a clause that directors must protect the interests of all shareholders. However, this proposed revision could apply across all companies, potentially constraining business operations and increasing the likelihood of lawsuits against directors, a major concern for the business community.
The expansion of separate elections for audit committee members aims to reinforce the independence of audits from controlling shareholders by electing independent auditors. The proposal suggests limiting controlling shareholders’ voting rights to 3% and increasing the number of required auditors. However, the business sector fears this could allow speculative capital to interfere in management by exploiting the so-called “3% rule” to exert voting power, posing a direct threat to corporate control.
Additionally, the mandatory implementation of cumulative voting is under consideration. This system allows shareholders to cast a number of votes equal to the number of directors to be elected per share held, potentially enabling small shareholders to elect their nominated directors. Business circles worry this could be exploited by hedge funds for short-term profits. A Democratic Party representative emphasized the importance of carefully considering business concerns and opposition before the legislation process through debate meetings.