Rep. Park Soo-young of the People Power Party criticized the Democratic Party’s initiative to amend the Commercial Act on the 22nd, stating, “It’s like burning the entire house to catch bedbugs, and it could potentially lead to the outflow of our national wealth through activist funds.”
During a strategy meeting, Park pointed out a statement by CEOs from 16 conglomerates opposing the amendment, asserting that the response mirrors the severity of the MERS outbreak in 2015, illustrating the critical nature of the proposed changes.
Park explained, “Extending the board’s duty of care to shareholders may sound appealing, but it exposes companies to constant litigation risks from minority shareholders and threats from foreign activist funds, which is why most developed countries limit this duty to the company alone.”
He warned of a surge in companies targeted by activist funds, from 8 in 2019 to 77 last year, due to overlapping regulations disrupting corporate governance in Korea. Park also highlighted inheritance tax as another destabilizing factor, noting a steep increase in both per capita net assets from 220 million won in 2012 to 440 million won in 2022, and the inheritance tax burden jumping over tenfold from 1.8 trillion won to 19.3 trillion won during the same period. He remarked that companies are losing control or being sold to private equity firms due to the maximum 60% inheritance tax rate.
Comparatively, Park mentioned that the U.S. took an opposite approach under the Trump administration, limiting proxy advisory firms’ interference in corporate management and promising to lower inheritance and corporate taxes to protect domestic companies. He stressed that interventions harming shareholder interests should be corrected with “precise penalties,” not by amending the Commercial Act.
Park urged the Democratic Party to reconsider the impact on businesses providing jobs and taxes and focus on supporting Korean companies.
Kim Sang-hoon, Chair of Policy Planning, also expressed concerns over the broad scope of the proposed Commercial Act amendment, suggesting it imposes significant pressure on both listed and unlisted companies. Kim proposed applying alternative measures under the Capital Markets Act specifically to listed companies, anticipating a detailed proposal via an economic and financial consultation led by the Deputy Prime Minister of the Economy.