Don’t discourage entrepreneurship
The National Assembly wants to fix the Commercial Act to prevent excesses by the families that control chaebol with small stakes and to reinforce the rights of even smaller shareholders. The ruling party and three opposition parties have reached a tentative agreement to make some amendments that would legalize electronic voting and class-action suits and put it up for a vote this month.
The need to reform the governance of Korea’s chaebol cannot be based simply upon the current scandal in which the president is accused of collecting money from large conglomerate heads and rewarding them in some way or another. There are many other good reasons for such changes. But the changes in the business act being considered could make Korea a more difficult place to do business and could force companies to take their business elsewhere.
If controlling families have to continually worry about their management rights, they will be more preoccupied with that issue and not concentrate on investment and hiring. Most of the proposals have been debated in President Park Geun-hye’s first year in office, but were scrapped.
Domestic enterprises could fall prey to foreign investment funds sensing weakness. Politicians should recall how SK and KT&G were ripped apart by foreign hedge funds. Voting rights by large shareholders was limited to 3 percent, and hedge funds threatened management rights by having several funds gang up to purchase up to 3 percent stakes.
Making changes to the business act ahead of a presidential election suggests politicians want to burnish their anti-chaebol credentials.
There is no need to legalize electronic or class-action suits. Adding more regulation goes against the international trend. In the U.S. and Europe, more companies are allowing dual-class rights to long-term shareholders.
Instead of further constraining businesses, politicians should think of ways to stimulate corporate investment. What they should do is pass the regulation-free zones and services sector promotion act to help create jobs.
JoongAng Ilbo, Feb. 13, Page 30