[EDITORIALS]Let the Market Regulate FirmsThe Korea Chamber of Commerce and Industry said Tuesday it opposes a plan to set up a new government agency that would periodically rate local businesses' governance structure and make the results public. The plan was proposed Wednesday by the Ministry of Finance and Economy. The chamber is opposed, it said, because the agency would probably serve as just another government control on business.
The government intends to separate the corporate governance improvement committee from the Korea Stock Exchange and make it an incorporated entity, so the chamber has a point in its concerns. Although the government says the new agency is intended to "enhance corporate transparency," but the chamber's position attracts our attention in connection with recent controversies about deregulation.
The government promised to ease business regulations as part of its efforts to get the economy moving, the proposal seems to suggest a distrust of the private sector, as if it does not believe that corporations can improve their governance structures independently.
We believe that efforts to make corporate management more transparent is most effective and sustainable when they are carried out by companies themselves under the market's force, not the government's. In the same vein, the commerce chamber noted, "It must be left to the market, including stock investors and financial institutions, to make the final decision on whether a company has chosen the optimum governance structure." No company would dare not to improve its management structure if the market forces it to do so.
The so-called "corporate governance evaluation agency" will probably overlap private credit rating agencies that already rate governance as a part of their evaluations, and perhaps even undermine them.
If corporate governance improvement efforts need to be strengthened, private credit rating agencies and financial institutions should give more consideration to them. In order to ensure market-driven enhancement of management transparency, the government should think twice about setting up the proposed evaluation agency.