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Companies as easy prey

Published: 29 Dec. 2011, 20:02

The Ministry of Justice is planning to submit a revised enforcement ordinance of the Commercial Law which mandates all listed companies with more than 300 billion won ($260 million) in assets hire lawyers to monitor illegal activities from April next year. If the revised ordinance passes the National Assembly, it would obviously cause more trouble to medium-sized businesses than to big ones, which already hire lawyers for the monitoring job.

The justice ministry has turned a deaf ear to mid-sized companies’ persistent demand that the asset limit be increased to two trillion won at least - or to their complaint that the ordinance will increase their costs. We are deeply concerned that the ministry might have come up with the idea in an attempt to create jobs for law school graduates.

Despite the importance of ethical business operation, the issue must ultimately be left in the hands of businesses themselves. In developed economies, over 70 percent of big companies hire internal watchdogs according to their own needs with the goal of averting large financial losses from potential lawsuits by outsiders as a result of internal frauds. For them, that is simply a preventive measure. Our government would be better off encouraging private companies to introduce their own watchdogs voluntarily rather than compulsorily. Moreover, the size of assets varies greatly according to what businesses companies are engaged in.

It is not rational or realistic for the government to apply a uniform standard - 300 billion won, no matter what the actual size of the company is - by ignoring intrinsic differences among companies. That’s why we cannot help but be suspicious of the government’s motive. The ministry most likely came up with the new ordinance to create jobs for over 500 new lawyers who will soon hit the market.

With a gloomy economic forecast for next year, the job market is obviously going to get tougher. If the government wants to push ahead with the ordinance - which would require a whopping 150 million won per lawyer per company - it will cost three to four good jobs elsewhere in a company. The government needs to review the decision within 40 days of its announcement. It must sharply raise the asset limit while leaving room for companies to hire lawyers according to their own situations. If the revision is approved, it will become a financial monster for medium-sized companies. Our judicial society should not view companies as nothing but easy prey.