Unstoppable contradictions

The way the ruling Democratic Party (DP) acts is contradictory as it promotes venture enterprises while it blocks a bill allowing multiple or dual class stock structure, which was long demanded by venture enterprises. On December 1, the National Assembly’s Trade, Industry, Energy, SME and Start-ups Committee passed a bill enabling venture enterprises to issue shares in more than one class of common stock with one voting right so that their founders can go on attracting capital without worrying about management rights. But on Monday, the Legislation and Judiciary Committee rejected to review the bill due to opposition by some DP lawmakers.

The bill cannot be put to a vote in this ad hoc session. But a bill allowing labor representation at managing boards of public enterprises easily passed the legislature despite strong protests from the business community.

Most developed economies with active venture activities like the United States, Israel, Britain and Sweden already have dual or multiple stock class structures. The Moon Jae-in administration repeatedly promised to institutionalize multiple-class shares to enable greater voting rights. The DP even made it a campaign platform in the 2020 parliamentary elections. Attending a venture event in August last year, Moon also promised to do his best to legalize the system.

DP lawmakers who opposed the bill raise concerns of favoritism of large conglomerates. But the lawmakers must not have bothered to study the bill. Multiple-class issues are not granted if a start-up’s assets hit 5 trillion won, which would make it fall under the conglomerate category. Therefore, owner families or affiliates of large conglomerates cannot take advantage of the system.

Also, there are multiple protections against the possibility of abusing the system.

When the company goes public, the shares must be converted into common shares after a grace period. Some raise concern about investors’ risk, but the investors themselves — the venture capital association — support the scheme aggressively.

In a meeting with businessmen, DP presidential candidate Lee Jae-myung promised to create an ecosystem for innovation and growth in venture enterprises. He also pledged to bring the economy into the top five ranks and invest more than 135 trillion won for grand digital transition. But Lee neglects inexpensive means to help venture enterprises by legalizing multi-class stocks. He may chant pro-business, but could be anti-business.