Who protects shareholders’ rights?

PARK SU-RYEON
The author is head of the IT industry news department at the JoongAng Ilbo.

The world couldn’t take its eyes off the drama in Silicon Valley over the past five days. The board of directors of ChatGPT developer OpenAI fired CEO Sam Altman in a surprise move. In the end, Altman made a spectacular return.

Microsoft CEO Satya Nadella made the quick decision to bring in Altman, who had been fired for ambiguous reasons. Many employees said they would go to Microsoft if Altman didn’t return and pushed for the board’s resignation.

The episode shows that the biggest variable in the game of betting on the future of mankind is not the technology itself, but rather the leadership that moves people and their hearts.

OpenAI’s new board said that it will overhaul its governance structure. This resulted from shareholders’ demands for change, including those of Microsoft. Even if OpenAI is rooted in a non-profit organization, the structure of the board determining the future of a for-profit company valued at $86 billion is not sustainable in America, a country of enterprises.

No shareholder would blindly trust the goodwill and sense of mission of the few board members. The dramatic episode shows that a company cannot last without the support of the shareholders who share responsibility through investment.

This situation is strangely familiar to us in Korea, where the foundation of “shareholder capitalism” is weak. In fact, the board that kicks out the founder, citing the mission of the organization, could be unfamiliar, but we are accustomed to a board that does not care about the interests of the shareholders.

Article 382 of our Commercial Act does not require corporate board members to work for the “interests of the shareholders.” Instead, the law states that board members should be faithful to the “interests of the company.”

Therefore, if the interests of major shareholders, including the owner, are packaged as the interests of the company — or even if shareholders suffer losses due to unqualified management — members of the board stay silent. There are countless examples in major companies like SK, LG and Kakao, which forced minor shareholders to sacrifice their own interests by dividing a parent company into subsidiaries and listing them. But I have never heard any executive boards putting the brakes on this.

Some companies try to restore shareholders’ trust by setting up an oversight committee only after owners’ judicial risks grow. But it is hard to expect more than a proclamatory effect. Commercial banks have had compliance officers for more than 20 years, but internal embezzlements of tens, hundreds of billions of won were not prevented.

As a result, they did not have much to say when the president called banks “unethical” and the head of the Financial Supervisory Service ridiculed them by asking, “What innovations have the banks made?”

But the shareholders cannot simply rely on the government’s rant. Rather than repeating the controversial “no short selling” mantra, how about establishing a mechanism for board directors to be faithful to the interests of shareholders? That would be a solution the president, who well knows the law, can offer.