Revising the Commercial Act for what and whom
Published: 24 Nov. 2024, 20:14
The last time the corporate top brass issued a joint statement was in July 2015 when the external climate turned perilous with Greece’s debt default and the MERS epidemic. The latest vocalization came in response to the motion by the majority opposition Democratic Party (DP) to amend the Commercial Act mandating a board of directors to be more responsible for protecting the rights of shareholders.
The revision also mandates the so-called cumulative voting system which allows shareholders to lump their votes on a specific board director candidate. This is to enhance the rights of minority shareholders, but listed companies fear the provision can invite a cascade of lawsuits and takeover bids from overseas speculative forces.
A report by the Federation of Korean Industries (FKI) found eight boards of the country’s top 30 listed companies vulnerable to fall in the hands of foreign alliances. Six others also are potentially hazardous with a board director ratio of 40 percent. Foreign capitalists like Carl Icahn had cashed out his investment in KT&G with handsome returns after attempting to take over management.
It is true that a greater protection for shareholders is needed due to the side effects from stock splits and conflicts over merger ratios largely benefiting large shareholders. But these mechanisms should be installed in the Capital Markets Act instead of the Commercial Act.
While business-related bills are in the spotlight, the legislature should correct legal provisions that repress business activities. DP leader Lee Jae-myung proposes to ease punishments on the breach of trust. The government must also get eagerly involved.
Korea Inc. is in perilous waters. Posco shuttered its first steel wire rod plant in Ulsan after 45 years of operation. Lotte Group issued a statement that it is trying to secure “sufficient liquidity” amid worries over its chemical unit’s troubles. Exporters are alarmed in fear of across-the-board tariffs on imports from Trump 2.0. In such hard and uncertain times, companies should not suffer from burdensome legislations at home.
The value of shareholders will become meaningless if the companies of their concern falter. The government and the National Assembly must fix regulations to enhance corporate competitiveness and support innovations. Companies also must strive harder to cultivate new businesses and jobs, drive innovation-led growth and improve communication and values of shareholders.
with the Korea JoongAng Daily
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