FSS chief pushes back against DP with call for Capital Markets Act revision

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FSS chief pushes back against DP with call for Capital Markets Act revision

Published: 28 Nov. 2024, 17:16 Updated: 28 Nov. 2024, 17:28

PARK EUN-JEE
[email protected]

Audio report: written by reporters, read by AI

Financial Supervisory Service (FSS) Gov. Lee Bok-hyun speaks to the press at the Korea Federation of Banks building in central Seoul on Thursday. [YONHAP]

The government and liberal Democratic Party (DP) are locking horns over a proposed legislative revision aimed at expanding the scope of responsibility for corporate board directors.

Financial Supervisory Service (FSS) Gov. Lee Bok-hyun voiced opposition on Thursday to the DP’s push to amend the Commercial Act, citing concerns of vagueness in the expanded obligations and the possibility of activist funds taking advantage of the amended law.

The opposition party has put forward a bill to include the interest of all shareholders in Article 382-3 of the act, which enumerates the interest of the company as a duty of board directors. Instead, the governor advocated for a revision of the Capital Markets Act to stipulate further protection for shareholders.

“The discussion surrounding a possible revision of the Commercial Act was fueled by the controversies related to the merger and split-off practices of listed companies,” he said, “So, I am not sure whether it is proper to revise the law in a way that affects all types of companies irrespective of their relevance to the capital market.”

He went on to mention how a revision of the Capital Markets Act could strengthen the rights of shareholders.

“We can state the principle of shareholder protection in the Capital Markets Act and create a maneuver to obligate a proper value assessment for mergers and split-offs,” Lee said, adding that the shareholders of a parent company should be guaranteed fair benefits when a business unit splits off.

Many retail shareholders of parent companies see the value of their shares erode with a decision to split off key cash cow business divisions.

In the beginning of 2024, the Yoon Suk Yeol administration called for a legal revision to prevent a recurrence of such cases, but has recently pivoted, due apparently to backlash in corporate circles.

Top executives from major conglomerates in Korea collectively opposed proposed amendments to the Commercial Act earlier this month, claiming that they undermine corporate value and competitiveness.

Samsung Electronics President Park Seung-hee, SK Group President Lee Hyung-hee and Hyundai Motor Executive Vice President Kim Dong-wook were among 16 executives who issued the statement in a rare joint move indicating the urgency of the matter.

The FSS governor also took aim at the current leadership of Woori Financial Group, saying that illegal loan issuance took place not only under former Chairman Son Tae-seung but under the current chief Yim Jong-yong.

The financial regulator uncovered 61.6 billion won in loans granted by Woori Bank to borrowers with connections to Son, who held the top post from January 2019 to March of last year.

The FSS has also launched an accounting audit of Young Poong, a major shareholder of Korea Zinc that is engaged in a management dispute with the world’s largest zinc smelter, according to Lee.

BY PARK EUN-JEE [[email protected]]