Lee Jae-myung’s vision of direct democracy extends to retail investors

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Lee Jae-myung’s vision of direct democracy extends to retail investors

Published: 13 May. 2025, 00:04

Audio report: written by reporters, read by AI

Park Su-ryon

The author is the industry news desk head at the JoongAng Ilbo.

Democratic Party (DP) presidential candidate Lee Jae-myung has long emphasized direct democracy. But recent remarks have drawn renewed attention to how deeply he envisions transforming Korea’s political and economic systems.

At a meeting with the heads of Korea’s five major business lobby groups on May 8, Lee said the past six months of political upheaval in Korea — marked by martial law, impeachment and a snap presidential election — might be seen by the world as a cultural turning point.

“If Korea was once known for K-pop and K-food,” he said, “then from December 3 to June 3, it may be remembered as a sacred ground for modern direct democracy. This, too, is a pinnacle of culture.”

To many Koreans, those six months were defined by political shock, public division and constitutional disruption. But to Lee, they represent democratic progress.

Democratic Party presidential candidate Lee Jae-myung and Korea Chamber of Commerce and Industry (KCCI) Chairman Chey Tae-won attend a meeting with the heads of Korea’s five major business lobby groups at the KCCI building in Jung District, central Seoul, on May 8, 2025. [NEWS1]

Lee has long promoted direct civic engagement over traditional representative democracy. His belief is that elected officials are outdated intermediaries in an era when individuals can directly participate in politics through online platforms or public demonstrations.

That conviction has shaped his party leadership. While serving as DP chair, Lee introduced a rule requiring that 20 percent of the vote in floor leader and National Assembly speaker elections come from registered party members with voting rights. Earlier this year, he also vowed to introduce a national recall system allowing voters to remove lawmakers through referendums.

Within the party, even powerful parliamentary posts now depend on the support of Lee’s devoted base, including the so-called Gen-Z daughters who dominate online party discourse. Whether these mechanisms reflect democratic vitality or threaten institutional balance remains contested.

The last three years of legislative gridlock — marked by DP dominance in the Assembly and repeated presidential vetoes — have done little to strengthen Korea’s democratic institutions or economic competitiveness.

Lee’s push for direct democracy also echoes in his economic policies, especially his approach to small shareholders, often called “ant investors.” He has likened the empowerment of everyday voters in politics to the enfranchisement of retail investors in the stock market.

“I was once a significant ant myself,” he has said, underscoring his affinity for individual investors.

Lee has taken positions that align closely with this group. Last year, he supported the Yoon Suk Yeol administration’s decision to scrap the planned financial investment income tax, a reversal from the DP's earlier position. He has promised stronger shareholder rights, revisions to Korea’s Commercial Act and measures to increase corporate dividend payouts. His campaign often frames these promises as both morally just and economically necessary to push the Kospi stock index from its current plateau of around 2,500 to 5,000.

Lee sees little difference between advocating for small investor rights and boosting the overall market index. But while shareholder equity is a worthy goal, questions remain about how far such policies can go.

Recent years have revealed weaknesses in corporate governance. Boards have often failed to act as effective checks on majority shareholders, approving dilutive capital increases or spinoffs that hurt minority stakeholders. Professionalism on boards, dominated by academics and former bureaucrats, is still limited. Korean law has struggled to bridge the interests of majority and minority shareholders.

Still, even if the principle is sound, the promise of a "Kospi 5,000" may be out of reach. The barriers are not limited to geopolitical risks or outdated corporate structures. The more fundamental problem is that Korea lacks a deep bench of high-growth, high-valuation companies that investors want to back. Many lawmakers themselves prefer U.S. stocks like Nvidia over local listings.

Excluding some recent standouts in sectors like defense, shipbuilding and Korean food, the majority of local conglomerates have seen sluggish share performance. Samsung Electronics, which accounts for 16 percent of the Kospi's market cap, has already completed its generational leadership transition and announced a 10 trillion won ($7 billion) stock buyback. Still, its price-to-book ratio (PBR) remains below 0.9 — an indicator of low market confidence.

At a recent meeting with the Korea Financial Investment Association, Lee questioned why companies with PBRs as low as 0.1 or 0.2 should even remain listed. “They should all be liquidated through M&As,” he said. But top-tier firms in industries like distribution, steel and petrochemicals also fall within those valuation ranges. Should all of them be dissolved?

Kicking underperforming manufacturers off the index might raise the average valuation, but it would do little for national competitiveness, consumer welfare or employment.

Moreover, the idea that boosting shareholder returns directly increases stock prices is only partially true. A recent Bank of Korea study found that in fast-changing, high-tech industries, capital investment by companies often contributes more to firm value than stock buybacks or dividends.

Lee Jae-myung, leader of the Democratic Party, leaves the podium after delivering remarks on the state of the Korean economy during a Supreme Council meeting at the National Assembly in Yeouido, Seoul, on April 17, 2024. [NEWS1]

For Lee’s shareholder-focused agenda to avoid becoming populist, he must also present a credible industrial policy. That means revitalizing the competitiveness of Korean manufacturing and incentivizing corporate investment. Otherwise, the reforms could backfire — leading to increased shareholder lawsuits, declining competitiveness and falling share prices. This would mirror how expanding internal party voting rights inadvertently weakened parliamentary democracy and fostered political dysfunction.

Ultimately, Lee’s vision of direct democracy and shareholder empowerment taps into widespread frustration with entrenched elites. But without a balanced plan that includes a long-term economic strategy, the approach risks undermining the very institutions it seeks to revitalize.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.