As opposition mounts against the Commercial Code amendment centered around The Federation of Korean Industries, the Financial Supervisory Service has launched a detailed rebuttal. The amendment broadens the obligation of directors from 'the company' to 'shareholders.' The business community opposes this, arguing it would lead to an excessive number of lawsuits against directors.
On the 26th, Lee Bok-hyun, head of the Financial Supervisory Service, appeared on MBC Radio's 'Kim Jong-bae's Focus' and noted, 'If shareholder value protection does not hold even under the Han Duck-soo-Choi Sang-mok regime, nothing can be done, even with Zhuge Liang.'
Lee stated, 'I have met many foreign investors and the media since the state of emergency, and foreign investors remember Prime Minister Han Duck-soo and Deputy Prime Minister Choi Sang-mok very well.' He added, 'During the Roh Moo-hyun administration, the person who worked hard to eliminate the Korea discount while promoting the Northeast Asian Financial Hub was then Deputy Prime Minister Han Duck-soo, and Choi Sang-mok was the head of the securities system division.'
He warned that if a presidential acting authority exercises veto power on the Commercial Code amendment passed by the National Assembly, foreign investors would leave the market. He explained, 'Exercising veto power on the amendment will raise doubts about the government's commitment to resolving the Korea discount and will impact the stock and foreign exchange markets.'
On the same day, the FSS announced 'Key legislative cases and related references on shareholder value protection' to correct erroneous overseas examples related to the obligation of directors toward shareholders. This followed Lee's previous suggestion for a public debate with the FKI that did not materialize.
In its materials, the FSS stated that the claim by the business community that 'only Delaware and California mention shareholders in their duties of directors among the 50 states' is weak. The FSS noted, 'Delaware corporate law and case law play a leading role as a model standard for corporate laws not only in the United States but in various countries around the world,' adding, 'This claim does not consider the status of Delaware corporate law.'
Among IPO corporations, 79%, 68.2% of Fortune 500 companies, and 65% of Standard and Poor's (S&P) 500 companies are established in Delaware. Furthermore, outside of Delaware, states like Kentucky, Maine, and Minnesota recognize the obligation of directors to shareholders through legal regulations and case law. Also, states like California, Michigan, and New York that operate independent corporate laws also recognize the obligation to shareholders.
The FSS also rebutted the claim that 'Delaware corporate law does not impose enforceable obligations on directors toward shareholders.' Some voices have arisen claiming that if those asserting the responsibility of directors fail to prove fault, the directors are merely not responsible to shareholders, according to the regulations.
The FSS emphasized, 'Including both the company and shareholders as subjects of legal responsibility for the violation of the director's duty of loyalty clearly indicates that the interests of both the company and shareholders are protected under the duty of loyalty.' He added, 'In practical terms, a firm precedent has been established recognizing shareholders as direct parties in lawsuits against directors for breaches of the duty of loyalty in capital transactions such as mergers.'
The FSS stated that the 'Effect of shareholder return policies on corporate value' published by the Bank of Korea should also be interpreted more objectively. The Bank of Korea's empirical analysis showed that while the size of shareholder returns and shareholder protection indicators had a positive relationship, in industries requiring large investments like semiconductors, this relationship was not clear.
The FSS clarified, 'The fact that industries such as semiconductors have a greater impact from investments than shareholder returns does not mean that higher levels of shareholder protection hinder corporate value.'