The Democratic Party is reviewing the proposed amendment to the Commercial Act that only includes the 'duty of loyalty of directors to shareholders' and 'electronic shareholders' meetings.' This involves separating these two parts from the original proposal set by the party and creating an alternative. This strategy aims to target the sentiments of 8 million individual investors during the early presidential election phase. Amid moves to eliminate the financial investment income tax and defer taxation on virtual assets, this approach could mitigate backlash from the traditional support base.
According to ChosunBiz coverage on the 12th, the party leadership is currently discussing a plan to prepare an 'alternative' with such content. It has been reported that members of the party's 'Stock Market Revitalization Task Force' shared opinions with those who proposed the amendment to the Commercial Act. While there are differing opinions on modifying the party's stance, a key party official noted a shared understanding that 'protecting individual investors' would serve as a boon in the presidential election context.
The Democratic Party's stance on the amendment to the Commercial Act includes: ▲expanding the scope of the duty of loyalty of directors from 'the company' to 'the company and shareholders' ▲expanding the separate election of audit committee members for large listed companies ▲mandating the cumulative voting system for large listed companies ▲regulations supporting the independence of directors and electronic shareholders' meetings. Representative Lee Jeong-moon, the deputy chairman of the party's policy committee, proposed these amendments. Additionally, it explicitly specifies the duty of directors to protect the interests of all shareholders and the duty to treat all shareholders equally.
While both ruling and opposition parties have been quarreling over the 'duty of loyalty to shareholders', it is known that the real resistance from the business community is stronger regarding the 'cumulative voting system' and 'separate election of audit committee members.' This is due to concerns that it may infringe on the autonomy and efficiency of decision-making. In particular, the cumulative voting system was a promise made by former President Moon Jae-in during the 2017 presidential election when he stated he would "prevent the abuse of power by the founding families." At that time, there was significant opposition from the business sector as well as the political sphere.
According to the current simple voting system, when a company appoints directors, it grants one voting right per share. On the other hand, the cumulative voting system grants as many voting rights as the number of directors to be elected. If three directors are to be elected, shareholders can cast three votes per share. This is intended to curb the management monopoly of major shareholders. Although this is already stipulated in the Commercial Act, a company may exclude it via its articles of incorporation.
In the case of introducing electronic shareholders' meetings, the government is also in a position to actively promote it. The Ministry of Justice stated last month in a report to Acting President Choi Sang-mok that it would push for amendments to the Commercial Act to establish electronic shareholders' meetings with the aim of revitalizing shareholders' meetings.
The legislative committee in charge, the Legal Affairs Committee, is expected to hold a subcommittee meeting to vote on the amendment as early as the 24th. Although a subcommittee meeting will also be held on the 17th of this month, it is set to focus primarily on the so-called 'Myung-taek Kyun special investigation (special prosecutor) law.' Given that the Constitutional Court is likely to reach a conclusion on the impeachment trial next month, the bill must be reviewed by the end of this month. If impeachment is determined, the political timeline will align with the 'presidential election', making it difficult for the committee's activities.
A key official of the Democratic Party stated, "What the business community fears most is not the 'duty of loyalty to shareholders' that the ruling and opposition parties are arguing about, but rather the cumulative voting system and the separate election of audit committee members," adding that "there was a consensus that it is more efficient to achieve results by tying together the duty of loyalty that prevents the abuse of irregular succession and the electronic shareholders' meetings, which the government also supports."
There are also observations that the amendment to the Commercial Act could lead to a favorable situation for the ruling party in its offensive against the opposition. The ruling party has opposed the amendment, citing 'interference with management rights.' The Democratic Party attempted to amend the law during the 21st National Assembly, led by former lawmaker Lee Yong-woo, a representative from KakaoBank, but it was thwarted by opposition from the People Power Party. If the Democratic Party were to process the bill solely on its own and the acting president were to exercise veto power, it could lead to a public relations battle centered on 'support and opposition for investor protection' in the election phase.