The Democratic Party on the 1st noted that Acting President Han Duck-soo, also the Prime Minister, exercised his veto on the commercial law amendment bill centered on the 'duty of loyalty to shareholders,' saying it "trampled on the rights of minority shareholders and the public in order to protect the vested interests of conglomerates and large corporations," and announced plans to push for the amendment again. With the likelihood of a snap election increasing, the opposition parties are focusing on the commercial law as a key policy to attract the support of 8 million individual investors.
◇“No punishment for breach of duty in case law is becoming common in advanced countries"
Members of the National Assembly’s Political Affairs Committee from the Democratic Party, Justice Party, and Social Democratic Party issued a statement on that day demanding the withdrawal of the Acting President's veto. They also stated, "The commercial law amendment bill is a minimum measure to prevent major shareholders and management from infringing on minority shareholders' rights and to encourage management to make decisions considering shareholder interests," adding that "the government has incontrovertibly proven itself to be merely a complaint outlet for conglomerates."
Opposition lawmakers on the Political Affairs Committee rebutted the rationale provided by the government for rejecting the commercial law amendment. First, regarding the claim of ‘choking management activity,’ they said, "The expansion of directors' duties of loyalty does not hinder legitimate management activities; rather, the problem arises when management disregards shareholder interests and engages in arbitrary acts."
Additionally, concerning the fear of 'litigation proliferation,' they stated, "The duty of loyalty to shareholders is a principle that has become common in advanced countries such as the United States, the United Kingdom, and Japan," indicating that similar concerns were raised during the introduction of the 'Securities Class Action Act,' yet lawsuits remained extremely limited. Regarding 'management rights being weakened due to strengthened breach of duty,' they added, "The principle of business judgment is already recognized by the Supreme Court, and normal business judgment is not penalized as a breach of duty." This means that there are precedents indicating that a breach of duty would not incur punishment.
In particular, regarding the alternative proposed by the government and ruling party as the 'Capital Market Act amendment,' they saw it as a way to excuse themselves from protecting major corporations by suggesting to replace a commercial law amendment applicable to over a million corporations with a capital market law change. They further stated, "In a situation where foreign investment institutions are also demanding transparency in management and protection of shareholder rights, this is an outdated response."
Jin Sung-jun, the chair of the policy committee, also stated during a special meeting held at the Gwanghwamun tent office, "The commercial law amendment aims to protect the rights and interests of minority shareholders and make our corporate governance transparent and fair," asserting that "the Democratic Party will not give up on the commercial law amendment under any circumstances and will ensure its completion."
◇Yoon “Reflecting minority shareholders' interests” Choi “We need to discuss expanding duties of loyalty”
The commercial law amendment has been a recurring issue mentioned in the political arena since past presidential elections. President Yoon Suk-yeol attended the securities market opening ceremony in January of last year and promised to promote the amendment, stating, "The board of directors must be able to responsibly reflect the interests of minority shareholders." Deputy Prime Minister Choi Sang-mok also remarked, "Discussions on expanding the duty of loyalty to shareholders are necessary."
Lee Bok-hyun, the head of the Financial Supervisory Service, sent an opinion letter to the government on the 28th of last month, stating that exercising the veto on the commercial law amendment was inappropriate. The letter noted that "(exercising the veto) raises doubts about the government's willingness to protect shareholder value altogether, which could adversely affect the entire stock and foreign exchange markets." He also stated on the 26th, "I cannot accept a decision that rolls back discussions on enhancing shareholder value," adding, "I oppose the veto with all my strength."
The government and ruling party believe that amending the 'Capital Market Act' is sufficient instead of changing the commercial law. They propose to implement 'pinpoint regulation' only targeting mergers and divisions of listed companies. The People Power Party argued that if the 'duty of loyalty to shareholders' is included in the commercial law, minority shareholders will abuse litigation, and management rights will come under attack by speculative capital.