On the 30th, President Lee Jae-myung's anticipated 'relaxation of breach of trust' is strongly characterized as a 'complementary nature' to the ruling party's ultra-modern commercial law reform. As the National Assembly pushes for amendments to the commercial law mandating cumulative voting and separate election of audit committee members, alongside the yellow envelope law, the burden on the business community has increased. It aims to change the law to a level that explicitly states that management decisions will not be punished, in order to offset the criticism of being 'anti-business' related to the restoration of the corporate tax to 25%.
Kim Yong-beom, the Deputy Minister of the President's Policy Office, said during a briefing on the results of the third emergency economic task force meeting, 'As the second commercial law amendment passes through the Legislative Affairs Committee in the National Assembly, various opinions are being raised among businesspeople.' He noted, 'Naturally, there is a lot of discussion about concerns regarding breach of trust. The President hopes that discussions will consolidate, become socially publicized, and lead to institutional improvements.'
This means there is a need for measures that will 'offset' corporations' concerns regarding the stringent commercial law amendments. He then stated, 'The President has recently quoted the concerns of foreign investors after meeting with several businesspeople.' In fact, the President remarked in the meeting, 'The fear of breach of trust among foreign investors is particularly large, more than we think.' He continued, 'When asking foreigners to manage Korean corporations, they hesitate. There is much talk of how Korean labor unions are, but a significant number consider that 'if something goes wrong while doing business in Korea, they could end up in prison,' which deters investment.'
There are also claims that the current breach of trust law is being abused, thereby stifling corporate management activities, which is the logic that large corporations and the business community have maintained. The relaxation of the breach of trust law is a subject that President Lee has mentioned since his days as the representative of the Democratic Party. There have been considerable complaints within the party that it 'disrupts the identity foundation of the faction.' Many have pointed out that it does not align with the purpose of the commercial law amendments. Since there are already related Supreme Court precedents, they argue that excessive penalties are not imposed without changing the law. However, after the presidential election, President Lee has accelerated the 'pro-corporation stance,' and members of the Democratic Party have followed suit by consecutively proposing amendments to the criminal law and commercial law.
The communication between President Lee and the business community has existed since his tenure as party leader. Last November, President Lee garnered attention by expressing his willingness for 'relaxation of breach of trust' during a meeting with the Korea Enterprises Federation. The meeting was initially set up to persuade the legitimacy of commercial law amendments and to seek cooperation from corporations. At that time, Kim Kyung-sik, the chairman of the Federation, raised concerns about the chilling effect on management activities due to the 'duty of loyalty to shareholders' clause and the necessity for a buffer zone. President Lee reportedly responded by stating, 'We need to improve excessively placing responsibilities on management decisions.'
◇ 'Reduce unnecessary conventional penalty clauses' TF formation
The Presidential Office decided to form a 'Task Force on Rationalization of Economic Penalties' to expedite the process of amending the law. The name of the organization itself reflects the President's intention that current criminal penalties for economic crimes are excessive. The Vice Minister of Economy and Finance and the Vice Minister of Justice will co-lead the task force. The main objective is to reduce the criminal penalty clauses related to the economic sector as specified in current law. The figure mentioned by the President is '30% overhaul within a year.'
However, the Deputy Minister stated, 'Rather than meaning to mechanically reduce it by 30%, it is about comprehensively surveying the economic-related penalty clauses across ministries and reducing some that have entered conventionally.' He also noted, 'If even relatively unimportant matters are prosecuted as criminal penalties, it takes too long for the prosecution, etc., to handle them. This causes significant psychological pressure on the corporations involved, and the uncertainty of business activities continues. I have also had awareness of such issues while working long at the Financial Services Commission.'