A criticism emerged that the multiple voting rights system for unlisted venture corporations has gone unused three years after its introduction because the intent of the system was misread as "founder favoritism." Rather, multiple voting rights are closer to a mechanism that helps investors exit their capital.
Multiple voting rights are an exception to the "one share, one vote" principle under the Commercial Act, allowing the founder to assign several votes to one share held by the founder so that management control can be protected even with a small equity stake. To date, only two corporations have adopted the system and issued such shares: Kolosseum Corporation and Hylium Industries.
At a corporate governance seminar held in Seoul on the 24th, Yoo Hyo-sang, head of the Unicorn Management and Economy Institute, who delivered the keynote, cited Coupang's 29-to-1 multiple voting rights structure listed on the New York Stock Exchange as a case. Yoo said, "At the time of Coupang's listing, major financial investors (FIs) held large equity stakes, creating a situation in which an overhang (potential large-scale selling) issue could surface," adding, "To prevent this and to fully entrust management to the founder, the 29-to-1 structure was largely introduced."
Yoo defined the core of this structure as "investor protection." Yoo said, "The concept is that the founder ties themselves to go all the way with the company without selling their own shares, while investors are free to sell in the market and exit at any time," adding, "In practice, Chair Bom Kim's Class B shares are not listed, and the moment they are sold they convert into common stock (Class A), reducing voting rights to one vote per share." The explanation is that while it is structurally impossible to cash out private gains by selling equity right after listing, it effectively separates ownership and management. All Class B shares are held by Kim; while the equity ratio based on the number of shares is 8.7%, the voting power share applying the 29-to-1 voting rights is 73.3%.
Under the Venture Corporations Act implemented in Nov. 2023, multiple voting right shares can be issued only to founders of unlisted venture corporations, within a range of 2 to 10 votes per share. The founder must participate as a promoter and be the largest shareholder with at least 30% equity. The enforcement decree requires that the company receive an investment of at least 10 billion won after founding and that the final investment amount be at least 5 billion won, and it provides that the shares convert to common stock upon expiration of the duration, inheritance, transfer, loss of the founder's director position, or three years after listing. Yoo noted, "Thinking of multiple voting rights as a huge incentive for founders led to overly stringent conditions, and as a result, there have been almost no adoption cases."
At the discussion that day, participants continued to argue that governance should be viewed differently by growth stage. Kim Beom-jun, a professor of accounting at the Catholic University of Korea, said, "While upholding the principle of shareholder equality of one share, one vote, we need to consider a governance structure that can induce founders' long-term responsible management for growth corporations." Lee Ji-yoon, a professor of business administration at Yonsei University, said, "For startups that must attract large-scale external capital, mechanisms to stabilize control can function usefully," while adding, "Checks to prevent abuse of the system must be established in tandem." Kim Hee-kyung, managing partner at law firm Doyoung, said, "This is an era when good corporations can choose their borders, but Korea lacks the attractiveness to hold corporations and the credibility to reassure investors."
Professors in attendance included Cho Woo-je and Lim Jae-hyun (Seoul National University, business administration), Shin Dong-hyuk and Park Sang-chan (KAIST, management engineering), Cho Dae-gon (Yonsei University, business administration), Kwon Nam-ho (Soongsil University, public administration), and Kim Hyeong-jin (Myongji University, future convergence management). Participants agreed to begin regularizing K-governance discussions starting with this seminar.