Economic Sector and Ruling Party at Crossroads over Fair Economy 3 Laws... Compromise Plan Remains Uncertain

[Asia Economy Reporter Dongwoo Lee] As the government ruling party and the business community discuss the Fair Economy 3 Acts, disagreements remain unresolved over the scope of regulations and detailed items. In particular, both sides are sharply divided over the introduction of the separated election system for audit committee members and the 3% rule, and conflicts are expected to continue in the future.

According to the business community on the 17th, the Democratic Party of Korea and the business sector recently held policy meetings over two days to gather opinions on the Fair Economy 3 Acts.

The meetings, hosted by the Democratic Research Institute and attended by the Korea Chamber of Commerce and Industry, the Korea Employers Federation, and economic research institutes affiliated with the four major conglomerates, proceeded with the Democratic Party side inquiring about specific side effects that may arise from the introduction of the Fair Economy 3 Acts, and the business community responding.

Each corporate research institute emphasized three side effects: the separated election of audit committee members, the expansion of the scope of internal transaction regulations, and the presumption of collusion through information exchange activities. They also reiterated concerns that the introduction of the separated election system for audit committee members could increase the risk of management rights being seized by activist funds in Korean companies.

At the meeting, the economic research institutes of the four major groups highlighted last year's case where the U.S. activist fund Elliott held 2.9% and 2.6% stakes in Hyundai Motor and Hyundai Mobis respectively, and attempted to appoint executives from competing companies as outside directors.

The Korea Chamber of Commerce and Industry pointed out that even the National Pension Service would be subject to the 3% rule if the amendment to the Commercial Act is implemented. They argued that if the amendment is enforced as originally proposed, the National Pension Service, which plays a key role in improving corporate governance by electing audit committee members separately from other directors and limiting major shareholders' voting rights to 3%, could also be restricted.

However, despite the continuous meetings, the business community's concerns are growing as the government shows determination to push forward with the amendment to the Commercial Act. The government ruling party plans to coordinate positions through additional discussions by the end of this month, but the business community questions the effectiveness.

A business community official said, "At the meeting where alternatives were proposed, the government said to let them know anytime if there are good alternatives," adding, "This gave the impression that the bill's passage is being taken for granted and the process is merely formal."