[Asia Exclusive] Lee Dong-geun "Anti-Corporate Sentiment Still Serious, Must Revive Entrepreneurship to Overcome"

Lee Dong-geun, Executive Vice President of Korea Employers Federation, Asia Exclusive Interview
Serious Anti-Business Sentiment in Korea, Some Companies Made Past Mistakes but Have Changed Significantly
Severe Competitiveness Decline Due to Flood of Regulations, Need to Break Regulatory Chain

Donggeun Lee, Executive Vice President of the Korea Employers Federation./Photo by Hyunmin Kim kimhyun81@

[Interview = Eunjeong Lee, Head of Industrial Department at Asia Economy, Organized by Changhwan Lee, Reporter] "As companies face increasing judicial risks, the burden of excessive criminal penalties is significant. To prevent the contraction of corporate investment and innovation, it is necessary to codify exemption provisions such as the ‘business judgment rule’ that does not hold corporate executives accountable for management outcomes when due diligence has been exercised."

On the 5th, at the Korea Employers Federation Hall in Mapo-gu, Seoul, Lee Dong-geun, the newly appointed full-time vice chairman of the Korea Employers Federation, expressed concern that the competitiveness of domestic companies is rapidly declining due to the flood of regulations recently imposed by the government and the National Assembly, who claim to be correcting the ‘tilted playing field.’

He pointed out that although most companies are strengthening compliance and maintaining corporate ethics well, the persistent anti-corporate sentiment is a result of this regulatory-only atmosphere.

Vice Chairman Lee first criticized corporate behavior. One reason the government is strengthening regulations is due to some companies’ wrongful practices and deviations. That is why he has chosen alleviating anti-corporate sentiment as a key project during his term.

Lee emphasized, "We must break the cycle of public opinion deterioration caused by some companies’ misconduct and the resulting regulatory tightening by the government and National Assembly. We will strive to remove misunderstandings and prejudices against companies and help the public recognize the true value of corporations."

He also said that strengthening entrepreneurial spirit is a way to improve the public image of companies. Lee mentioned, "Understanding entrepreneurs as a concept of infrastructure like public perception and cultural capital, and spreading a favorable view of entrepreneurs, is a way to activate entrepreneurial spirit and improve anti-corporate sentiment."

Lee Dong-geun, Executive Vice President of the Korea Employers Federation. / Photo by Hyunmin Kim kimhyun81@

The following is a Q&A with Vice Chairman Lee.

-It has been a month since your inauguration. How do you feel?

▲I was vice chairman of the Korea Chamber of Commerce and Industry until 2017, so I was well aware of the role of economic organizations. Nevertheless, I feel that the environment surrounding economic organizations has worsened compared to then. This is because regulations on companies have increased significantly compared to that time. I hear a lot that companies are struggling due to increased regulations amid the already difficult situation caused by COVID-19. Large corporations are somewhat okay, but small and medium-sized enterprises, small business owners, and self-employed individuals are especially struggling more.

-What are the causes of anti-corporate sentiment in our society and how can it be overcome?

▲Anti-corporate sentiment increases the burden on companies in legislative, judicial, and administrative sectors. It can damage the positive value of companies that drive economic growth, create jobs, and improve income, as well as entrepreneurial spirit, causing significant national loss. I believe the main cause of anti-corporate sentiment in Korea is that during the past era of economic development and rapid growth, some companies’ wrongful practices and preferential treatment controversies spread resentment toward companies, increasing negative perceptions.

Today, most companies strengthen compliance and uphold corporate ethics well. However, wrongful practices and deviations still exist in some companies and must be corrected, and distorted misunderstandings and prejudices against companies must also be removed. Companies should not only strive for transparent and ethical management and corporate social responsibility but also strengthen communication with the public in various ways to correct distorted perceptions.

-Recently, the entrepreneurial spirit of founders was recalled through the 20th anniversary of Honorary Chairman Chung Ju-yung and the passing of Chairman Shin Chun-ho. What is the ideal entrepreneurial spirit?

▲During the high-growth period of our economy, passionate challenges and new business pioneering capabilities of entrepreneurs like the late Chung Ju-yung and Chairman Shin Chun-ho were important driving forces for economic growth. However, as the economy matures, entrepreneurial spirit should be understood not simply as personal qualities or capabilities of entrepreneurs but as a concept of infrastructure such as public perception and cultural capital, and spreading a favorable view of entrepreneurs is key to activating entrepreneurial spirit.

When a social atmosphere that respects and supports entrepreneurs is created, entrepreneurial spirit can be activated, and its scope will develop beyond management innovation to actively contributing to economic and social development at an ideal level.

-The government is increasingly strengthening corporate regulations. Do you expect this trend to continue this year?

▲After the ruling coalition secured about 180 seats in last year’s general election, many corporate burden laws such as the Commercial Act, Fair Trade Act, Labor Union Act, and Serious Accident Punishment Act, which were major policy tasks of the government and ruling party, passed the National Assembly. On the other hand, issues long demanded by business circles such as ‘flexibility of working hours’ and ‘deletion of criminal penalties for unfair labor practices by employers to restore labor-management balance’ saw only slight improvements or were excluded from discussions.

This year, a strong legislative drive is expected again focusing on major policy laws of the government and ruling party. There are concerns that corporate burden laws, including regulations on complex shopping malls and class action/punitive damages bills currently being prepared by the government, will continue to pour in. However, the prolonged COVID-19 economic situation and future political schedules may act as variables in legislation.

-As corporate regulations strengthen, judicial risks for companies continue to grow. What are the side effects and solutions?

▲There are about 2,500 criminal penalty provisions related to businesspeople in Korean economic laws. In particular, managerial decisions can be punished as breach of trust depending on the outcome, which suppresses entrepreneurial spirit. To prevent excessive criminal penalties from hindering corporate investment and innovation, it is necessary to codify exemption provisions like the ‘business judgment rule’ that do not hold corporate executives responsible for management outcomes when due diligence has been exercised.

Especially, the Serious Accident Punishment Act includes unprecedented punitive provisions worldwide and imposes harsher penalties than the UK’s Corporate Manslaughter and Corporate Homicide Act, which served as its model. It is necessary to mitigate the excessive punishment level for management compared to foreign countries and extend the law’s enforcement period by two years considering the preparation period at industrial sites through supplementary legislation (re-amendment of the Serious Accident Punishment Act).

-Labor-management relations are expected to become more difficult this year. How should companies respond?

▲According to the ‘2021 Labor-Management Relations Outlook Survey’ conducted by the Korea Employers Federation, 59.8% of respondent companies expect labor-management relations to be more unstable this year than last year. According to the amended Labor Union Act, even dismissed workers and unemployed persons not currently employed at the company can join labor unions, so companies need to revise internal regulations and supplementary rules to ensure efficient business operations are not hindered. Also, as industrial accidents have emerged as a core issue in labor-management relations, companies should focus on prevention activities and pay attention.