[Column] The Value-Up Control Tower Is Nowhere to Be Seen

It has been two months since the Financial Services Commission announced the finalized Value-Up (corporate value enhancement) guidelines last May. However, as of the end of last month, only 11 companies have disclosed Value-Up announcements. Moreover, about half of these are financial holding companies that have no choice but to watch the government’s stance. Large corporations, including the five major conglomerates (Samsung, SK, Hyundai Motor, LG, and POSCO), remain on the sidelines, observing quietly.

The reason for the low participation of the business community in Value-Up disclosures is that it is left to corporate autonomy without any mandatory enforcement, and the incentives offered by the Financial Services Commission’s Value-Up guidelines are not attractive proposals. A representative from an affiliate of a major conglomerate, whom we met during the reporting process, said, "There is no reason for us to act first when big brothers like Samsung Electronics and Hyundai Motor are staying still." One of the key cards to persuade the business community, tax incentives, remains uncertain. The ruling Democratic Party, a major opposition party, opposed the 'tax benefits for business succession and shareholder returns' included in the July tax reform bill prepared by the Ministry of Economy and Finance, calling it a 'tax cut for the rich.'

But does the policy enjoy the trust and support of investors? President Yoon Suk-yeol expressed agreement on the necessity of ▲measures to enhance shareholder value and ▲protection of minority shareholder rights during the Financial Services Commission’s New Year work report in January this year, hinting at amendments to the Commercial Act. Investors expected the scope of the 'duty of loyalty of directors (Article 382-3 of the Commercial Act)' to be expanded. However, the Ministry of Justice, the competent authority, showed reluctance, and only after Financial Supervisory Service Governor Lee Bok-hyun took the lead did the issue of amending the Commercial Act resurface. Even afterward, the public discussion process was not smooth. The Ministry of Economy and Finance excluded the amendment to expand the duty of loyalty of directors from the 'Capital Market Advancement Plan' announced on the 3rd of last month as part of the 'Dynamic Economy Roadmap.' They stated that the amendment to the Commercial Act is still at the public discussion stage and did not mention a specific announcement timeline. The Korea Corporate Governance Forum recently criticized the Democratic Party’s 'Korea Booster Project,' saying, "The enthusiasm for Value-Up led by the government and ruling party is cooling, and there are even many criticisms that there is no Value-Up control tower."

In the market, it is said that a control tower is necessary to oversee the policy to ensure that the Value-Up program has consistent direction and momentum. This is because the responsible ministries for tax policy (Ministry of Economy and Finance), Commercial Act amendments (Ministry of Justice), and capital market policy (Financial Services Commission) are all different. There are also calls to elevate the 'Corporate Value-Up Advisory Group,' which includes public and private members, beyond just an advisory group to a committee form.

In Japan, which is a benchmark for Korea’s Value-Up program, the Prime Minister personally took the lead to empower the policy. Yoshio Horimoto, Commissioner of the Japan Financial Services Agency, emphasized at a domestic seminar last May, "The success of Japan’s Value-Up policy is because Prime Minister Fumio Kishida personally met and persuaded overseas investors." Prime Minister Kishida inherited and further developed the revitalization strategy of his predecessor, Shinzo Abe. In September 2022, he even flew directly to the U.S. stock exchange. Although Financial Supervisory Service Governor Lee Bok-hyun and Financial Services Commission Vice Chairman Kim So-young have undertaken overseas sales efforts, they cannot compare to the weight carried by the Japanese Prime Minister’s actions.

Value-Up policy involves complex interests. To bring together the differing views of the business community and the buy-side and to push policies forward in a fragmented political landscape, a commander who can hold the helm with a long-term vision is needed. Fortunately, I have heard recently that the Blue House has not given up hope on the Value-Up policy. Let us just hope it is not too late.