Proposal of Special Act Through the Political Affairs Committee, Not the Legislation and Judiciary Committee
Representative Kim Nam-geun Scheduled to Officially Propose Today
The Democratic Party of Korea has initiated a 'Value-Up' (enhancement of corporate value) campaign through a special law aimed at improving corporate governance. Instead of the National Assembly's Legislation and Judiciary Committee, which is marked by extreme confrontations between ruling and opposition parties, the effort to improve corporate governance is being attempted via the National Assembly's Political Affairs Committee. However, the bill for corporate governance improvement appears to be caught up in the political strife triggered by the financial investment income tax (금투세).
Democratic Party of Korea Policy Committee Chair Jin Seong-jun and Representative Kim Nam-geun are announcing plans to promote the "Korea Booster" project, aimed at resolving the stock market's "Korea discount" and ensuring that Korean companies are properly valued. [Image source=Yonhap News]
According to a comprehensive report by Asia Economy on the 12th, the office of Democratic Party lawmaker Kim Nam-geun plans to officially propose the "Special Act on Corporate Governance of Listed Companies" (Ant Investor Protection Act) within the day. The special act includes key provisions such as "extending directors' fiduciary duties to shareholders," "requiring more than half of the board of directors to be independent directors," "mandatory cumulative voting for listed companies with total assets exceeding 2 trillion won," "expanding the number of separately elected audit committee members to three," and "mandatory concurrent on-site and electronic shareholders' meetings."
The Democratic Party has continuously stoked the fire, viewing corporate governance improvement as a prerequisite to resolving the Korea discount. On the 30th of last month, Jin Seong-jun, the Democratic Party's Policy Committee Chair, announced the "Korea Boost-Up Project" at a press conference. The contents of the special act proposed on this day are largely similar to those of the Korea Boost-Up Project. Chair Jin stated, "We will promote the project to democratically improve corporate governance and secure a long-term upward momentum in the capital market." Before proposing the special act, the Democratic Party also held a "Forum for the Enactment of the Ant Investor Protection Act" to generate public opinion on the special law.
It is interpreted that the Democratic Party is attempting legislation through a special act because the related amendments to the Commercial Act have repeatedly failed to pass the National Assembly. The standing committee responsible for the Commercial Act amendments is the National Assembly's Legislation and Judiciary Committee, which is currently preoccupied with major contentious bills such as the special investigation laws on Prosecutor Cha Sang-byeong and First Lady Kim Geon-hee, causing the Commercial Act amendments to be sidelined. Although 13 amendments to improve corporate governance were proposed during the 22nd National Assembly, they have not been properly addressed in the Legislation and Judiciary Committee. Lawmaker Kim Nam-geun of the Democratic Party said, "The possibility of the Commercial Act amendments being discussed in the Legislation and Judiciary Committee is low, and the Ministry of Justice is not preparing related content. If the Political Affairs Committee focuses solely on listed companies, discussions can proceed relatively quickly."
The government has also consistently emphasized the need to improve corporate governance, including expanding directors' fiduciary duties. Earlier this year, President Yoon Seok-yeol expressed a positive stance on amending the Commercial Act to protect minority shareholders. Subsequently, the government announced a Value-Up program and introduced systems such as "corporate value-up disclosure." However, as of the 9th, the participation rate in the value-up disclosure stands at only 1.4%. On the 8th, Lee Bok-hyun, Governor of the Financial Supervisory Service, said at a meeting with CEOs of asset management companies, "The government's position is to achieve value-up through voluntary efforts and institutional benefits rather than regulation," but added, "Some political circles are discussing somewhat regulatory approaches, and if major companies do not take this seriously, the value-up program could go in a direction the government does not want."
However, the domestic capital market and National Assembly environment are challenging. The ruling party has identified the abolition of the financial investment income tax, not corporate governance improvement, as a prerequisite for value-up, and the opposition party is somewhat responsive. Thus, the special act could also be drawn into the political strife between ruling and opposition parties over value-up. On the 8th, Democratic Party lawmaker Lee So-young wrote on her Facebook, "The amendment to the Commercial Act to protect general shareholders is a law that must be prioritized to protect the 12 million citizens participating in the stock market," adding, "It is reasonable to postpone the introduction of the financial investment income tax until the instability and vulnerability of the stock market improve to the level of other OECD markets."
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