[Interview] Rep. Yoon Ho-jung Reviewing Public Interest Corporation Activation Package Act... "Establishing Public Interest Committee to Enhance Transparency"

Considering Measures to Revitalize Civil Society
Reviewing Expansion of Public Interest Stock Contributions by Sangchul Group Companies
Bill Proposed to Recognize Public Interest Investment and Financing in October

Editor's NoteDiscussions are underway in the political sphere regarding institutional support measures to revitalize public interest corporations. Serious consideration is being given to expanding tax exemption limits to allow companies with goodwill to support public interest corporations through stock contributions and other means. We met with Park Su-young (People Power Party) and Yun Ho-jung (Democratic Party of Korea), lawmakers seeking institutional improvements to revitalize public interest corporations.

"You need brakes to be able to accelerate."

Yun Ho-jung, a lawmaker from the Democratic Party of Korea, recently told Asia Economy in an interview, "We are preparing a package bill that links the establishment of a Public Interest Committee to enhance the transparency of public interest corporations with the expansion of tax exemption limits on stock contributions by business groups subject to mutual investment restrictions (Sangchuljipdan)." The package includes amendments to the Inheritance and Gift Tax Act (Sangjoongse Act) to promote donations such as stock contributions by companies to public interest corporations, along with legislation to strengthen management and supervision. This approach simultaneously provides public interest corporations with the incentive of 'funding' and the 'braking mechanism' of a Public Interest Committee.

As a five-term senior member of the National Assembly and a member of the Planning and Finance Committee, Yun's legislative efforts are expected to create an opportunity to broaden the tax exemption limits on stock contributions by companies, which has been a key turning point in revitalizing public interest corporations. However, regarding the timing of the bill's submission, he intends to proceed cautiously. Yun said, "It's not something that must be done immediately within this year," adding, "We need to discuss with stakeholders and refine the bill. We will go through a process of publicizing the issue."

Yoon Ho-jung, a member of the Democratic Party of Korea, is giving an interview to Asia Economy at the National Assembly on the 24th. Photo by Hyunmin Kim kimhyun81@

Earlier, Yun plans to propose an amendment to the Sangjoongse Act in October to allow public interest investments for public interest projects, such as investments and loans to small and medium-sized enterprises and non-profit organizations. The idea is to open the door to investments made for public interest purposes rather than for profit generation or asset value appreciation. Yun has been contemplating the activation of civil society since his time as a Blue House administrator during the Kim Dae-jung administration. He said, "I have been thinking about what is necessary for civil society to be activated, and that awareness has not yet been resolved," revealing that the plan to revitalize public interest corporations is the result of long-standing reflection.

He proposed the 'Act on the Operation and Revitalization of Public Interest Corporations' in the 21st National Assembly, but it did not pass.

In the previous National Assembly, he submitted a bill to comprehensively amend the 'Act on the Establishment and Operation of Public Interest Corporations.' Currently, only the establishment process of public interest corporations is strictly managed, but there is insufficient oversight afterward. Approval is granted with the consent of the Ministry of Strategy and Finance, but subsequent management is handled by various ministries. Since there is no organization that continuously monitors whether public interest corporations continue to operate according to their founding purposes, the public misunderstands them. On one side, they are seen as tools for large corporations' tax evasion or illicit inheritance; on the other, as entities where power holders squeeze companies for donations to pursue private gain, as seen in the state power abuse scandals. There was a need to institutionalize these issues. When proposing the creation of a Public Interest Committee to oversee public interest corporations, civil society and public interest corporations misunderstood it as creating a 'mother-in-law' figure. To resolve this, the idea emerged that incentives and braking mechanisms must be provided together, leading to the consideration of amendments to the Sangjoongse Act.

What measures are being considered?

Typically, conglomerates and large corporations are classified as Sangchuljipdan under the Fair Trade Act. For Sangchuljipdan, tax exemption is recognized only up to 5% of stock contributions regardless of voting rights. However, with amendments to the Fair Trade Act, if voting rights are restricted, up to 15% is allowed. Since the Sangjoongse Act and the Fair Trade Act are inconsistent, we are reviewing amendments to align these laws. The Fair Trade Act allows up to 15% if voting rights are limited, but the Sangjoongse Act has not caught up, so we plan to supplement this and consider including a mandatory investment clause for public interest corporations.

However, since conglomerates might use this as a means to maintain management rights through illicit inheritance, strict management is necessary. The Fair Trade Commission can manage voting rights, but there needs to be oversight on whether donated funds are properly used. Hence, the need for a Public Interest Committee. Under the current system, focusing only on supply (stock contributions) could lead to the wrong direction. There are people who want to donate for social contribution, but the tax burden is so high that it makes them mistakenly think they are contributing to the government rather than society. By enhancing transparency through the Public Interest Committee and managing funds according to public interest purposes, citizens and the public are expected to understand that easing supply restrictions is acceptable.

Yoon Ho-jung, a member of the Democratic Party of Korea, is giving an interview to Asia Economy at the National Assembly on the 24th. Photo by Hyunmin Kim kimhyun81@

Public interest corporations are considered a third sector alongside the state and market, but there are criticisms that our society lags behind in this area.

The familiar term for us is civil society, including non-profit organizations (NPOs) and non-governmental organizations (NGOs). These organizations have lacked sufficient support from the government and corporations and have been less institutionalized, so conditions for developing civil society have not been established. In the UK, there is the Charity Commission; in Germany, Social Courts; and in the US, meta-NGOs that oversee NGOs. Because public awareness of public interest activities is low, diverse activities are limited. This is why a Public Interest Committee is necessary. It would assess whether public interest corporations use their resources appropriately through analysis of annual reports and other data. Currently, there is no such mechanism, so annual reports are very simplified, and accounting reports are not disclosed.

(Due to weak foundations) civic groups tend to chase issues influenced by media and public opinion. They have not expanded their scope to activities fulfilling diverse social values. If many donors emerge, they will continue working for the public good regardless of media coverage. Public interest corporations operated by wealthy individuals, like the Bill & Melinda Gates Foundation in the US, are also needed. They must be able to make public interest investments to engage in such financial activities, but the current system only allows direct investments. Financial activities that play a role in social finance should be included. Corporations that contribute financially and organizations that engage in practical activities are both necessary. A diverse and multi-layered structure is needed.

Are you considering expanding mandatory expenditures for public interest corporations?

There is a need to increase them. We plan to determine the direction through future forums and discussions.