Democratic Party Pushes Stronger Commercial Act Amendment... Support for Lee Jae-myung

Lee Jae-myung Discusses Stock Market Advancement Measures with Small Shareholders
Lee Jung-moon Proposes Amendment to Commercial Act Adding Duty of Care

Lee Jae-myung, leader of the Democratic Party of Korea, has taken steps to support the amendment of the Commercial Act, including meeting with individual investors. The Democratic Party is pushing for a strengthened amendment to the Commercial Act that explicitly includes a duty of protection in addition to the duty of loyalty of directors.

Lee Jae-myung, leader of the Democratic Party of Korea, is speaking at the Supreme Council meeting held at the National Assembly on the 20th. Photo by Kim Hyun-min

On the 20th, Lee attended the 'General Investor Meeting for Revitalizing the Domestic Stock Market' held at a cafe in Yeouido, Seoul, where he discussed ways to revitalize the domestic stock market with small shareholders. Lee said, "The stock market is the core of the capitalist system. However, it is currently impossible to make long-term investments in blue-chip stocks in the domestic stock market," adding, "A systematic solution to problems such as abuse of management rights is to amend the Commercial Act by expanding the duty of loyalty of directors." Small shareholders, including Jung Eui-jung, president of the Korea Stock Investors Association who opposed the financial investment income tax (FIIT), conveyed their demands to Lee for improving the stock market structure and strengthening penalties for illegal stock trading as part of stock market advancement measures.

This meeting with general shareholders is interpreted as a move to bolster the Commercial Act amendment that the Democratic Party is promoting. On the 4th, Lee declared that instead of imposing the FIIT, the amendment to the Commercial Act would be processed within the regular National Assembly session. He defined the amendment as a "stock market advancement measure" and announced it would be promoted as a value-up measure for the domestic stock market. In line with Lee’s intentions, the Democratic Party also launched the 'Republic of Korea Stock Market Revitalization Task Force (TF)' to discuss the amendment. The amendment was adopted as a party bill through a party caucus meeting on the 14th.

The Democratic Party is pushing for an amendment to the Commercial Act that adds a duty of protection to the duty of loyalty, extending it to shareholders. Jeong Moon Lee, deputy floor leader of the Democratic Party’s Policy Committee, introduced a bill the day before to amend Article 382-3, Paragraph 2 of the Commercial Act, adding the clause: "A director shall, in performing their duties, protect the interests of all shareholders and treat the interests of all shareholders fairly." Previous proposals only included that directors must be loyal not only to the company but also to shareholders. However, it is reported that within the Democratic Party, there is an opinion that merely expanding the duty of loyalty is insufficient to bring about change and that a stronger Commercial Act is necessary. In a phone interview on the day, Lee explained, "There was criticism that expanding the duty of loyalty alone does not clearly define the company’s legal responsibility to protect shareholders," adding, "Paragraph 2 was added with the intent to ensure fair protection of all shareholders."

Clashes with the government and ruling party are inevitable. While the government agrees on the need to amend the Commercial Act, it is considering the business community’s position and is promoting an amendment that includes the phrase "must endeavor to protect the interests of shareholders." The People Power Party holds the view that protecting general shareholders is possible solely through amendments to the Capital Markets Act. On the 10th, Kim Sang-hoon, policy committee chairman of the People Power Party, said, "(Expanding the duty of loyalty) could allow hedge funds to infringe on management rights," adding, "If there is an opportunity to communicate with the opposition later, we can discuss protecting shareholders’ interests during mergers and acquisitions through amendments to the Capital Markets Act."

The Democratic Party plans to ease conflicts surrounding the amendment by engaging in dialogue with the business community. The TF plans to meet with the Korea Chamber of Commerce and Industry and the Federation of Korean Industries next week to hear their opinions on the amendment. Lee said, "If the business community requests alternative legislation, we will listen carefully."