From Breach of Trust to Labor Market Flexibility... Why Is Lee Jae-myung Taking a 'Pro-Business' Stance?

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Lee Jae-myung, leader of the Democratic Party of Korea, is focusing on livelihood and economic issues regardless of receiving a 'loss of parliamentary seat' sentence in the first trial for violating the Public Official Election Act. Following the recent party decision to abolish the 'financial investment income tax,' he is showing a pro-business stance by bringing to public discussion the easing of the 'breach of trust' charge, one of the long-standing demands of the business community.

Lee made the breach of trust easing public at the 'General Investor Meeting for Revitalizing the Domestic Stock Market' held on the 20th at Appendix in Yeouido, Seoul. Referring to the amendment to the Commercial Act being promoted by the Democratic Party, he said, "The aim is to resolve the abnormal situation where major shareholders exercise absolute power, but actual major shareholders who exercise management rights have concerns about 'going to prison,'" adding, "It seems time to bring to public discussion the issue of investigating and punishing businesspeople under breach of trust charges."

The background of this statement is that the Democratic Party announced it would push the amendment to the Commercial Act as a party policy, which centers on expanding the director's duty of loyalty from the company to shareholders in exchange for abolishing the financial investment income tax. The business community immediately raised concerns to the Democratic Party, arguing that it is a 'decision against shareholder interests' and that corporate directors could face excessive punishment under breach of trust charges. In other words, Lee directly mentioned the side effects of the Commercial Act amendment currently being promoted by the Democratic Party.

Lee Jae-myung, leader of the Democratic Party of Korea, is wearing a stern expression at the Supreme Council meeting held at the National Assembly on the 18th. Photo by Kim Hyun-min

Considering the concerns of the business community, the Democratic Party is considering including measures to ease breach of trust charges in the amendment to the Commercial Act. Instead of explicitly stating the 'duty of loyalty to shareholders' in the Commercial Act, it is known that they are contemplating easing breach of trust charges under criminal law. Within the party, there is growing support for the view that it is excessive for corporate executives to face criminal punishment under breach of trust charges. Kwon Chil-seung, a party member and former Minister of SMEs and Startups, expressed agreement in a phone interview, saying, "The issue of abolishing breach of trust charges is something Lee has mentioned before," and added, "He has pointed out that breach of trust charges are legally inappropriate and that alternative measures are needed."

Lee's progressive pro-business moves are not the first. On the 4th, he agreed to abolish the financial investment income tax, and on the 11th, he visited the Korea Employers Federation and responded positively to the business community's request for 'separate taxation on dividend income,' saying, "Institutional improvements are needed to revitalize dividends." The core of separate taxation on dividend income is to impose a single tax by separating dividend income from comprehensive income. Under the current tax system, if combined financial income from dividends and interest exceeds 20 million KRW per year, a progressive tax rate of up to 49.5% is applied by combining it with other comprehensive incomes such as earned income and pension income. Implementing separate taxation is judged by the economic sector to reduce the tax burden on dividends and thereby increase incentives for investing in dividend stocks. On the 20th, he also emphasized the need for dialogue and compromise on contentious issues such as the 52-hour workweek and easing the application of the Serious Accidents Punishment Act.

Lee Jae-myung, leader of the Democratic Party of Korea, is having a meeting with Yoon Jin-sik, chairman of the Korea International Trade Association, at the National Assembly on the 20th. Photo by Kim Hyun-min

Lee's consecutive pro-business remarks are analyzed as a strategy to appeal to the moderate electorate for his presidential bid while emphasizing the image of an alternative party. It is interpreted as a strategy to highlight the economic shortcomings of the Yoon Seok-youl administration, which is seen as a 'weak link' in economic matters, and to differentiate his stance.

However, it is uncertain whether the ongoing pro-business moves will yield clear results. Immediate backlash from the labor sector is detected. Kim Byung-guk, policy director of the University Labor Union of the Korean Confederation of Trade Unions, said in a phone interview, "Breach of trust is a serious issue, and if regulations are loosened, problems may arise in eradicating business corruption," adding, "The problem is companies committing breach of trust, so it is ironic to try to reduce occurrences by changing the law."

Some also point out that Lee may be continuing anti-labor policy remarks to capture public sentiment on livelihood issues ahead of successive judicial risk rulings surrounding him. Park Hong-bae, a Democratic Party lawmaker, responded to such concerns, saying, "Lee's expanding activities, such as visiting the business community, are not viewed negatively especially by the labor sector," and explained, "We maintain constant communication with the labor sector, and shouldn't we meet and listen to anyone?"