Kim Byung-hwan, Financial Services Commission Chairman, "Amendment to Commercial Act Negatively Impacts Corporate Value"

Appeared on 'KBS Sunday Diagnosis' on the 24th
Virtual Asset Trading Volume Surpasses Stock Market
Unfair Trading Concerns... Close Monitoring Ensured

Kim Byung-hwan, Chairman of the Financial Services Commission. Photo by Kim Hyun-min

On the 24th, Kim Byung-hwan, Chairman of the Financial Services Commission, expressed a negative perception for the first time regarding the amendment to the Commercial Act being promoted by the Democratic Party of Korea. He pointed out the need to fully consider the side effects that the business community has been concerned about, such as decision-making delays and excessive demands from foreign speculative capital.

"Including shareholders in the duty of loyalty will significantly delay decision-making"

Chairman Kim appeared on KBS Sunday Diagnosis the previous day and said regarding the amendment to the Commercial Act, "Currently, directors have a duty of loyalty to the company, but if shareholders are also included, decision-making could be significantly delayed." He added, "While I agree that corporate governance should become more transparent, it is necessary to consider the negative impacts on corporate management and the capital market when it comes to whether the method should be an amendment to the Commercial Act."

He also pointed out, "There are concerns that many lawsuits will arise, and if foreign speculative capital uses this as a pretext to make excessive demands on companies or threaten management rights, it could negatively affect corporate value."

He said, "Speculative capital entering and then extracting short-term profits could also affect stock prices, and from the perspective of the capital market, there are concerns about whether the amendment to the Commercial Act is entirely desirable or if the side effects might be greater."

Instead, Chairman Kim explained that improvements are being pursued in the system regarding issues raised in mergers and splits related to corporate governance, and through this, it is expected that effective governance improvements can be achieved while avoiding the side effects of the Commercial Act amendment.

Regarding mergers, he explained that the practice of calculating the merger ratio based on the standard stock price will be abolished, and the board of directors will set a fixed merger price to protect the legitimate interests of shareholders, receive external evaluations, and disclose them. For splits, since splitting the sound part into a subsidiary and listing it could harm existing shareholders, the system will be improved so that existing shareholders can be preferentially allocated a certain portion of the subsidiary's shares when the subsidiary is listed.

Earlier, the government and the ruling party had shifted toward pursuing only the amendment of the "Capital Markets and Financial Investment Services Act (Capital Markets Act)" within the year. Kim Sang-hoon, a member of the Policy Committee of the People Power Party and the Political Affairs Committee, recently revealed in a media interview that the direction of amending the Capital Markets Act to protect general shareholders was discussed through a non-public party-government meeting.

"Funds should flow into the stock market rather than virtual assets"

He also expressed concerns about the recent phenomenon where the trading volume in the virtual asset market has surpassed the scale of the stock market, emphasizing the need to strengthen monitoring. After the election of former U.S. President Donald Trump on the 5th (local time), an abnormal phenomenon called the "Trump Trade" (investing in assets that could benefit from Trump’s policies) caused the trading volume of the top five domestic coin exchanges to far exceed the total trading volume of the stock market.

Chairman Kim said, "Looking at the two markets, money should flow into the stock market," and added, "Since virtual asset prices have surged sharply in a short period and the market itself is highly volatile, the government needs to closely monitor whether there is unfair trading."

He pointed out, "Everyone recognizes that the stock market is very important for the virtuous cycle of our economy, but there are questions about the positive impact of virtual assets on the real economy, so it is necessary to look into why the trading volume is higher in virtual assets."

Regarding the possibility of South Korea fostering virtual assets like the Trump administration’s pledge to strategically stockpile Bitcoin, he said, "We need to see the actual U.S. policy, but for now, it is a somewhat distant topic," and added, "Currently, the priority is how to link the virtual asset market with the existing financial system and how to protect investors in that process."

In response to criticism that the government’s response to the recent collapse of the KOSPI below 2400 points has been lukewarm, he said, "Measures such as the stock market stabilization fund are still valid, and institutions ready to inject funds are prepared whenever necessary," but added, "However, the government acts as a safety net rather than intervening every time, so the appropriate timing must be considered."