Debate on Key Issues like Fiduciary Duty and Cumulative Voting
7 Executives vs 7 Investors Engage in Discussion
The Policy Committee of the Democratic Party of Korea and the Korea Stock Market Revitalization Task Force held a forum titled "How to Amend the Commercial Act" on the morning of the 19th at the National Assembly. Before the forum began, Representative Lee Jae-myung said, "As a potential investor myself, there are many regrets," adding, "It is a time when deep discussions on the structural problems of the Korean stock market are necessary." Jin Sung-jun, chair of the Policy Committee, described the forum as "the Democratic Party's policy move to revive the Korean stock market."
At the forum, seven panelists from the management side and seven from the investor side participated. On the management side, Park Il-jun, Executive Vice President of the Korea Chamber of Commerce and Industry, Kim Dong-wook, Vice President of Hyundai Motor Company, and Lee Hyung-hee, Chair of SK Supex Communication Committee, spoke. On the investor side, Myung Han-seok, Executive Director of the People's Solidarity for Participatory Democracy, and Yoon Tae-jun, Director of the shareholder action platform 'ACT' research institute, delivered remarks.
Lee Jae-myung, leader of the Democratic Party of Korea, is speaking at the Democratic Party policy debate held at the National Assembly on the 19th, themed "How to Amend the Commercial Act." Photo by Kim Hyun-min
The Democratic Party is pushing for an amendment to the Commercial Act as party policy to include protective measures for small investors. The core of the amendment is to strengthen directors' duties toward shareholders when making business decisions. Specifically, it includes △ explicitly stating 'shareholders' as subjects of directors' fiduciary duties △ expanding separate election of audit committee members △ mandating cumulative voting. The forum featured debates over these contentious issues.
The Democratic Party is considering an amendment to Article 382-3 of the Commercial Act (Directors' Fiduciary Duty) to specify 'shareholders' alongside 'the company.' The business community opposes this, fearing that applying such provisions to both listed and unlisted companies under the Commercial Act could hamper management. The provision to expand separate election of audit committee members was included to enhance auditor independence from major shareholders, but the business sector worries it could increase opportunities for speculative capital intervention. Additionally, the Democratic Party included a mandatory cumulative voting provision to empower small investors' voting rights. Some argue that the bill could be misused contrary to its intended purpose.
Representative Lee and the Korea Stock Market Revitalization Task Force previously met separately with small investors and business representatives to hear opinions on the Commercial Act amendment. Each time, the Democratic Party reaffirmed the necessity of the amendment. However, this was the first time representatives from both sides gathered in one place. With financial authorities such as Financial Services Commission Chairman Kim Byung-hwan and Financial Supervisory Service Governor Lee Bok-hyun effectively opposing the amendment, attention is focused on whether the Democratic Party will revise its stance after collecting stakeholders' opinions.
Representative Lee has expressed his determination to pass the Commercial Act amendment within the year multiple times. However, discussions were delayed due to the December 3 emergency martial law incident and the impeachment political crisis. The forum was also postponed from the originally scheduled date of the 4th. If the Democratic Party maintains its plan to pass the amendment within the year amid this situation, there is a high possibility that the amendment will be approved at the plenary session held at the end of this month. Alternatively, the party may slow the pace, possibly revising some contentious provisions and passing the bill after the new year.
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