Hankyung Association: "68% of Overseas Commercial Law Professors Say Duty of Loyalty Applies to the Company"

Results of a Survey of 25 Law School Professors
Majority Say "Company" Is the Primary Target of Duty of Loyalty
Concerns Raised About Expanding Duty to Shareholders in Korea

Amid discussions in the National Assembly to amend the Commercial Act to expand the duty of loyalty targets from companies alone to both companies and shareholders with the goal of enhancing corporate value (value-up), a survey found that 7 out of 10 professors of commercial law at major overseas law schools consider the target to be the company.

On the 20th, the Korea Economic Association announced that this result came from a survey commissioned by the Korea Management Association to professors at leading global law schools such as the University of Cambridge in the UK, Cornell University in the US, and Hitotsubashi University in Japan. Out of 2,000 surveyed, 25 responded.

Among the respondents, 68% (multiple answers allowed) answered that the duty of loyalty target is the "company," while 32% answered "company and shareholders." Only 8% answered "shareholders," and 4% answered "company, shareholders, and stakeholders." The Korea Economic Association evaluated this as the global standard.

National Assembly Main Chamber. Photo by Yonhap News

Among respondents who included shareholders as the duty of loyalty target, 28% answered that "the interests of the company and shareholders coincide." 16% said "the interests of the company and shareholders do not coincide," and another 16% said "protection of minority shareholders is necessary."

The Korea Economic Association interpreted this by stating, "Distinguishing between the company and shareholders is a conventional expression," and "in reality, they are considered the same interests."

When asked whether expanding the duty of loyalty to shareholders is effective in protecting minority shareholders, 48% answered "no." Only 28% responded that it is effective.

Subject to the Duty of Loyalty in Moving. Provided by Hankyung Association

In the case of expanding the duty of loyalty to shareholders in Korea, 52% expressed concern that "unexpected side effects will occur." 36% said "it will fail to increase corporate value," and 28% answered "it will hinder directors' decision-making."

Lee Sang-ho, head of the Economic and Industrial Division at the Korea Economic Association, said, "Many major overseas law school professors also view the expansion of the duty of loyalty as inefficient," adding, "There are concerns about side effects such as increased litigation and reduced investment. Legislative discussions should be approached with caution."

This content was produced with the assistance of AI translation services.