[Reporter’s Notebook] The ‘Legislative Risk’ Returns for Businesses

Companies on Alert Over Possible Revival of Commercial Act Amendment
Need for Predictable Environment and Mid- to Long-Term Policy Design

Since the Constitutional Court dismissed President Yoon Seok-yeol last week, the business community has once again been engulfed in tension over the impending uncertainty. There are concerns that if the regime changes through an early presidential election, previously pursued anti-economic bills might be brought back. While companies are refraining from publicly commenting, they are closely monitoring the potential revival of key bills led by the opposition party, including the amendment to the Commercial Act and the amendment to the Corporate Testimony Act in the National Assembly.

The amendment to the Commercial Act is what companies are most sensitive about. A business official met on site responded immediately after President Yoon’s dismissal, saying, "The amendment to the Commercial Act will eventually pass." The bill includes provisions that require directors of joint-stock companies to treat the interests of all shareholders fairly, not just specific shareholders, which the business community opposes. The bill had previously passed the plenary session of the National Assembly led by the ruling Democratic Party, but was stalled due to Acting President Han Duck-soo’s veto request. However, the business community fears that if the regime changes and the Democratic Party forms a new government, the bill could be pushed forward again. Ryu Jin, chairman of the Korea Economic Association, had previously expressed concerns about the amendment to Democratic Party leader Lee Jae-myung.

This concern is not limited to the amendment to the Commercial Act. There is growing credibility to the prospect that bills rejected by the Yoon Seok-yeol administration, such as the amendment to the Grain Management Act mandating the government to compulsorily purchase surplus rice, and the amendment to the Corporate Testimony Act strengthening demands for corporate executives to appear before the National Assembly, will be pursued again. Although these bills have justifications such as protecting minority shareholders, stabilizing farmers’ livelihoods, and strengthening parliamentary oversight, they involve direct government intervention in the market, which could have a direct impact on some companies, making them sensitive issues.

Politicians argue daily that investment, employment, and innovation are necessary. However, consistency and predictability in policy are essential prerequisites to achieve these goals. The business community’s concern about regime change immediately after the Constitutional Court’s acceptance of President Yoon’s impeachment is not merely due to political interests. The greater worry is the uncertainty caused by abrupt shifts in policy direction.

The structure in which the private sector is greatly shaken every time there is a regime change has been a burden on corporate activities. While the new government does not have to unconditionally continue existing policies, sufficient explanation and social consensus must support policy changes. In particular, the political sphere needs to focus on policy design that reflects the opinions of various stakeholders such as the market, companies, labor, and consumers from a mid- to long-term perspective rather than rushing for short-term achievements. What the business community wants is a foundation that enables sustainable growth in a predictable environment. If the situation where regime change inevitably means regulatory tightening or a change in direction repeats, the ultimate victims will be the public and the overall economy.