Cumulative Voting System to Be Discussed Later
at a Public Hearing
The ruling and opposition parties have agreed to pass an amendment to the Commercial Act at the National Assembly plenary session on July 3, which expands the fiduciary duty of directors from the company to include shareholders. The amendment will also include the contentious '3% rule.'
On July 2, Kim Yongmin, a Democratic Party lawmaker who serves as both the secretary of the Legislation and Judiciary Committee and the chair of its bill review subcommittee, met with reporters after a meeting with the floor leaders and committee secretaries of both parties. He stated, "We have agreed to include the separate election of audit committee members and the application of the 3% rule." The 3% rule limits the voting rights of the largest shareholder to 3% when electing auditors or audit committee members.
Kim added, "We have agreed to adopt the 3% rule with certain modifications," and explained, "We will hold a public hearing to discuss the introduction of cumulative voting and the expansion of outside directors serving as audit committee members from one to two or all members."
According to the modifications, the 3% rule will also apply when electing outside directors as audit committee members, limiting the combined voting rights of shareholders to 3%, just as in the election of inside directors to the audit committee. Kim explained, "Previously, the voting rights of major shareholders were less restricted when electing outside directors as audit committee members compared to inside directors. The revision raises the standard to match, so the application of the 3% rule is now consistent in all cases."
Other provisions included in the amendment are: ▲expanding the fiduciary duty of directors, ▲introducing electronic general shareholders' meetings, and ▲converting outside directors into independent directors.
Jang Donghyuk, the secretary of the Legislation and Judiciary Committee from the People Power Party, stated, "Reaching a bipartisan agreement to pass the bill sends a much more positive message to the market than showing disagreement. Although there are still some points of contention, we have managed to reach a consensus on the remaining issues."
The bill review subcommittee of the Legislation and Judiciary Committee passed the amendment reflecting these agreements. If the amendment is passed at the plenary session on July 3, it will become the first bill jointly passed by the ruling and opposition parties since the inauguration of the Lee Jaemyung administration. Kim emphasized, "It is meaningful to handle the first bill of the Lee Jaemyung administration, but it is even more significant that it was passed through bipartisan agreement. For the unresolved issues, we will hold public hearings and process them as quickly as possible."
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