[Inside Chodong] Business Community Anxious Over Rapid Pace of Economic Legislation

Commercial Act Amendment with '3% Rule' Passes
Business Community Laments Exclusion from Discussions
Legislation Without Persuasion Fuels Conflict

The meeting between the Democratic Party and the six major economic organizations’ executive vice presidents on the Commercial Act was held on June 30. At this meeting, the business community raised concerns that expanding the fiduciary duty of directors and the so-called '3% rule' could increase the possibility of management intervention by foreign capital and excessively expand the liability of directors. Participants warned, "The amendment could lead to increased voting participation by foreign activist funds, and there is a risk that the voices of capital seeking short-term profits may be excessively reflected in corporate management."

On the 11th, at the Public Hearing for the Additional Amendment of the Commercial Act held by the Subcommittee 1 of the Legislation and Judiciary Committee of the National Assembly, Woo Yong Jung, Vice President of Policy at the Korea Listed Companies Association, is testifying. From the left: Woo Yong Jung, Vice President of Policy at the Korea Listed Companies Association; Woo Chan Kim, Professor at Korea University; Jun Sun Choi, Emeritus Professor at Sungkyunkwan University School of Law; Tae Jun Yoon, Director of the Shareholder Action Platform ACT. July 11, 2025 Photo by Hyunmin Kim

However, the amendment to the Commercial Act passed the plenary session just three days after the meeting. Watching this, one business representative lamented, "If this is how things are going to be done, what is the point of holding these meetings? It is nothing more and nothing less than a mere formality."

There are other cases where the demands of the business community have not been adequately reflected. On July 11, at the public hearing of Subcommittee 1 of the Legislation and Judiciary Committee of the National Assembly, experts gathered to discuss the additional amendment to the Commercial Act. However, the meeting focused solely on the separate election of audit committee members and the strengthening of cumulative voting. The long-standing request from companies to discuss easing the burden of criminal breach of trust was not even brought to the table. The demand to address the burden of occupational breach of trust, which sees around 2,000 reports each year, was ignored in the amendment process.

Woo Yong Jung, Vice President of Policy at the Korea Listed Companies Association, who attended the meeting, said, "After the passage of the Commercial Act amendment, we were told that issues such as breach of trust and the business judgment rule would be discussed as follow-up measures, so there were high expectations. But suddenly, I was contacted and told that the public hearing would be held today, which was very surprising. If cumulative voting or separate elections are implemented before discussing breach of trust, companies will have no countermeasures," he lamented.

During the legislative process for this amendment to the Commercial Act, 'one-way communication' was observed several times. Although this is an issue strongly supported by the Lee Jaemyung administration, it is all the more necessary to gather opinions from various stakeholders.

Especially in the current political landscape, where the ruling party holds a majority and the opposition is in the minority, there is a risk of fostering unnecessary misunderstandings that the process could become structurally one-sided. The ruling party, which holds a majority in the National Assembly, has announced a series of economic legislative initiatives following the Commercial Act amendment, including the introduction of a 4.5-day workweek and the extension of the retirement age. As the legislative process accelerates under the leadership of the ruling party, companies are increasingly concerned that they may lose opportunities to voice their opinions.

Economic legislation is directly linked to the livelihoods of the people. It requires careful adjustment of multilayered interests. This is especially true for bills that affect corporate governance, such as the Commercial Act amendment. The separate election of audit committee members increases the influence of foreign activist funds, and if the legal liability of directors is expanded to near infinity, management decisions are bound to become more conservative. This inevitably leads to reduced investment and damage to corporate value.

The same applies to the extension of the retirement age and the introduction of a 4.5-day workweek. While these are systems aimed at improving the quality of life for the public, from the perspective of companies, they present concerns about increased labor costs and productivity issues. In a situation of great domestic and international economic uncertainty, if legislation is accelerated, companies may be swept away by a wave of regulation without the capacity to manage the risks.

The government and the business community are partners. To sustain this relationship, due process and trust must be the foundation. No matter how many seats one holds, politics that pushes through the will of the people by sheer numbers cannot last long. 'Legislation without persuasion' leads to conflict without dialogue, and such conflict ultimately hinders growth. For the law to change lives, it must first be able to contain dialogue.