Commercial Act Amendment Mandating Cumulative Voting Passes Judiciary Subcommittee Led by Ruling Party

Ruling Party: "Ensuring Fairness and Transparency in the Capital Market"
Opposition: "Concerns Over Potential Loss of Management Control"

An amendment to the Commercial Act, which mandates cumulative voting for large listed companies with assets of 2 trillion won or more and expands the separate election of audit committee members, passed the National Assembly Legislation and Judiciary Committee's Legislative Review Subcommittee on July 28.

This follows the previous amendment to the Commercial Act regarding the fiduciary duty of the board of directors to shareholders, which was a campaign pledge of President Lee Jaemyung, and represents an even stronger push for reform of the Commercial Act.

The ruling Democratic Party of Korea unilaterally passed the amendment during the 3rd meeting of the 1st Legislative Review Subcommittee of the Judiciary Committee held at the National Assembly on this day, after lawmakers from the People Power Party walked out.

The amendment passed on this day requires listed companies with assets of 2 trillion won or more to implement cumulative voting and increases the number of audit committee members to be elected separately from one to at least two.

Initially, the Democratic Party had sought to pass an amendment to the Commercial Act including these measures, but earlier this month, both parties agreed to gather additional public opinion on issues such as cumulative voting during negotiations.

Kim Yongmin, the Democratic Party's secretary on the Judiciary Committee, explained, "We have discussed the amendment to the Commercial Act thoroughly, holding seven subcommittee meetings and two public hearings, and we determined that it could not be delayed any longer."

He added, "Under the Yoon Sukyeol administration, the government itself was investigated for ministerial involvement in stock price manipulation related to Sambu Construction. The Lee Jaemyung administration will demonstrate a completely different approach, striving to ensure fairness and transparency in the capital market so that Korea's stock prices and stock market receive a fair evaluation."

Yonhap News

The Democratic Party plans to process the amendment to the Commercial Act at the plenary session on August 4, after it passes through the full Judiciary Committee meeting.

In contrast, the People Power Party maintains that, as with the previous amendment to the Commercial Act, the passage of this amendment will further increase difficulties in corporate management.

Jang Donghyuk, a lawmaker from the People Power Party, pointed out, "The strengthened 3% rule has already passed, and if, on top of that, the separate election of audit committee members is expanded or cumulative voting for directors is introduced, it will cause tremendous problems. Despite concerns about the risk of losing management control, there was no discussion at all."