Joint Statement Issued Immediately After Passage of Second Commercial Act Amendment
Just One Month After the First Amendment in July
Mandatory Cumulative Voting and Expanded Separate Election of Audit Committee Members
Calls for Codifying the Business Judgment Rule and Reforming the Breach of Trust Law
On August 25, the eight major economic organizations immediately expressed their regret through a joint statement following the passage of the second amendment to the Commercial Act in the National Assembly, led by the ruling party.
Park Iljun, Executive Vice President of the Korea Chamber of Commerce and Industry, Lee Donggeun, Executive Vice President of the Korea Employers Federation, Kim Changbeom, Vice President of the Korea Economic Association, and other executives of eight economic organizations Photo by Yonhap News
The Korea Economic Association, Korea Chamber of Commerce and Industry, Korea Employers Federation, Korea International Trade Association, Korea Federation of SMEs, Korea Federation of Mid-sized Enterprises, Korea Listed Companies Association, and KOSDAQ Listed Companies Association stated in their position paper released on this day, "We regret that, just one month after the first amendment to the Commercial Act in July, an additional amendment-focused on expanding the separate election of audit committee members and mandating cumulative voting-has been passed by the National Assembly."
They further urged, "Given the high possibility that this amendment will increase the risk of management disputes and litigation, we call on the National Assembly to strive for balanced legislation that minimizes negative side effects." In particular, they pointed out, "It is urgent to establish global-standard defense mechanisms to protect companies from the threat of management rights by speculative capital, thereby ensuring free business activities." They also emphasized, "To enable companies to make bold decisions for the future, the 'business judgment rule' should be codified and the crime of breach of trust should be rationally improved." Additionally, they added, "We hope that economic criminal penalties and regulations, as well as incentives differentiated by company size, will be extensively restructured so that companies can focus on innovation and growth."
Meanwhile, on this day, the National Assembly held a plenary session and, led by the ruling party, passed the second amendment to the Commercial Act, often referred to as the "stronger Commercial Act." Out of 182 lawmakers present, 180 voted in favor and 2 abstained. The amendment mandates the introduction of cumulative voting for listed companies with assets of 2 trillion won or more and expands the separate election of audit committee members from at least one to two or more. This follows the previous amendment (passed on July 3) that expanded the fiduciary duty of directors to include both the company and its shareholders.
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