"8 Out of 10 Companies Cite 'Regulatory Burden'... Legislative Changes Now the Top Management Risk" [President Lee's '100 Days in Office' Survey]

Emergency Survey on Corporate Management Environment at President Lee's 100-Day Mark
47 of Top 50 Companies Responded
8 Out of 10 Companies Cite "Significant Regulatory Burden"
Regulatory Risks Surpass Trade and Tariff Concerns
Yellow

In a survey conducted ahead of President Lee Jaemyung's 100th day in office, 8 out of 10 companies reported that regulatory and legislative changes are placing a significant burden on their management. The results, confirmed through a survey by Asia Economy targeting major domestic companies, demonstrate that a series of legislative changes since the inauguration have become a widespread burden on corporate activities. Experts stressed the urgent need to establish a consistent and predictable policy environment.

In the "100-Day Business Environment Diagnosis Following President Lee Jaemyung's Inauguration" survey conducted by Asia Economy from September 1 to 3 with Korea's top 50 companies, 13 out of 47 respondents (27.7%) said the regulatory and legislative burden was "very high," while 24 companies (51.1%) said it was "somewhat high." This means that 79% of all respondents are feeling the weight of regulatory burdens.

Only 9 companies (19.1%) answered "moderate," and just 1 company (2.1%) said the burden was "not significant." There were no responses indicating "none at all." This shows that virtually all companies are affected by regulations to some extent, making a "regulation-free zone" practically nonexistent.

Regulatory uncertainty was also identified as the biggest management burden by companies. Half of the respondents, 23 companies (48.9%), cited regulation as the greatest risk. This was followed by global trade and tariff risks (27.7%), tax and cost increases (10.6%), and labor-management conflict and talent acquisition challenges (6.4%). In the field, it is often pointed out that while taxes or workforce issues can be calculated, regulations are like a minefield where timing and intensity are hard to predict.

Companies' demands toward the government also focused clearly on regulation. When asked about the most urgent measure to be implemented within the next six months, 26 companies (55.3%) chose "regulatory rationalization and improved predictability." This was followed by strengthening trade and supply chain response (8 companies, 17.0%), tax system stabilization (6 companies, 12.8%), and labor market system improvement (5 companies, 10.6%). This suggests that companies are seeking long-term stability in the rules, rather than short-term support measures.

The reason companies have cited "regulation" as the greatest risk since President Lee's inauguration is largely due to major legislative changes recently passed in the National Assembly. The Yellow Envelope Act (amendments to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act), which expands bargaining rights for subcontractors and limits the scope of damage claims during strikes, passed the National Assembly at the end of August and was recently approved by the Cabinet. From a corporate perspective, this inevitably increases both the risk of labor disputes and cost burdens.

The second amendment to the Commercial Act, passed alongside the Yellow Envelope Act, introduces further uncertainty for companies. While mandatory cumulative voting and expanded separate election of audit committee members strengthen the rights of minority shareholders, large corporations view these provisions as weakening their ability to defend management rights. Since the nomination and voting calculation methods for board candidates will change starting with next year's regular shareholders' meetings, companies have already begun running simulations to prepare.

In addition, the strengthening of environmental and carbon regulations and the expansion of ESG (Environmental, Social, and Governance) disclosure requirements are compounding the situation. Companies must align carbon emissions calculations and eco-friendly requirements across their supply chains with global standards, but as the implementation date of these laws approaches, there is growing concern that there is simply not enough time to prepare. As a result, companies are under pressure to quickly overhaul their labor-management strategies, shareholder meeting operations, and dispute response standards even before the laws take effect.

Recently, Chey Tae-won, Chairman of the Korea Chamber of Commerce and Industry, also emphasized the need to resolve regulatory issues, stating, "We must change the structure that discourages companies from pursuing growth."

Experts believe that the survey results revealed at the 100-day mark of the presidency are not merely a reflection of public opinion, but a direct signal tied to the survival strategies of companies. The fact that 79% of responding companies reported regulatory burdens demonstrates that "institutional uncertainty" has emerged as the biggest obstacle to investment, regardless of economic conditions.

Shin Jaeyong, professor of accounting at Seoul National University, said, "The most important thing for companies is to reduce management uncertainty, but current government policies are moving in a direction that increases costs and operational risks." He added, "It is difficult for companies to accept that regulations are being strengthened at a time when macroeconomic variables such as tariff wars are deteriorating."

Companies also pointed to tax and fiscal policy burdens as a major challenge. In this survey, 2 out of 3 responding companies said tax and fiscal policies are a burden on management. As discussions on corporate tax and securities transaction tax reforms coincide with an expansionary fiscal stance, companies are complaining of a "double burden" from both regulation and taxation.

Of the 47 companies, 2 (4.3%) said the tax and fiscal policy burden was "very high," and 29 (61.7%) said it was "somewhat high," meaning 66% of all respondents are feeling a significant tax burden. 14 companies (29.8%) answered "moderate," and only 2 companies (4.3%) said the burden was "not significant." There were no responses indicating "none at all."

The government and the National Assembly are currently pursuing an increase in the corporate tax rate. In addition, hikes in the securities transaction tax and strengthened taxation of major shareholders are also underway, all of which are directly linked to corporate investment. Some in the field say they will have to revise their investment and hiring plans as early as next year.

Lee Byungtae, professor at KAIST Graduate School of Business, said, "Tax competitiveness is crucial for companies, but Korea is losing its edge in corporate and income taxes. As corporate profitability has recently declined, profits are shrinking while tax burdens are growing, making the impact even more pronounced."

There is also analysis that the combination of worsening corporate profitability and heavier tax burdens is heightening anxiety in the field. If the tax system works against corporate management and the external environment deteriorates as well, the shock could be even greater.

A representative of a responding company commented, "A good leader is someone who lets companies take the credit for achievements while the government assumes responsibility, but right now, the opposite is happening." He added that while the government initially appeared to be working in tandem with companies, the rapid passage of major bills in the National Assembly has left companies feeling increasingly constrained.

There was also dissatisfaction with how lawmakers are handling legislation. An industry representative said, "There is no clear message from the political community regarding these bills, and they rely solely on explanations from the Ministry of Economy and Finance. As a result, companies are more concerned about regulation and uncertainty than about government support." He pointed out that in the process of the National Assembly quickly passing key bills, companies' opinions are not being sufficiently reflected, and policy uncertainty is actually increasing.

A business administration professor who requested anonymity commented, "Talking about the stock index reaching 5,000 while policies actually take us back to 2,000 is no different. Externally, companies are hit by tariff policies and a slowdown in trade, while domestically, additional taxes and regulations are piling on, subjecting companies to double the pressure."