Lee Jae-myung, the Democratic Party of Korea's presidential primary candidate, is promoting a pledge for the mandatory 'destruction of treasury stock' while making exceptions for employee stock ownership plans and corporate mergers and acquisitions. As part of a plan to revitalize the capital market, he is pushing for a strong revision of the Commercial Act while creating a buffer zone considering corporate opposition.
According to a comprehensive report by ChosunBiz on the 23rd, the candidate's camp is reviewing the inclusion of relevant content in the Commercial Act amendment related to the capital market pledge. While a plan to destroy all purchased treasury stock was mentioned, there are indications that the emphasis is on the need for an exception clause as a sort of buffer.
Accordingly, it is likely that existing treasury stock holdings will be permitted, but newly purchased treasury stock destruction will be mandated, and exceptions will be allowed in cases where the purpose is clearly defined, such as employee compensation for stock ownership plans, bonuses, responses to corporate mergers and acquisitions, and crisis management.
A key official from the camp noted, "Treasury stock is seen as a means to protect management rights and serves the interests of controlling shareholders, which is pointed out as a reason for the undervaluation of the Korean stock market," adding, "Revising the Commercial Act is not an easy task, but the candidate's resolve on this matter is very strong." They also said, "We are reviewing a plan to flexibly operate it by allowing exceptions."
The candidate's camp is refining the pledge by referencing cases from Germany, the United States, the United Kingdom, and Japan. These countries, or some states, do not grant voting rights to the treasury stock purchased by corporations, and generally require destruction. Notably, Germany has a limit of 10% on the purchase of treasury stock, and the purchase amount is excluded from market capitalization. In Korea, there are no strict regulations regarding the destruction of treasury stock.
Earlier, on the 21st, the candidate announced a 'policy to revitalize the stock market.' The main points include the principle of the destruction of treasury stock for listed companies and prioritizing the allocation of new shares to common shareholders when subsidiaries are listed after partitioning. In particular, the scope of the directors' duty of loyalty will be expanded from 'the company' to 'the company and shareholders,' and the introduction of the cumulative voting system and separate election of audit committee members will also be expanded.
The introduction of the cumulative voting system and separate election of audit committee members is a content that the Democratic Party had excluded from its party line considering backlash from the business community. Instead, they revised it to only include the duty of loyalty and the introduction of electronic shareholder meetings. Although it passed the National Assembly plenary session under the Democratic Party's leadership, it was discarded after the government demanded reconsideration and a re-vote. The candidate is preparing a 'super-strong Commercial Act' that includes everything initially excluded, aiming to create a 'KOSPI 5000 era.'