The Democratic Party of Korea's special committee on 'KOSPI 5000' welcomed the passage of the amendment bill to the Commercial Act, which was processed with agreement from both the ruling and opposition parties on the 3rd. Additionally, they announced a legislative roadmap, indicating that President Lee Jae-myung's election pledge of making stock repurchases mandatory would be addressed in the regular session.
Chairperson Oh Gi-hyeong held a press conference immediately after the passage of the amendment bill to the Commercial Act, stating, "The fact that today's amendment bill was processed with agreement from both parties is significant. Over the past year, the principle of duty of loyalty has been debated, and both the People Power Party and the business community have accepted this. Therefore, the system has now been established on a stable basis."
Chairperson Oh emphasized the effectiveness of the amendment, referring to the merger case of Samsung C&T and Cheil Industries. He noted, "No directors took responsibility for the losses suffered by the shareholders of Samsung C&T. Therefore, once the duty of loyalty is introduced, such behavior will not be tolerated."
He also mentioned the capital increase case of Korea Zinc, stating, "It is significant to present criteria so that the board of directors does not make decisions based solely on the instructions of certain shareholders or individuals behind them, which would undermine the interests of general shareholders. Many corporations will have to improve their decision-making processes as a result."
The amendment bill to the Commercial Act that passed the National Assembly includes provisions to: ▲expand the duty of loyalty to ‘the company and its shareholders’ explicitly ▲broaden the regulations limiting the voting rights of major shareholders and related parties to 3% during the election of audit committee members ▲mandate electronic shareholder meetings for listed companies with assets of over 2 trillion won ▲convert outside directors to independent directors and increase the ratio of independent directors, all aimed at strengthening the rights of minority shareholders. However, the plans to expand the election of audit committee members from the current one to two or more, or to all, and the introduction of a cumulative voting system allowing minority shareholders to cast concentrated votes for certain director candidates will be discussed later.
◇"Cumulative voting system public hearing in July… Discussion on stock repurchase will take place in the regular session"
The special committee also stated it would swiftly pursue remaining tasks for capital market transparency and outlined a short- to medium-term roadmap.
Chairperson Oh said, "This amendment to the Commercial Act is not the end, but the beginning. A stronger second amendment is underway," adding that the short-term legislative tasks include the cumulative voting system, the expanded separate election of audit committee members, stock repurchase, and amendments to the Capital Market Act.
He further stated that there will be a public hearing during the July extraordinary session concerning the cumulative voting system and the separate election of audit committee members and that they would quickly handle it afterwards.
Regarding the stock repurchase issue, he noted, "It is part of the president's pledges" and emphasized, "Some form of discussion must occur in the second half of this year. We will start discussions and gather public opinion to prepare for addressing it in the next regular session."
In the long term, he mentioned expanding liquidity and capitalizing retirement pensions, as well as inclusion in the Morgan Stanley Capital International (MSCI). Chairperson Oh stated, "There is a need to secure liquidity with a longer-term perspective," adding, "Inclusion in the MSCI could take 2 to 3 years, so we need to prepare for it from now." He also referred to capitalizing retirement pensions and reforming the tax system, saying, "While we cannot discuss these matters immediately, there are tasks that need careful examination going forward."
◇"Special Provisions on Breach of Trust will be discussed in the regular session"… “Communicating with law enforcement agencies and the business community"
Chairperson Oh stated that the People Power Party's request to ease laws on breach of trust would also be discussed. He mentioned, "We will actively discuss it, not exclusively," adding, "We will seek reasonable methods while communicating with law enforcement agencies and have no specific deadlines." He further noted, "Since Representative Ko Dong-jin has proposed the bill, we will discuss it in the regular session."
Kim Nam-geun, Democratic Party deputy representative of the People’s livelihood, who participated in the conference, stated, "We have been demanding that criminal liabilities and breach of trust should not be expanded in cases of managerial judgment, and that this should be explicitly stated," adding, "Since we promised the business community, we will continue to collect opinions on breach of trust at the special committee on KOSPI 5000."
It is reported that during the process of agreeing on the amendment bill to the Commercial Act, the ruling and opposition parties formed a consensus to consider the concerns of the business community and to pursue the revision of the exemption provisions of the criminal code regarding breach of trust in the future. Representatives from the People Power Party indicated that the direction of this would be to include a principle stipulating that 'managerial judgment is an exception' in the breach of trust regulations to acknowledge grounds for exemption from illegality. Exemption from illegality refers to actions that violate the law but are not penalized due to special reasons.
In relation to this, on the previous day, Ko Dong-jin, a member of the People Power Party who is a former president of Samsung Electronics, introduced a bill for the 'special provisions on breach of trust' aimed at preventing corporate management stagnation and the rampant filing of lawsuits.
The current Article 622, Paragraph 1 of the Commercial Act stipulates the application of breach of trust to company officials who engage in 'actions contrary to their duties.' Representative Ko suggested that this clause is overly broad and proposed to clarify the criteria as 'actions contrary to duties for the company.' He also suggested that the 'business judgment rule' presented by the Supreme Court in 2004 should be codified in law so that if a director makes prudent decisions for corporate interests without pursuing personal benefits but ultimately incurs losses, they cannot be penalized for breach of trust.