[Editorial] A Relief That the National Assembly’s Revote on the Commercial Act Amendment Bill Was Rejected
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Writer
CFE
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- We Urge the National Assembly to Actively Create a Legal and Institutional Environment Conducive to Doing Business -
On April 17, 2025, the National Assembly forced through a revote on the amendment to the Commercial Act just two weeks after the acting president requested reconsideration, but the bill was voted down. The amendment sought to expand the scope of directors’ duty of loyalty from the “company” to “shareholders” and to mandate the holding of electronic shareholders’ meetings.
The Center for Free Enterprise (CFE) considers it fortunate that this bill was rejected, as it would have undermined corporate autonomy and efficiency and, furthermore, constituted anti-business legislation contrary to the principles of the market economy.
This amendment would institutionalize a structure in which political circles intervene in the operation of the board of directors, which is at the core of corporate governance. Expanding directors’ duty of loyalty to all shareholders signals a shift in the central axis of board decision-making from “managerial judgment” to “political interests.” This poses a significant risk of encouraging management driven by short-term profits and public opinion rather than long-term corporate value and growth strategies.
In addition, a uniform legal mandate on how shareholders’ meetings are to be conducted would strip companies of the flexibility to make decisions suited to their size, industry, and circumstances. Many companies have already voluntarily expanded electronic voting and electronic shareholders’ meetings. Forcing this by law could lead to uniform, government-led regulation of corporate management.
Most concerning of all is the political symbolism of this amendment. Attempts by outside forces representing specific interests to influence corporate decision-making through legislation could mark the beginning of the socialization of corporations, which would mean the end of free corporate activity.
The moment corporate management rights become subordinate to political interests, South Korea will be unable to avoid being branded in global capital markets as “a country where it is difficult to do business.”
Directors’ duty of loyalty is originally grounded in the interests of the company and sustainable growth. The company laws of major advanced countries such as the United States, the United Kingdom, and Germany clearly specify that the object of the duty of loyalty is the “company,” and they broadly recognize directors’ autonomy in managerial judgment (Business Judgment Rule).
We urge the National Assembly to use the rejection of this revote on the Commercial Act amendment as an opportunity to actively create a legal and institutional environment conducive to doing business. Ensuring a governance structure that enables corporate autonomy and sustainable performance is the true advancement of the legal and institutional system.
2025. 4. 17.
Center for Free Enterprise (CFE)
Original title: [논평] 국회 상법 개정안 재표결 부결, 다행
Author: Center for Free Enterprise (CFE)
Date: 2025-04-17
Source: https://www.cfe.org/bbs/bbsDetail.php?cid=comment&pn=2&idx=27538