SEOUL, Dec. 9 (Yonhap) — The so-called three fair economy bills passed Wednesday by the National Assembly are designed to keep in check top shareholders’ corporate dominance and enhance supervision of conglomerates’ business practices, including inter-affiliate transactions.
But business circles and critics voiced concerns that the measures could sap companies’ business sentiment and shrink investment amid an economic slowdown caused by the new coronavirus outbreak.
The National Assembly approved the three bills — a revision to the Commercial Act, a revision to the Fair Trade Act and a bill on supervising business groups that have financial units — at a plenary session.
The Commercial Act amendment, also called the “3 percent rule,” has been highly controversial. Conglomerates strongly opposed its passage, claiming that speculative forces could abuse the rule and that it hurts shareholder rights.
The bill requires listed firms to name at least one auditor from outside their board and limits the voting powers of the top shareholders and their affiliated people to 3 percent when appointing the auditor.
Currently, board members are first appointed at a shareholders’ meeting and an auditor is later selected among them. This could put auditors under top shareholders’ influence.
Critics and civic groups said the essence of the bill was compromised as the ruling party eased the limitation on the voting power in the act in the face of strong backlash from the corporate sector.
The original bill required the combined voting power of the top shareholder and affiliated people to be limited to 3 percent, but the final version allows them to cast their 3-percent votes separately.
Meanwhile, the Fair Trade Act was revised for the first time in about 40 years since it was enacted.
The act will make more companies subject to a tighter regulation on inter-affiliate business deals.
Currently, the regulation is applied to listed companies 30 percent or more owned by group chiefs and their families, and unlisted firms 20 percent or more owned by them. But under the revised bill, the threshold will be set at 20 percent for both cases.
Hyundai Glovis Co. a logistics unit of Hyundai Motor Group, is currently not subject to the regulation as it is 29.9 percent owned by owner families.
Starting at the end of 2021, an additional 343 companies’ inter-affiliate business deals, valued at some 27 trillion won (US$25 billion), are expected to be scrutinized by the Korea Fair Trade Commission (KFTC).
During parliamentary deliberation over the Fair Trade Act bill, the ruling Democratic Party (DP) decided not to abolish the KFTC’s exclusive right to file a complaint with the prosecution over price fixing cases.
Meanwhile, the bill on supervising firms with financial arms is designed to bolster monitoring of conglomerates running multiple financial affiliates, including Samsung, Hyundai Motor Group, and Hanwha.
The bill will apply to business groups that hold more than 5 trillion won in assets while operating two or more financial units.
Business circles immediately voiced concerns that the new laws could cripple corporate management and demanded that their implementation be pushed back by one year.
“The National Assembly again adopted regulations that inflict enormous burden on companies at a time they are desperately struggling to ride out an unprecedented crisis due to the new coronavirus,” the Federation of Korean Industries, a major business lobby, said in a press release.
The group also called for a modification of the passed laws in a way that enhances local companies’ right to defend their management rights against speculative foreign capital.
The Korea Enterprises Federation also expressed regrets over the new laws which, it said, would “paralyze” Korean companies’ rights to defend against hostile forces.
Both demanded that the implementation of the new laws be postponed by one year to allow companies time to prepare for the new regulations.
The two groups also expressed dissatisfaction over the assembly’s passage of three bills aimed at enhancing labor rights, including a revision to the labor union law that allows laid-off or jobless people to join labor unions.