Restructuring of Conglomerates
South Korea’s new President Moon Jae-In made his inaugural address on May 10, expressing his strong will to reform chaebols and root out collusive ties between business and politics. The new President mentioned punitive damage suits, minority shareholders’ rights to claims for compensation, cumulative voting and electronic voting as specific measures for chaebol reform.
Punitive damage suits are for compensations to exceed victims’ losses in the event of companies’ unlawful acts. Cumulative voting is to give each share voting rights equal in number to candidates during director appointment at a shareholders meeting and allow multiple votes to go to a specific candidate. The purpose of cumulative voting is to guarantee minority shareholders’ participation in business and limit major shareholders’ power. Minority shareholders’ rights to claims for compensation are already in wide use in the United States and Japan.
He also mentioned the revival of limited total equity investment by South Korean conglomerates for preventing their excessive business expansion along with separation between banking and commerce on a larger scale. These measures are predicted to be reinforced with the possible appointment of Kim Sang-jo as the chairman of the Fair Trade Commission to be in charge of the chaebol reform. He is currently the head of the Solidarity for Economic Reform and recently offered critical advice for Samsung Electronics vice chairman Lee Jae-yong to be arrested with regard to the Choi Soon-sil scandal.
In addition, commercial code revision is likely to be resumed in an extraordinary session of the National Assembly. Two months ago, ruling and opposition parties reached an agreement on the introduction of multiple derivative suits and electronic voting concerning this issue but failed to revise the commercial code by failing to meet the quorum requirement. The upcoming extraordinary session is expected to be held next month.