The South Korean government passes a law strengthening shareholder rights

 

South Korea's National Assembly has approved a significant amendment to the Commercial Act aimed at strengthening shareholder rights and enhancing corporate transparency.

The new legislation mandates that large listed companies, particularly those with assets exceeding 2 trillion won (approximately $1.4 billion), implement cumulative voting in board elections. It also stipulates that audit committee appointments must be voted on separately, a change intended to reduce the influence of controlling shareholders and empower minority investors in corporate governance. 

This reform is part of a broader initiative by President Lee Jae Myung's administration to address the issue commonly referred to as the "Korea Discount," which describes the historical undervaluation of South Korean companies due to unclear governance practices and concentrated ownership. 

The recent changes build on previous amendments passed in July, which expanded the fiduciary duties of directors to better protect minority shareholders. That earlier bill faced a veto under the previous acting president, but has now been reinforced under the current administration. 

Investor advocates have expressed support for these measures, suggesting they could enhance confidence in South Korea's markets and draw in more foreign investment. Conversely, business associations and industry groups have raised concerns, indicating that the new regulations might elevate the risk of management disputes and lead to legal conflicts, potentially destabilizing firms and complicating efficient decision-making.