Seoul: Acting President Han Duck-soo on Tuesday vetoed an opposition-led bill expanding the fiduciary duty of corporate directors from solely the "company" to both the "company and its shareholders." The amendment to the Commercial Act, which was passed by the opposition-controlled National Assembly last month, was vetoed by Han at a Cabinet meeting and will be sent back to parliament for a revote.
According to Yonhap News Agency, the bill not only aimed to expand corporate directors' fiduciary duties but also mandated the adoption of electronic shareholder meetings for listed companies. Despite expressing agreement with the bill's basic intent, Han raised concerns about its potential impact on the business environment and competitiveness, especially for small and medium-sized enterprises. He emphasized the need for an alternative solution that minimizes potential side effects through in-depth discussions.
Han highlighted that while the bill seeks to ensure fair treatment of all shareholders' interests, it lacks clarity on what constitutes fair treatment in corporate decision-making. This ambiguity could expose directors to civil and criminal liability, potentially discouraging their active management involvement. He warned that this could negatively affect the national economy and general shareholder protection.
To counter these issues, the government has proposed amending the Capital Markets Act. This amendment requires directors of only listed companies to safeguard shareholders' interests during mergers or spinoffs, applying to approximately 2,500 listed companies as opposed to the 1 million unlisted companies affected by the revised Commercial Act.
Han urged the National Assembly to reconsider the bill and the government's alternative proposal, encouraging further discussions to reach a desirable solution. In the same Cabinet meeting, the government also promulgated a revision to the national pension scheme following its approval by the National Assembly last month. This revision, agreed upon by rival parties, includes an increase in premiums from 9 percent to 13 percent and a rise in the nominal income replacement rate from 41.5 percent to 43 percent.