Seoul: A parliamentary subcommittee on Monday passed an additional revision to the Commercial Act aimed at better protecting minority shareholders, despite objections from the conservative opposition party.
According to Yonhap News Agency, the latest revision mandates the adoption of the cumulative voting system at large listed companies with assets over 2 trillion won (US$1.45 billion) and expands the separate nomination of audit committee members from one to at least two. These provisions were excluded from an earlier Commercial Act revision passed by the National Assembly earlier this month amid bipartisan disputes.
Cumulative voting allows shareholders to cast multiple votes proportionate to their shareholding when electing board members, helping to better protect the interest of small shareholders. The ruling Democratic Party (DP) passed the bill unilaterally during a subcommittee meeting of the parliamentary legislation and judiciary committee as lawmakers of the main opposition People Power Party (PPP) walked out in protest.
PPP lawmakers have opposed the revision, voicing concerns over inefficient corporate governance and a negative impact on the competitiveness of companies. "South Korean companies could lose their managerial control to foreign capital with the additional revision following the earlier amendment to the Commercial Act," PPP Rep. Jang Dong-hyuk said.
The DP aims to push through the bill during a plenary session, set for next Monday. The latest revision comes as President Lee Jae Myung has pledged to improve corporate governance as part of efforts to eliminate the so-called Korea Discount, which refers to undervalued local stocks.
In early July, the Assembly passed a revision of the Commercial Act that would expand the fiduciary duty of corporate board members to all shareholders with bipartisan support. It also included limiting the voting rights of the largest shareholders and related parties to 3 percent when appointing or dismissing audit committee members. A previous version of the bill approved by parliament was vetoed in March by then acting President Han Duck-soo.