[fn Editorial] Announcement of Reforms to 110 Economic Criminal Penalties, A Rare Boost for Businesses

The government has announced a business-friendly policy for the first time in a while. After consultations between the ruling party and the government, the first phase of the 'Rationalization of Economic Criminal Penalties' was unveiled on the 30th, which will revise 110 regulations related to economic criminal penalties. The government stated its intention to improve the system by replacing imprisonment or fines for minor administrative violations with administrative fines.
Of the 110 regulations, 68 will see criminal penalties abolished and replaced with administrative fines. Examples include minor damage to fertilizer containers or packaging labels, omission of certain employment conditions such as workplace or job description in labor contracts, and minor violations of automobile tuning approvals. In fact, most citizens were unaware that so many economic criminal penalties existed.
It is necessary for the state to enforce the law to prevent recurrence and maintain order when wrongdoing occurs. However, when such enforcement becomes excessive, it may not be unconstitutional but can be considered an overreach of the law. Economic criminal penalties, in particular, can restrict the activities of businesses and the self-employed, dampening management and ultimately harming the national economy. In this regard, the government’s recent reforms are a desirable step for the country’s economic health.
This is why the business community has welcomed the announcement. The Korea Chamber of Commerce and Industry (KCCI) stated that the reforms will 'reduce uncertainty in corporate decision-making and enhance predictability.' The key demand from the business sector was the abolition of the breach of trust offense, and the government appears to be moving in that direction. However, civic groups argue that 'abolishing breach of trust without an alternative system is a very dangerous idea that could undermine the foundation of the capital market.' The People Power Party also claims this is a policy designed to 'save Lee Jae Myung.'
In contrast to civic groups, the business community regards breach of trust as a representative law that stifles business activities. The core issue in the debate over breach of trust is the 'business judgment rule.' The business sector argues that the scope is too broad, making it difficult for executives to make bold decisions. They believe that as long as a decision is reasonable, executives should not be held liable even if the company incurs losses. Opponents counter that this could lead to moral hazard among management and harm minority shareholders.
The government has stated that it will not abolish breach of trust immediately but will prepare alternative legislation. It is appropriate to listen to various opinions and make a decision when there is controversy over any system or law. Since there is ongoing debate over breach of trust, it would be prudent to review cases from other advanced countries and make a final decision that balances the interests involved.
The government plans to revise related laws in bulk during this regular session of the National Assembly and aims to overhaul 30% of economic criminal penalty regulations within the next year. We hope this promise will be kept. Since the launch of the new administration, anti-business legislation such as the Yellow Envelope Act and amendments to the Commercial Act have increased the burden on companies. In this sense, government policy seems contradictory, as if giving both the disease and the cure. From now on, legislation and regulations that stifle business management should no longer be introduced. Even if the government cannot actively support businesses, it should at least avoid undermining their spirit.