[Noh Dong-il Column] The amendment to the Commercial Act must also leave room for companies

The third amendment to the Commercial Act, which mandates the retirement of treasury shares, passed the National Assembly on the 25th of last month. This completed the first, second and third amendments to the Commercial Act pushed by the government and ruling party. The stated rationale was to resolve the chronic Korea discount and to protect the rights of minority shareholders. It was also clearly intended to support President Lee Jae-myung’s pledge to lift the Korea Composite Stock Price Index (KOSPI) to 5,000 points.
The first amendment to the Commercial Act is to expand the duty of loyalty of directors from "the company" to "the company and its shareholders." It is said to be necessary to protect minority shareholders by preventing the erosion of shareholder value during processes such as physical spin-offs followed by relisting or mergers. Critics counter that the scope of "shareholders" is ambiguous and that, when conflicts of interest arise among shareholders, directors could face criminal complaints for breach of trust, which may chill corporate management.
The second amendment, dubbed the "tougher Commercial Act," includes mandatory adoption of the cumulative voting system for listed companies with assets of 2 trillion won or more, broader separate election of audit committee members, and mandatory virtual general meetings of shareholders. The justification is that appointing independent directors and auditors will curb abuses by controlling shareholders and enhance corporate transparency. The business community fears, however, that it will become easier for directors nominated by activist or speculative capital to gain board seats, leaving companies more vulnerable to attacks on management control.
The third amendment requires companies to retire treasury shares acquired by the company within one year, or to obtain approval from the general meeting of shareholders when disposing of them. Proponents stress that this will prevent treasury shares from being abused as a tool for controlling shareholders to defend their management rights, while also boosting share prices by increasing per-share value through the retirement of treasury shares. Opponents argue that retiring shares after they are repurchased reduces a company’s capital and restricts financial flexibility, including the use of treasury shares for employee compensation or to raise funds for investment in new technologies.
Opinions on all three amendments are thus sharply divided. Claims about what constitutes a global standard also differ depending on the issue. Even while accepting that the Commercial Act would be amended, the business community has consistently asked that companies be granted tools to defend their management control in response. Countries such as the United States allow a variety of institutional mechanisms to protect corporate control from hostile takeovers. These include the dual-class share structure, the poison pill shareholder rights plan, staggered terms for directors, and Golden Parachutes. Allowing such measures is, in that sense, the global standard.
Alphabet Inc., Google’s parent company, issues its shares in three classes. The common "Class A" shares carry one vote per share, while "Class B" shares carry ten votes per share. Through this structure, Google founders Larry Page and Sergey Brin maintain a majority of voting rights despite holding only a minority of the equity. The non-voting "Class C" shares were created so that, when the company issues new shares for employee compensation or mergers and acquisitions, the founders’ voting power is not diluted. Thanks to such dual-class share structures, Mark Elliot Zuckerberg of Meta Platforms exercises about 55–61% of the voting rights with roughly a 13.6% equity stake, and the Ford family holds about 40% of the voting rights with around 4% of the shares. Microsoft Corporation, by contrast, has chosen to strengthen the powers of its board of directors instead of adopting a dual-class share structure.
The Korean stock market is in what many call a sustained bull run. The pledge of "KOSPI 5000" became reality just seven months after it was made. After the index first closed above 5,000 on January 27, it took only 18 trading days for the KOSPI to climb to the 6,000-point mark on February 25. There is no denying that the Corporate Value-up Policy, including the amendment to the Commercial Act and separate taxation on dividend income, has played a major role. Volatility has been amplified by the Middle East war and other factors, but without the semiconductor supercycle that produced nicknames like the "200,000-won stock" and "One-Million-Nyx," the rally would likely have been limited. Sectors such as robotics, secondary batteries, defense, and nuclear power have also contributed significantly. The Korea-U.S. Shipbuilding Cooperation Program (MASGA), which played a decisive role in concluding the United States–Korea Tariff Negotiations, was possible only because South Korea has the three major South Korean shipbuilders. It is hard to agree with Han Dong-hoon’s remark on the domestic stock market on the 7th that "even if former President Yoon Suk Yeol of South Korea were still in office, the index would still have hit 6,000." It is more accurate to say that the outcome reflects a combination of government policy, corporate efforts, and external variables.
At a meeting with corporate leaders on the 4th of last month, President Lee Jae-myung said, "In January, exports exceeded 60 billion dollars for the first time ever, and the stock index, which people said would never reach that level, has climbed above 5,000," adding, "This is all thanks to you." President Lee went on, "It is clear in my mind that companies are at the center of the economy, and that only when individual companies are competitive and grow and develop will jobs be created, incomes rise, and the nation become more prosperous," and he pledged, "We will provide the best support we can." Now that the objectives of the amendment to the Commercial Act have largely been achieved, it is time to listen to what Korean companies are asking for. The global standard that was invoked to justify the amendment to the Commercial Act should also apply to tools for defending corporate control. That, too, should be part of the "best support we can provide."
dinoh7869@fnnews.com Editor-in-Chief Reporter