Published : 2013-08-26 20:19
Updated : 2013-08-26 20:19
President Park Geun-hye is rolling up her sleeves to boost corporate investment. On Wednesday, she is hosting a lunch for the heads of the top 10 conglomerates. The next day, she is meeting with the chiefs of 30 midsized companies.
The Presidential Office said Park arranged the meetings to listen to the captains of Korean industry air their views on corporate investment, job creation and her vision of an economy driven by creativity and technological fusion.
Increasing corporate investment is one of the few options available for Park as she seeks to ensure that the economic recovery, which was ignited by stimulus spending in the first half of the year, gathers pace.
Yet there is one thing that Park needs to do before exhorting the leading industrialists to boost investment. She has to address their complaints about a bill the Ministry of Justice has recently proposed with her blessing to revise the Commercial Code.
The ministry’s proposal is aimed at reforming the present corporate governance regime. It seeks to circumscribe the managerial power of corporate owners and protect the rights of minority shareholders.
The motivation behind the bill is the unending series of scandals involving chaebol owners. One latest example is CJ Group chairman Lee Jay-hyun, who was indicted for amassing slush funds totaling 620 billion won with money stolen from the group’s coffers.
The ministry’s bill is in line with Park’s push for economic democratization. Yet it met with far more vocal opposition from the business community than other bills aimed at leveling the playing field for every economic player.
One reason is that the latest bill could pose a threat to the managerial control of existing majority shareholders at many companies.
Thus, 19 business organizations, representing nearly all of the nation’s major industrial sectors, rose to oppose it last week, calling for the government to scrap it.
The most vehemently opposed part of the bill concerns the election of an auditor. Under the present law, the board of directors names an auditor among the board members.
The bill proposes an auditor be elected separately from the board and suggests that the voting rights of the majority shareholder be capped at 3 percent to limit his influence on the election process.
Corporate owners worry that this arrangement could enable minority shareholders to challenge them by joining hands in the auditor election. They especially abhor the possibility of foreign investment funds taking advantage of the new system to intervene in management of their companies.
The knee-jerk reaction of the business community is understandable as the reform bill could destabilize existing majority shareholders’ managerial control.
Yet a total rejection of the bill is something that goes beyond the pale. Corporate owners need to think first why the government has come up with such a bill in the first place.
At their meeting with Park, the business leaders are expected to bring up the corporate governance issue. For Park, it will be difficult to dismiss their objections altogether, given the need to cajole them into increasing spending.
Park will have to walk a tightrope between continuing her push for economic democratization and encouraging industrialists to ratchet up investment to keep up the recovery momentum.