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(EDITORIAL from Korea JoongAng Daily on Dec. 10)

All News 07:07 December 10, 2020

Against market capitalism

The ruling Democratic Party (DP) passed three controversial business regulation acts — revisions to the Commercial Act and Fair Trade Act, as well as the Financial Groups Oversight Act — in a plenary session of the National Assembly on Wednesday. Based on its supermajority, the DP railroaded the acts through the legislature following earlier approval by a standing committee. The party did not pay any heed to concerns from business groups.

The DP said it eased some regulations after considering worries in business circles. In the revision to the Commercial Act, for instance, it fixed the voting rights for largest shareholders and those with special interest with them at 3 percent each instead of applying the 3-percent limit to both of them combined. In the revision to the Fair Trade Act, the DP also decided to allow the Fair Trade Commission to continue to exercise its exclusive right to file complaints against companies.

Those revisions were nothing but an attempt to dodge criticism of its domineering approach. Despite the party's explanation, companies are still worried that the 3-percent cap on voting rights of owners and their families as the clause can be potentially exploited by speculative forces from foreign countries. For example, even if the 3-percent rule is separately applied to the family of the owner of Samsung Electronics, the total voting rights of domestic shareholders are only 17.7 percent. In comparison, the total voting rights of foreign institutional investors account for a whopping 27.6 percent. If they join forces, they can pose a serious threat to the management of the company.

Predatory foreign funds can take advantage of the revised acts for more profits if owning families' voting rights continue to be restricted. To prevent them from doing so, the Moon Jae-in administration needs to introduce so-called "poison pill" or "golden shares" to help our companies protect their management rights.

The 3-percent cap of the voting rights actually shakes the very fundamentals of the market economy based on the principle of "one share, one vote." The revision is unconstitutional. The DP has repeatedly promised to communicate with the corporate sector. But it is bent on pressing ahead with antimarket, antibusiness and pro-labor bills. If our companies suffer damages as a result, the ruling party bears the responsibility.

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