Park Yoo-kyung, managing director of emerging markets equities fundamental strategy at APG Investments, second from left, speaks during a press meeting at the conference center of the Federation of Korean Industries in Seoul, Friday. Other participants, from left, are Rhee Nam-uh, Korea Corporate Governance Forum chairman, Park, Amar Gill, secretary general of the Asian Corporate Governance Association (ACGA), and Stephanie Lin, the ACGA's research head for Korea and Singapore. Korea Times photo by Lee Yeon-woo

Korea's weighting in the MSCI Emerging Markets Index has recently dropped below 10 percent. This marks a stark contrast from 10 years ago when the investment industry questioned whether Korea should be reclassified into the Developed Markets Index.

There may be several reasons for this decline. However, the Asian Corporate Governance Association (ACGA) attributes the fall largely to declining shareholder trust in the market.

"The Korean market has a broad base and diverse industries. It is far too valuable to be overlooked. But when market dynamism weakens, and confidence in shareholder value declines, the market becomes unfit for active trading," said Park Yoo-kyung, managing director of emerging markets equities fundamental strategy at APG Investments.

"Korea becomes an ill market where structural reform is essential. That starts with amending the Commercial Act," Park, who also chairs the ACGA Korea Working Group, added.

The Hong Kong-based organization, focused on corporate governance advocacy, held a press meeting on Friday to present its perspective on the ongoing governance reform efforts in Korea.

Recently, Korea's legislative circles have been at odds over amendments to the Commercial Act, with the main opposition Democratic Party of Korea (DPK) advocating for its passage, while the ruling People Power Party (PPP) and business leaders remain strongly opposed.

The core of the amendment is to expand corporate directors' fiduciary duties — currently applicable only to the company itself — to include shareholders as well. It is intended to protect individual shareholders' rights, which have been "frequently neglected while major shareholders, typically owner families, consolidated their holdings through mergers and spinoffs."

Led by the DPK, the amendment was passed on March 13 during the plenary session of the National Assembly. Now, the PPP and business circles urge acting President Han Duck-soo to veto the bill. The latter claims that the legal measures will undermine corporate growth momentum, with a substantial rise in indictments of corporate executives for breach of trust.

While the ACGA acknowledged the importance of Korea's efforts to bolster governance reform, such as the Corporate Value-up program, it argues that these initiatives must go further to restore market confidence.

"One of the major reasons is that investors are not convinced. They're skeptical whether big companies truly care about shareholder returns — whether this is a market where foreign investors can actually invest profitably," said Amar Gill, secretary general of the ACGA.

The ACGA represents about 100 members, including international pension funds, sovereign wealth funds, asset managers and investment banks, collectively managing $40 trillion across 18 global markets. Notable members include Norges Bank Investment Management, BlackRock and Taiwan Semiconductor Manufacturing Co.