Lee Bok-hyun, center, governor of the Financial Supervisory Service, attends a meeting on building governance for corporate and shareholder coexistence, hosted by the Federation of Korean Industries (FKI), at the FKI building in Seoul, Thursday. Yonhap

Lee Bok-hyun, governor of the Financial Supervisory Service, opposed the ruling party's decision to request acting President Choi Sang-mok to veto the Commercial Act amendment, which was passed unilaterally by opposition parties on Thursday.

The chief of the country's financial watchdog stated that he could not accept any decision that would undo years of discussions on enhancing shareholder value, even if it meant putting his position on the line.

He also said the revision does not violate constitutional values enough to justify a presidential veto.

The amendment, proposed by the main opposition Democratic Party of Korea (DPK) lawmakers, expands corporate directors' fiduciary duties from applying solely to the company to also include shareholders. It also mandates the adoption of electronic shareholder meetings for listed companies.

The DPK took the lead in passing the amendment in a plenary session of the National Assembly while ruling People Power Party (PPP) lawmakers who opposed the bill voted against it or abstained. Of the 279 lawmakers present, 184 voted in favor, 91 opposed, and four abstained.

The final step came after the DPK and other opposition parties passed the bill through the Assembly's legislation and judiciary committee on Feb. 26, despite PPP lawmakers walking out in protest.

The DPK said that the amendment was necessary to enhance transparency in the stock market and resolve the so-called “Korea discount.”

The government, the ruling party and business associations opposed the amendment, citing concerns over potential infringements on corporate management rights.

PPP interim leader Kwon Young-se said, “We will immediately propose a veto (to the acting president) to protect our businesses.”

Regarding this, the FSS chief noted that the presidential veto has historically only been exercised for matters that clearly contradict constitutional values, questioning whether the Commercial Act amendment falls under that category.

“After years of efforts to enhance shareholder value, I also question whether it is productive to reset the discussion simply due to concerns over potential side effects,” Lee said during a meeting with reporters after attending the open discussion on building governance for corporate and shareholder coexistence, hosted by the Federation of Korean Industries.

Lee, however, maintained his opposition to the current version of the amendment, citing the inclusion of somewhat ambiguous provisions regarding “all shareholders” or “total shareholders,” which could lead to various unintended consequences.

But he also acknowledged that any proposal would inevitably have some side effects.

“Even if the amendment is somewhat imperfect, now is the time to consider ways to mitigate its side effects, not to reset the discussion entirely,” he said.

Regarding the government's decision to propose the amendment to the Capital Markets Act as an alternative to the Commercial Act revision, Lee stated, “It is difficult to view the Commercial Act amendment as an absolute evil and the Capital Markets Act amendment as the [absolute] good.”

The Commercial Act amendment is passed in a plenary session of the National Assembly in Seoul, Thursday. Yonhap

While both the ruling and opposition parties agree on the need to strengthen protection for minority shareholders, they remain divided on the approach.

The DPK has called for strengthening directors' fiduciary duties through the amendment to the Commercial Act, which applies to both listed and unlisted companies, whereas the government and the PPP advocated for amending the Capital Markets Act to limit its scope to listed companies.

In response to the passage of the Commercial Act amendment, the business community expressed deep regret, warning that it would significantly hinder Korea's economic and corporate development.

The Korea Chamber of Commerce and Industry warned that the amendment's passage could expose even routine decisions on long-term capital investments to legal disputes, discouraging directors from making bold choices to advance the company's future and enhance shareholder value.

"Furthermore, an increasingly restrictive regulatory environment might deter global companies from investing in Korea. We urge the National Assembly to reconsider the issue with greater caution," it said.