Rhee Nam-uh, second from right, chairman of the Korean Corporate Governance Forum (KCGF), announces a statement, urging the National Assembly to amend the Commercial Act, at the Korea Press Center in central Seoul, Thursday. Courtesy of KCGF

The Korean Corporate Governance Forum (KCGF), an organization that monitors transparency in business management, issued a statement urging the National Assembly to amend the Commercial Act. The proposed amendment would expand corporate directors' fiduciary duties to include responsibility toward shareholders.

The KCGF said, Friday, that the statement, announced the previous day, received endorsements from 109 domestic and foreign investors, academics and journalists, including high-level officials at global asset management firms such as Fidelity Management and Research, Wellington Management and Schroders Asset Management.

Among the 109 supporters of the statement also include Yoon Jong-ha, a partner at MBK Partners, the largest private equity firm in Northeast Asia.

The signatories emphasized that the Korean economy and its capital market are facing a severe crisis. They stressed the urgent need to amend the law to prevent harm to shareholder interests and to resolve the so-called "Korea discount."

"Domestic investors are increasingly diversifying their portfolios away from Korea to the U.S. and Japan, while foreign investors are being advised to reduce their exposure to Korea. Furthermore, promising companies like Coupang and Toss are increasingly opting to list on U.S. stock exchanges in search of higher valuations," the statement read.

"The Korean market is steadily losing the attention of the public. The most significant culprit contributing to the crisis in Korea's capital market and economy is the systemic failure of basic corporate governance principles."

Discussions on revising the act have been gaining momentum at the Assembly since Rep. Lee Jae-myung, chairman of the main opposition Democratic Party of Korea, announced the party's willingness to pass a related bill within the year. The party said the revision will shield minority shareholders from what it describes as unfair practices by companies run by large, family-owned business conglomerates whose stocks are publicly traded.

However, the business community, the ruling People Power Party and the government are opposed, raising concerns that the revision could leave Korean companies vulnerable to attempts to wrest control of their management.

The KCGF highlighted that the fiduciary duty of directors to protect the interests of all shareholders is the most basic and fundamental cornerstone of a functioning corporate system.

"Unfortunately, in Korea, this principle has existed only in textbooks," it said, noting that ongoing discussions on amending the law are "a significant breakthrough."

The KCFG said now is the perfect time to push for the amendment, as the majority party in the Assembly has adopted it as an official stance, and the Supreme Court has also expressed clear support.

Kim Chang-beom, front, vice chairman of the Federation of Korean Industries, speaks to protest a revision to the Commercial Act, which the business sector claims will undermine corporate growth momentum, at a hotel in Seoul, Nov. 21. He is joined by executives of 16 conglomerates. Yonhap

In response to opposition from the business community, the KCGF argued that protecting the rights and interests of all shareholders — who are the true owners of a company — should not be viewed as an excessive regulation on corporations.

"We must not allow the country's future to be sacrificed by a small, privileged minority who still cling to the outdated ideologies of the developmental dictatorship era in the 1970s," the statement read.

"We must urgently return to the fundamentals of corporate governance. By doing so, we can resolve the Korea discount in the capital market, which is one of the key steps to solving numerous social and economic issues such as extreme crowding into real estate assets, soaring cost of housing, falling birth rates and aging population."

The KCGF explained that the 109 supporters participated in the statement in their personal capacity.

The statement was announced after 16 top executives of Korea's major conglomerates, including Samsung Electronics and SK Supex Council, issued a joint statement, Nov. 21, protesting the revision plan, arguing that the amendment will undermine corporate growth momentum.