SEOUL (Reuters) – South Korea’s acting President Han Duck-soo vetoed on Tuesday a revision to the Commercial Act, saying the law’s broadening of corporate board members’ duty to all shareholders could impede management’s decision-making and create unnecessary confusion.
South Korea’s opposition-controlled parliament passed in March the revision, which expanded the fiduciary duty of board members to protect the interests of minority shareholders. The current law requires directors to work in the company’s best interests.
“There are concerns that there can be unexpected confusion as corporations make various decisions,” Han said at the start of a cabinet meeting televised live.
The revised law could also expose board members to possible legal action and impede their management activities, he said.
The revision was drafted to address the so-called “Korea discount”, referring to depressed stock prices attributed to poor corporate governance at South Korea’s family-owned conglomerates.
The country’s benchmark KOSPI cut early gains after the report of the veto.
The conservative ruling party had called for the bill’s veto, saying the revision affected even small and medium-sized enterprises and unlisted companies, describing it as “wielding an axe for surgery that requires a scalpel”.
It said the revision would lead to losses across the market, not just for shareholders.
Business groups, including some of the major family-controlled chaebols, had also expressed objections to the amendment, saying it would hamstring business growth and make South Korea a country where it was tough to do business.
(Reporting by Jack Kim, Joyce Lee, Jihoon Lee; Editing by Christian Schmollinger and Jamie Freed)
