Seoul: Korean companies are expressing significant concern as the Lee Jae Myung administration and the ruling Democratic Party of Korea advance legislation that could increase their operational burdens. This follows the recent revision of the Commercial Act, which passed the National Assembly on July 3. The new revision extends the fiduciary duty of corporate board members to serve not only their companies but also the interests of shareholders. Business circles fear that such changes might deter directors from engaging in long-term investments due to potential shareholder objections.
According to Yonhap News Agency, Democratic Party lawmakers have also proposed a bill to amend the Labor Union Act, known as the "Yellow Envelope Law." This proposal was presented to the National Assembly's Environment and Labor Committee and subsequently forwarded to a subcommittee for further deliberation. The party, which holds a substantial majority in parliament, is determined to pass the bill in an extraordinary session of the Assembly next month.
The proposed revisions to the Labor Union Act include Article 2, which would require primary contractors to engage in collective bargaining with subcontractor employees. Article 3 would make it nearly impossible for companies to claim damages from workers engaged in industrial action. Business leaders warn that if numerous subcontractor employees demand collective bargaining, both subcontractors and the large companies outsourcing work could face relentless labor disputes. Additionally, limiting damage claims against workers could encourage more industrial action, leading to heightened concerns among businesses.
Former President Yoon Suk Yeol had previously vetoed the bill twice, citing these concerns. The anxiety among companies is further fueled by Koo Yun-cheol, the nominee for deputy prime minister and minister of economy and finance, who mentioned the decline in corporate tax revenue during his confirmation hearing at the National Assembly. Koo suggested restoring higher corporate tax rates, which the Yoon administration had previously reduced. However, he attributed the reduction in corporate tax revenue to the cuts, arguing that they failed to spur increased investment and economic growth.
Corporate tax revenue reportedly decreased from 103 trillion won (US$74 billion) in 2022 to 80 trillion won in 2023 and further to 62 trillion won in 2024. However, analysts argue that the decline was primarily due to deteriorating business performance, driven by an export slowdown and a slump in the semiconductor industry. They caution that raising corporate tax rates without addressing the underlying economic issues could further dampen corporate investment and reduce tax revenue.
President Lee Jae Myung, in his efforts to support business activities, has engaged in discussions with Korean business leaders, including Hyundai Motor Group Executive Chairman Chung Eui-sun and LG Chairman Koo Kwang-mo. Despite these efforts, the proposed amendment to the Labor Union Act is seen as a move that contradicts the support he pledged for businesses. Lawmakers are urged to continue discussions on whether it is necessary to mandate primary contractors to bargain collectively with subcontractor employees and to outline specific conditions under which companies can claim compensation for damages.