South Korea: New Government Launches Corporate Governance Reforms

Following the impeachment of President Yoon in April 2025 (see commentary https://dbrs.morningstar.com/research/451546), Lee Jae-myung, of the Democratic Party was sworn in as South Korea's president on June 3. In line with his election pledge, the Lee administration passed an amendment to the Commercial Act on July 3. Measures announced include (1) the expansion of fiduciary duty of board members to protect the interests of minority shareholders; (2) the "3 percent rule," in which top shareholders and related parties will have their voting rights capped at 3 percent when electing audit committee members; and (3) mandatory electronic shareholder meetings for larger companies.

Key Highlights

-- President Lee followed through with his pre-election pledge passing amendments to protect interests of minority shareholders.

-- These measures bode well for improving corporate governance at Korea's family-owned conglomerates.

-- The Lee government's next key priority will be to support the economy as the country faces rising protectionism abroad.

"The amendment to Korea's Commercial Act bodes well in improving corporate governance at Korea's family-owned conglomerates," says Rohini Malkani, Senior Vice President, Global Sovereign Ratings. "This will likely raise foreign investors' confidence in domestic capital markets."