South Korea’s parliament on Monday approved a landmark revision to the country’s commercial law, introducing new measures to make corporate boards more accountable to shareholders as part of broader reforms aimed at tackling the long-standing “Korea discount.”
The revised Commercial Act, passed with 180 votes in favour while opposition lawmakers boycotted the session after a failed filibuster, targets the dominance of family-run conglomerates, or chaebol, which wield disproportionate control through cross-shareholdings.
Under the reform, firms with assets exceeding $1.4 billion will be required to adopt a cumulative voting system, allowing shareholders to concentrate all their votes on a single board candidate. The change is designed to give minority shareholders a stronger voice in electing board members.
Additionally, the bill raises the number of audit committee members not elected by controlling shareholders from one to at least two, further strengthening oversight.
President Lee Jae Myung, who took office in June on a campaign pledge to improve corporate governance, has championed the reforms as a step toward protecting minority investors and restoring confidence in South Korean equities.
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“The bill has enhanced corporate governance transparency, paving the way for the advancement of the capital market and the realisation of economic justice,” Democratic Party lawmaker Park Soo-hyun said in a statement.
Business groups, however, voiced concern. The Federation of Korean Industries warned that the new rules could fuel management disputes and increase legal risks, urging parliament to pursue “balanced legislation” that mitigates unintended consequences.
The reforms come against a backdrop of rising investor optimism. Since President Lee’s inauguration, the benchmark Kospi index has climbed nearly 16 percent, reflecting market expectations of improved transparency and governance across Asia’s fourth-largest economy.