Lee vows to ease punitive regulations on businesses to restore investor confidence

President Lee Jae Myung speaks duirng an emergency economic response meeting at the presidential office in Seoul, Wednesday. Yonhap

President Lee Jae Myung pledged Wednesday to swiftly launch a government task force to review and revise criminal penalties concerning business activities, aiming to ensure that "excessive" sanctions do not discourage corporate management.

In particular, Lee vowed to prevent the overuse of breach of trust charges, which have often been cited as a major hurdle to domestic investment by foreign investors.

This pro-business stance is widely seen as an action to mitigate concerns from business circles about the ruling bloc's "pro-labor" push, following the recent promulgation of the revised Commercial Act, additional moves to introduce tougher clauses and a push to amend the Trade Union and Labor Relations Adjustment Act — all of which business groups claim will undermine the industrial competitiveness of domestic companies.

The president made the comments during an emergency economic response meeting at the presidential office.

"Concerns have been raised that [foreign] businesspeople are reluctant to invest in Korea because even minor missteps could lead to imprisonment," Lee said. "We need to revisit institutional reforms as questions are being raised about whether it is in line with global standards to impose criminal penalties on top of financial or administrative sanctions for breaching trust."

Lee noted that the government will kick off a comprehensive reform of the economic criminal penalty system during the upcoming regular parliamentary session, with concrete goals such as revising 30 percent of relevant regulations within a year.

He also emphasized the need to swiftly remove unnecessary or excessively administrative regulations to create an environment where businesses can operate more creatively.

The task force for overhauling the economic criminal penalty system is expected to involve the presidential office and all relevant ministries.

Given Lee's remarks about initiating an overhaul during the regular parliamentary session, revisions to relevant laws such as the Criminal Act and the Fair Trade Act are also expected to be pursued.

In a follow-up briefing later in the day, Kim Yong-beom, presidential chief of staff for policy, explained that Lee's promise to set clear targets such as reforming 30 percent of economic criminal penalty provisions within a year was not meant as a strict numerical mandate.

Presidential chief of staff for policy Kim Yong-beom speaks during a media briefing at the presidential office in Seoul, Wednesday. Yonhap

"Instead, it reflects a comprehensive effort for all ministries to thoroughly review and update penalty clauses in economy-related laws," Kim said. "The task force will be jointly led by the first vice finance minister and the vice justice minister, who will also develop the relevant standards."

On Lee's remarks about the excessive use of breach of trust charges, Kim said, "The president recently met with various business leaders and was deeply concerned after hearing that foreign investors are reluctant to invest in Korea or establish local entities due to such legal risks."

Domestic firms are increasingly under pressure to enhance corporate governance following the National Assembly's July 3 approval of the first stage of the Commercial Act amendment, which was led by the ruling Democratic Party of Korea.

This revision seeks to bolster minority shareholder rights and limit the power of major shareholders by extending the fiduciary duties of corporate board members to cover all shareholders.

The party is now working to pass a second stage of the amendment with stricter regulations.

Additionally, the party is advancing the revision of the so-called "yellow envelope act," which aims to expand labor protections and prevent management from claiming compensation for damage caused by strikes.

Heightening corporate worries further, the government plans to increase the top corporate tax rate from 24 percent back to 25 percent.