Business leaders warn of tariff-regulation double bind

As U.S. tariffs weigh on Korean investments abroad, domestic lawmakers are pushing forward regulations that could further restrict business operations, leaving companies caught in a double bind. Firms already face a perfect storm: sluggish economic growth at home, punitive tariffs from the United States, aggressive Chinese pricing, and a surge in regulatory proposals that threaten to upend corporate governance.

According to business leaders on Friday, the Korean government has begun consulting with major conglomerates to identify potential investment pledges that could be offered to Washington in exchange for relief from the 25% reciprocal tariff. But the effort is complicated by recent amendments to the Commercial Act that increase the risk of shareholder lawsuits if firms pursue projects without strong business justification.

At the same time, the ruling Democratic Party is advancing several controversial bills, including further amendments to the Commercial Act that would mandate cumulative voting and expand requirements for the separate election of audit committee members. Another proposal, known as the “Yellow Envelope Law,” broadens the legal definition of “employer” and limits union liability for damages. Business leaders warn these measures could disrupt both governance and labor relations.

Amid growing scrutiny from politicians and minority shareholders, companies have largely suspended rights offerings and initial public offerings by affiliates, paralyzing capital markets as a funding mechanism.

If the revised Commercial Act is enacted, many top firms could see their management rights challenged. According to analysis by the Korea Listed Companies Association, commissioned by the Dong-A Ilbo, 24 of the 204 listed companies with assets over 2 trillion won (11.8%) would risk losing board control to shareholder coalitions with at least a 5% stake. Another 80 companies (39.2%) could see one-third of their board seats occupied by coalition-backed directors, a sign that more than half of Korea’s largest firms may face serious governance instability.

“There have been plenty of ‘stick’ policies like the tougher Commercial Act and the Yellow Envelope Law,” said Ahn Dong-hyun, an economics professor at Seoul National University. “But not a single ‘carrot’ to support businesses. The government must act on the president’s repeated call for negative-list regulation and push forward investment-friendly legislation.”


이동훈기자 dhlee@donga.com