Korean chaebols including Samsung tense over economic bills; restrictions of shareholders’ voting rights could have a major impact on its web of cross shareholdings among affiliates

2013-05-27 17:10

Chaebol tense over economic bills

By Jun Ji-hye
Ruling Saenuri Party and main opposition Democratic Party (DP) will open an extraordinary session on June 3 to handle bills on key economic issues.
Conglomerates and financial firms are paying keen attention on which bills will be legislated into laws as they will influence their business substantially.
Both parties have in principle agreed to handle bills aimed at removing unfair business practices by chaebol. However, they have yet to narrow differences on key issues before passing them.
One of the sensitive bills on “economic democratization” is the one to restrict voting rights of major shareholders of financial companies if they are caught embezzling corporate funds.The two parties differ on the details. The ruling party wants to adopt the rule for insurance and securities firms first, then gradually expand the scope of firms subject to the rule.
In contrast, the DP claims all companies should be subject to the rule.
Samsung Group, which has financial affiliates such as insurance, securities and credit card, has kept its eye on the bill, as restrictions of shareholders’ voting rights could have a major impact on its web of cross shareholdings among affiliates.
The move is burdening Hanhwa Group, in particular, as its Chairman Kim Seung-youn has been on trial for embezzlement and breach of trust. The group also possesses life insurance and securities subsidiaries.
Financial firms and chaebol are concerned about the parliamentary move to restrict voting rights of major shareholders.
“Reinforcement of regulation is just populism that would ruin the economy. Restrictions in major shareholders’ voting rights would leave companies defenseless against hostile M&A attempts” an official from a top conglomerate said.
Cuts into work hours
Another issue drawing attention is a bill on the reduction of work hours for laborers, including an amendment to the Labor Standards Law that the Assembly’s Environment and Labor Committee will deal with.
The revision is aimed at keeping employers from having their employees work for more than 40 hours a week, the legal work hours set by the Labor Standards Law.
Many employers have their employees work during holidays in violation of the law. However, the new bill will incorporate holiday work hours into the legal work hours.
Under the current law, employees’ holiday work is not viewed as working hours, so the authorities are not able to hold employers accountable for making their workers work extra hours using holiday work hours.
“The irregular extension of working hours has been the only measure to increase companies’ output at some workplaces. The reduction of work hours is also expected to cut average wages, which will cause conflicts between labor and management,” an official from the Federation of Korean industries said.
At the same time, the opposition and labor sector have argued that a regular bonus or extra payment should be included to the ordinary wages of workers in the event of them working on stipulated holidays.
It will cause a huge extra burden on employers if a bonus is calculated as regular wages, as it will result in rises in labor costs for companies. That is because regular wages are used as a base for labor and management negotiations for annual wage increases.
On the other hand, the government and the ruling party are against the move.
“It will pose a huge burden on companies,” said Labor Minister Phang Ha-nam, calling for the resolution of the matter through a tripartite meeting with labor and management.