Why it matters. South Korea is one of Asia's largest markets, and how Seoul handles corporate governance reform affects global investors who have long applied a "Korea discount" to its stocks.
Background. The "Korea discount" refers to the persistently lower valuations of Korean firms versus global peers, often blamed on opaque governance by family-controlled conglomerates called chaebol. The 2025 expansion of directors' fiduciary duty to all shareholders—not just controlling owners—was a landmark reform pushed after high-profile "split listings" by LG and SK angered minority investors. The author, Lee Yong-woo, is a former Democratic Party lawmaker writing in the left-leaning daily Hankyoreh.
What to watch next. Watch how the Financial Services Commission applies its new duplicate-listing rules and dual-class-share reviews in practice—whether flexibly or as blanket bans.
A market on the rise, held back from above
A former South Korean lawmaker argues that overly cautious financial regulators are the main obstacle to Korea’s surging stock market, warning in a recent Hankyoreh op-ed that simply banning controversial listing structures will not lift the country’s chronic “Korea discount.” The piece, by ex-Democratic Party legislator Lee Yong-woo, lands as the benchmark KOSPI index approaches the once-unthinkable 10,000-point mark.
Lee credits a single reform for the turnaround: a July 2025 revision to Article 382-3 of the Commercial Act, which expanded directors’ “duty of loyalty” to cover all shareholders rather than just controlling owners. In Korea, family-run conglomerates known as chaebol have long used small stakes to control sprawling business empires, sometimes pushing risky investments that hurt minority investors. The new law states that the goal of corporate management is to raise value for every shareholder.
The fight over “splitting” and dual listings
The reform was driven partly by anger over “split listings,” in which firms such as LG Chem and SK spun off their lucrative battery units and listed them separately—diluting the value held by parent-company shareholders. In response, the Financial Services Commission (FSC), Korea’s top financial regulator, said it would ban such duplicate listings in principle and allow exceptions only under strict criteria.
But Lee cautions against treating every dual listing as harmful. Some, he writes, transfer losses to minority shareholders; others let established firms enter genuinely new industries—he cites memory-chip packaging borrowed from textile weaving, and DNA synthesis based on inkjet-printer technology. The answer, he argues, is clear review principles: advance disclosure to shareholders, minority-investor consultation, independent directors, and ongoing post-listing reporting.
Why regulators, not rules, are the bottleneck
Lee’s central complaint is cultural. Korean regulators—the FSC, the Financial Supervisory Service, and the Korea Exchange—tend to treat market participants as subordinates rather than partners, he says, and avoid risk by delaying decisions on anything without precedent. He points to dual-class voting shares: when a venture firm with such shares sought to list, reviewers reportedly demanded the structure be dismantled simply because it was a first-of-its-kind case.
He uses Market Kurly, a fast-growing Korean grocery-delivery startup, as an example. Repeated fundraising diluted its founder’s stake to just 5–6 percent, leaving the company vulnerable to instability if financial backers exit after an IPO. Dual-class shares, Lee says, can protect a founder’s vision in such cases—but regulators treated the low stake itself as a disqualifier.
A four-point call for change
- Mediate conflicts of interest by flagging risks early and publishing minimum protection guidelines.
- Shift to disclosure-based regulation, letting the market and shareholder votes judge board decisions.
- End bureaucratic risk-aversion that delays review of novel cases.
- Build a culture unafraid of litigation, so shareholders exercise rights and legal precedents shape market norms.
For Korea’s market to advance, Lee concludes, regulators should ask whether they are nurturing growth or merely wielding the “blade of regulation.”
