Press conference urges passage of anti-share-price-suppression bill

Stewardship code, 'bear hug' measures called supplementary tools only

Democratic Party of Korea lawmaker Lee Hoon-ki [provided by lawmaker's office]
Democratic Party of Korea lawmaker Lee Hoon-ki [provided by lawmaker's office]

Democratic Party of Korea lawmaker Lee Hoon-ki held a press conference Wednesday at the National Assembly's communication hall, alongside the Korea Minority Shareholders Research Association, calling for the swift passage of a bill aimed at ending so-called "share price suppression."

Eight representatives of minority shareholders and institutional investors attended, including Lee, minority shareholder delegates from the Korea Minority Shareholders Research Association, Kim Min-kuk of VIP Asset Management, Lee Chang-hwan of Align Partners Asset Management, and Kim Ji-yeol, a director at Quad Asset Management.

"Our stock market is in a very difficult situation amid recent declines and rising volatility," Lee said, adding that structural problems undermining market confidence must be corrected and that all efforts should be directed at restoring trust.

He said current law creates a structure in which the lower a company's share price, the smaller the inheritance and gift tax burden on its largest shareholder. "It is more advantageous for a controlling shareholder, from an inheritance and gift tax standpoint, to keep the share price low rather than raise corporate value and share the gains with shareholders," he said. He added that the ultimate victims are the many retail investors and minority shareholders who invested believing in the company's growth.

Lee also said more than 1,300 listed companies are trading at below 80 percent of their net asset value. "That is how serious the undervaluation problem is in our stock market," he said.

He described the anti-share-price-suppression bill as the "finishing touch" that would complete the normalization of South Korea's capital markets, following three rounds of amendments to the Commercial Act.

On the stewardship code strengthening and so-called "bear hug" tactics being discussed by the ruling party and government, Lee said they are important tools for raising corporate value and strengthening shareholder rights, but that they alone can never put an end to share price suppression.

"The stewardship code and bear hugs are supplementary measures for preventing share price suppression," Lee said. "To eliminate the economic incentive of reducing inheritance and gift tax burdens through a low share price, the anti-share-price-suppression bill — which amends the Inheritance Tax and Gift Tax Act — is absolutely necessary."

Lee is a member of the Democratic Party's Special Committee on the K-Capital Market. On July 21, he co-hosted a forum on legislative tasks for an anti-share-price-suppression bill to address the Korea discount, together with fellow Democratic Party lawmaker Lee So-young and the special committee, helping bring the issue into public debate. He then submitted the bill as its lead sponsor on Aug. 5, incorporating improvements over the Ministry of Economy and Finance's earlier draft.

"Share price suppression is making retail investors cry — this time, we must put an end to it," Lee said. "As a member of the Special Committee on the K-Capital Market, I will push this through responsibly to ensure the anti-share-price-suppression bill is debated at this regular session of the National Assembly."


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