Majority of Companies Slam Forced Treasury Stock Retirement

Business Community Resists Mandatory Treasury Stock Retirement Plan

Seoul, South Korea – A significant rift is emerging between the South Korean government and the business community over a proposed amendment to the Commercial Act mandating the retirement of treasury stocks. A recent survey conducted by the Korea Chamber of Commerce & Industry (KCCI) reveals that a resounding 62.5% of surveyed companies oppose the plan, raising concerns about its potential impact on corporate strategy and financial flexibility.

Majority of Companies Slam Forced Treasury Stock R...

The survey, which polled 104 listed firms holding at least 10% of their own shares, highlights the depth of resistance to the government's initiative. Only a small minority, 14.7%, expressed support for the mandatory retirement, while 22.8% remained neutral. This strong opposition signals a significant hurdle for the government, which is aiming to push the amendment through by the end of the month.

The proposed reform, championed by President

The proposed reform, championed by President Lee Jae Myung and backed by the ruling Democratic Party of Korea, is framed as a measure to bolster the stock market and enhance shareholder value. Proponents argue that retiring treasury stocks, or shares repurchased by the company, reduces the number of outstanding shares, potentially increasing earnings per share and driving up stock prices.

However, the business community views the mandatory nature of the plan with skepticism. The KCCI survey indicates that many companies believe forced retirement of treasury stocks could restrict their ability to utilize these assets for strategic purposes, such as mergers and acquisitions, stock option plans for employees, or raising capital in the future.

Furthermore, concerns have been raised about the potential disincentive for companies to actively support their stock prices through share buybacks. According to the survey, 15.9% of respondents fear the mandatory retirement rule could diminish the motivation to engage in such practices. This is further compounded by the fact that 67.6% of those surveyed expressed opposition to the measure under the current proposed conditions.

The government's push for the amendment represents the third revision to the Commercial Act and is driven by a desire to create a more shareholder-friendly environment. However, the strong opposition from the business sector underscores the need for further dialogue and careful consideration of the potential unintended consequences of such a sweeping policy change. The coming weeks will be crucial as the government attempts to navigate this opposition and secure passage of the controversial amendment.