SEOUL, September 30 (AJP) - The South Korean government's plan to abolish a criminal law clause that has long exposed corporate executives to prosecution for breach of trust drew strong support from business groups on Tuesday, who argued the change would reduce legal uncertainty and encourage investment.
The government and ruling party said the clause — which allowed prosecutors to pursue executives for management decisions that resulted in losses, even absent personal gain — would be eliminated as part of a broader economic penalty reform package. The shift places greater emphasis on administrative and financial penalties rather than criminal charges.
The Korea Chamber of Commerce and Industry welcomed the move as a “first step” toward more predictable corporate governance, noting that aggravated penalties for breach of trust had created a chilling effect on decision-making.
Critics of the breach of trust provision have long said its vague standards turned legitimate but risky business decisions into potential criminal cases, discouraging executives from pursuing bold investments.
Democratic Party floor leader Rep. Kim Byung-ki said in a recent task force meeting that the clause had “become a burden on normal business operations,” while President Lee Jae Myung remarked on Sept. 15 that excessive punishment risked deterring investment.
Other business lobbies, including the Korea Enterprises Federation and the Korea Employers Federation, issued statements calling the reform timely and potentially a foundation for further regulatory improvements.
The Korea International Trade Association said in a statement that it hoped the changes would help achieve the government’s goal of reducing overall economic penalties by 30 percent and ensure industry voices are reflected in subsequent legislation.
* This article, published by Economic Daily, was translated by AI and edited by AJP.
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