“There are special risks to investing in Korean companies.”
This is one part of the Coupang stock report that decided to be listed on the New York Stock Exchange. Coupang said, “In case of an emergency, there may be regulation by the Korean government.” It is a warning to US investors who are not familiar with Korean legislation in advance of the risk factors in management.
“A special risk unique to Korea”
According to a stock report filed by Coupang to the Securities and Exchange Commission (SEC) on the 22nd,’the risks related to business activities in Korea’ are separately specified.
In this passage, Coupang emphasized, “There is a risk that corporate managers will be subject to investigation or criminal penalties for the conduct of the company or its employees.” “If there is an intellectual property infringement, labor standards law, fair trade law violation, and product-related defects, companies as well as management can be prosecuted or investigated,” he said. “These risks change over time.”
Coupang cited this as a special management environment in Korea, saying, “In Korea, individual executives are often subject to investigations.” He also said, “There are many cases where it is recognized that the management is not responsible.”
Source = Coupang Securities Report
In fact, in Korea, excessive criminal punishment for businessmen is a problem. According to the Korea Economic Research Institute, out of 285 economic laws and regulations in Korea, 2657 items (as of 2019) were criminally punished for businesses and businessmen. There are also considerable penalties for illegal activities of employees, such as overtime work and gender discrimination, which are difficult for the CEO to realistically grasp or control.
Choi Jun-sun, an emeritus professor at Sungkyunkwan University Law School, said, “In Korea, there are a lot of punishment laws for the CEO, such that it is said that businessmen walk on the prison fence.”
Various regulations are also mentioned in detail
Coupang mentioned in detail when the ruling Democratic Party put the Serious Accidents Act, which pushed against the opposition of large corporations and SMEs, as a management risk factor. The Severe Accident Penalty Act is a law that allows a person in charge of management to be imprisoned for at least one year if one or more workers die in a workplace. Although there are various causes of major disasters, it was pointed out that it was too much to blame only the management, but the ruling party enforced it within a month and a half after the law was introduced.
Coupang said, “The Serious Disaster Punishment Act passed the National Assembly plenary session on January 8th. According to this law, if a personal accident occurs due to a violation of the obligation to secure safety and health at the workplace or to prevent risk, the company or the manager of the management will be penalized He said, “We can bear the reinforced responsibility, including.” “There is a possibility of financial liability, including criminal punishment, public announcement of punishment, and punitive damages liability up to five times the actual damage due to the Great Disaster Punishment Act.” In addition, even those who have the authority and responsibility to represent and manage the business can be held accountable,” he warned.
“Improve performance” warning
Coupang also has various regulations promoted by the government and the ruling party, such as the enactment of the Act on the Fairness of Online Platform Brokerage Transactions (Online Platform Act) to regulate online retailers, and the amendment to the Commercial Act, which focuses on the introduction of punitive damages in all fields It was presented as a’future risk factor’. “If (new) legislation is enacted and implemented, it could lead to a loss of competence in Coupang’s core business areas,” said Coupang. “In the end, this could lead to adverse effects on Coupang’s business, financial condition, and performance.” Warned.
A business official said, “In the United States, if the management risk factors in the stock report are not explained in detail, it is inevitable for investors to sue when problems arise in the future. Paradoxically, the listing of Coupang was an opportunity to reveal the harsh corporate environment in Korea.” Evaluated.
Reporter Mi-Hyun Cho [email protected]