A Series of Anti-Business Laws, a Crisis for the Vitality of the Korean Economy

The vitality of the Korean economy is rapidly weakening. It is difficult to explain this simply in terms of global tariff negotiations or population decline alone. The fundamental cause is the anti-business legislation being pushed by the National Assembly and the government. A series of anti-business regulations and laws have recently been enacted, sharply constraining corporate autonomy, and as a result, the productivity and dynamism of the economic system are also expected to decline noticeably.

The Republic of Korea is a country that achieved industrialization and globalization simultaneously on the basis of the spirit of free enterprise. Countless entrepreneurs took risks and pioneered new industries, creating jobs and added value in the process. But now, the spirit of free enterprise is gradually losing strength under the shadow of anti-business laws and excessive regulation.

The 21st National Assembly recorded the largest number of legislative bills in history, and a considerable portion of them were heavily regulatory in nature. According to an analysis by the Korea Industry Alliance Forum, the more a law affects industry, the more its regulatory intensity tends to be strengthened as it passes through the National Assembly. As numerous bills reflecting public sentiment rather than systematic review have been passed, business predictability has collapsed, while overlapping penalties and excessive administrative burdens continue to accumulate.

A representative example is the Serious Accidents Punishment Act. Though introduced in the name of strengthening safety, in practice it has functioned as a law that criminalizes businesses. It created duplicate regulations while disregarding the existing Occupational Safety and Health Act, increasing only confusion and uncertainty at worksites. The class action system has been expanded into the criminal sphere, undermining companies’ willingness to invest and innovate, while punitive damages have created a structure of double punishment that has further discouraged business activity.

The recently proposed amendments to the Commercial Act are no different. Measures such as the 3% rule for appointing audit committee members, a higher proportion of outside directors, and the introduction of cumulative voting were presented under the banner of improving corporate governance, but in reality they merely undermine managerial autonomy and create a structure vulnerable to external pressure.

If the third round of amendments to the Commercial Act, which would make treasury share retirement mandatory, is passed, companies will face difficulties not only in pursuing aggressive management but also in maintaining long-term management. There is a high risk that private equity funds posing as minority shareholders will resort to hostile M&A attacks to raise corporate value and then resell the company for profit.

The tax system is also worsening the situation. Inheritance tax rates, among the highest in the world, are obstructing business succession and driving small and medium-sized enterprises and mid-sized firms toward sale or liquidation. Moreover, recent tax reform proposals put forward by the government—including a corporate tax rate increase and stricter criteria for major shareholders under capital gains taxation—have been designed in a way that dampens the vitality of businesses and investors and weakens growth momentum at a time of intense global competition.

Labor-related legislation is another major factor undermining business vitality. The Yellow Envelope Act (Revised Labor Commission Act) effectively grants immunity to illegal strikes and shakes the very foundation of the rule of law. Recently, labor unions have increasingly functioned not as partners in productivity but as political power centers, and new legislation is operating in a direction that reinforces this trend. Workers must be protected, but they cannot stand above the law.

The government and the political sphere must move away from viewing businesses as objects of control and punishment. When a business-friendly environment is created in which companies are free to take risks and invest, entrepreneurship will revive and economic vitality will recover as well. A turn toward freedom is the very path to reviving the Korean economy.

Gwang yong Go

Policy Director, Center for Free Enterprise (CFE)

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Original title: 반기업적 입법의 연속, 한국경제 활력 위기

Author: Gwang yong Go

Date: 2025-09-04

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=28029