AM Lecture 5

Management > Asian Management > Chaebol > Lee's management challenges > Lee explained > Corporate behaviour > Effects of law reforms

Effects of law reforms

Intended effects

The intended effects of the law reform was to strengthen the board of directors as the main decision-making body of a company and to make it independent of controlling shareholders.

It was also intended to strengthen minority shareholder rights, enhance transparency and disclosures, and increase the accountability of controlling shareholders and directors on the board.

Finally, it was intended to strengthen accounting standards and internal controls, enhance the competitiveness of large group firms and facilitate corporate takeovers.

Positive outcomes

There was a high profile case in December 2001, where the Chairman and 9 directors of Samsung Electronics Co. were fined 97.7 billion Wong for breaching fiduciary duty, including bribery and acquiring majority stakes in an unstable firm.

Extension of legal reforms

Legislation was extended in January 2005 to include actions against company officers, managers, and controlling shareholders for:

Window dressing
Inadequate audits
False disclosures
Stock price manipulation
Insider trading