Lee Jae Myung Elected Amid Corporate Policy Shakeup

On June 4, 2025, Lee Jae-myung of the Democratic Party was officially elected as South Korea's 21st president, signaling a period of significant transformation for the nation's corporate management and labor relations. His campaign was marked by a series of ambitious, yet controversial, policy pledges that have stirred both anticipation and apprehension within the business community. These include the re-promotion of the so-called Nohranbong Act, amendments to the Commercial Act, the introduction of a 4.5-day work week, and an extension of the retirement age—all policies seen as leaning heavily toward labor interests and raising concerns about their potential impact on corporate competitiveness.

Lee's Nohranbong Act, which amends Articles 2 and 3 of the Labor Union Act, aims to expand the definition of "employer" to include original contractors, thereby strengthening their responsibility for subcontractors. It also limits companies' ability to claim damages against striking workers. This legislation, which had been passed in previous National Assemblies but vetoed by former President Yoon Suk-yeol, is poised for revival under Lee's administration. Business leaders worry that restricting damage claims could embolden illegal industrial actions, leading to more frequent labor disputes and destabilizing the industrial ecosystem.

Complementing this, Lee has pledged to push forward amendments to the Commercial Act, which focus on corporate governance reforms. These include clarifying directors' fiduciary duties to encompass both the company and its shareholders, mandating a minimum proportion of independent directors, expanding separate elections for audit committee members, and activating cumulative voting for large listed companies. While aimed at fostering a "fair economy" and protecting shareholder rights, these changes have sparked fears among businesses of excessive litigation and hostile shareholder activism, especially from foreign hedge funds. The precedent of Elliott Management's 2019 management rights attack on Hyundai Motor Group, which halted the company's governance restructuring, looms large in these concerns.

During his campaign, Lee made clear his intent to implement these reforms swiftly, promising on June 2, 2025, that the Commercial Act amendments would be processed within two to three weeks of his inauguration. Despite warnings from Korea's top five economic organizations—including the Korea Chamber of Commerce and Industry, Korea Employers Federation, and Korea International Trade Association—Lee's stance reportedly hardened, underscoring a commitment to his pro-labor agenda.

Another cornerstone of Lee's platform is the introduction of a 4.5-day work week without wage reductions, a move designed to alleviate long working hours and improve work-life balance. However, experts and business officials caution that without corresponding productivity gains, this policy risks undermining corporate competitiveness. South Korea's corporate culture, which has yet to fully embrace concentrated work periods, may see productivity declines, increased labor costs, and exacerbated labor shortages. Additionally, the abolition of the comprehensive wage system—which currently allows flexible management of overtime pay—is feared to backfire if not paired with robust flexible work arrangements.

Extending the retirement age to 65, another labor-backed priority, is also on Lee's agenda. While intended to enhance employment stability for older workers, business groups warn this could crowd out youth employment opportunities and deepen generational conflicts. They also point to potential rises in "freeriders"—employees who contribute less effort—thereby dampening organizational vitality and productivity.

Lee's commitment to maintaining the punitive provisions of the Serious Accidents Punishment Act for business owners and managers further adds to corporate concerns. Despite strengthened industrial safety standards, companies fear increased legal risks may deter investment and hiring. The business sector advocates for a focus on proactive accident prevention rather than expanding punitive measures.

Yet, Lee's vision is not solely about regulatory tightening. His five major strategic pillars include fostering South Korea's emergence as an AI powerhouse and nurturing future strategic industries such as biotechnology, content and culture, defense and aerospace, energy, and manufacturing. He has pledged to invest 100 trillion won in these sectors and offer significant tax incentives—including income and corporate tax cuts—for individuals and companies investing in these fields. Additionally, he promises regulatory reforms, such as integrating data use across industries and reforming software procurement systems, to stimulate innovation.

Business leaders acknowledge the necessity of such support, especially as corporate competition increasingly takes on a "state-versus-state" character in the global arena. They emphasize the urgency of eliminating domestic regulatory imbalances that create an "unlevel playing field" internationally. However, they urge the new government to balance these initiatives with policies that create a more favorable environment for business, cautioning that Lee's pro-labor policies could exacerbate internal conflicts and hinder economic growth.

In response to Lee's election, economic organizations issued statements calling for social unity and a business-friendly climate. The Korea Economic Association expressed hopes that the new administration would lead South Korea to become one of the world's top five economies through pragmatic, performance-oriented policies. They stressed the importance of revitalizing domestic demand, minimizing damage from global trade tensions—especially tariffs imposed by the Trump administration—and fostering innovation in advanced industries.

Similarly, the Korea Employers Federation highlighted the critical juncture at which South Korea stands, facing challenges such as global supply chain reconfigurations and the AI revolution. They urged the president-elect to demonstrate insightful and balanced leadership to propel the nation's prosperity, advocating for the removal of regulatory barriers and the establishment of a flexible labor market and stable labor-management relations.

The Korea International Trade Association echoed these sentiments, emphasizing the need for swift and coordinated trade diplomacy to reduce external risks and enhance South Korea's reputation as a reliable economic partner. They also called for continuous efforts to discover new growth engines and dismantle unnecessary regulations to sustain economic vitality.

Despite these calls for cooperation, the business community remains wary. A senior executive noted, "The biggest challenge in our management environment is the prevailing anti-corporate sentiment. Laws like the Commercial Act amendments and the Nohranbong Act risk deepening this divide." Another industry insider added, "We hope the new government pursues policies that invigorate the entire industrial ecosystem, especially strategies that support domestic companies against the backdrop of the U.S. tariff policies and sluggish domestic demand."

As Lee Jae-myung embarks on his presidency, the delicate balance between advancing labor rights and maintaining corporate competitiveness will define South Korea's economic trajectory. The unfolding policy implementations will be closely watched by stakeholders at home and abroad, as the nation navigates the complex interplay of social equity, economic growth, and global market pressures.