Corporate executives now seem as jittery as government officials about a controversial bill that will allow lawmakers to hold hearings more frequently.
The revision to the National Assembly Act, which was passed by the outgoing parliament last week, gives parliamentary committees the right to hold hearings on all “pending” issues. Existing law stipulates that the hearings can be held if necessary for the deliberation of important matters and parliamentary audit or investigation.
Speculation has been rife that President Park Geun-hye, who embarked on an 11-day trip to Africa and France on Wednesday, will veto the revision bill shortly after she returns home. Administration officials are worried that the parliamentary measure would significantly restrict or virtually paralyze government affairs as their time might be spent mostly in preparing for and attending Assembly hearings.
President Park Geun-hye on her way to embark on an 11-day trip to Africa and France on Wednesday (Yonhap)
Corporate executives express similar concerns. It has already been a familiar scene in previous hearings that a hoard of top executives from the country’s large conglomerates were summoned as witnesses just to be rebuked by lawmakers with little interest in listening to their answers.
“We may not be in a position to comment on the bill that lawmakers argue is needed for a tighter scrutiny into state affairs,” said an official at a local business association, requesting anonymity. “Still, it is hard to dismiss doubts that the measure targets large corporations as well as the administration.”
Such a concern is rising among business circles especially as the incoming Assembly, which begins its four-year term Monday, is set to be dominated by liberal opposition parties critical of the way big companies have been run. The conservative ruling Saenuri Party lost its parliamentary majority in last month’s general election.
During the election campaign, The Minjoo Party of Korea and the People’s Party put forward a raft of pledges business circles oppose as restricting corporate activities and dampening efforts to increase employment.
The opposition parties promised to increase corporate tax rates, raise minimum wages and block labor bills that they saw as further weakening the job security of irregular workers.
The Minjoo Party also vowed to strengthen pressure on large profitable companies to spend more of their retained earnings on increasing wages of employees.
The Federation of Korean Industries, the main business lobby here, has recently taken the lead in highlighting the negative effects that would probably stem from the implementation of pledges made by the opposition groups.
Participants in a seminar held by a research institute affiliated with the FKI last week argued that a steep rise in minimum wages would only result in shedding jobs and undercutting growth.
Park Ki-sung, professor of economics at Sungshin Women’s University in Seoul, said that, if the minimum wage was raised from the current 6,030 won ($5.07) per hour to 10,000 won in three to four years as proposed by opposition lawmakers, up to 510,000 jobs would disappear and the country’s growth would be down by 1.48 percentage points.
Song Won-geun, an official at the FKI, claimed in a paper that employment conditions have remained weak due to bills passed by the outgoing parliament to make the labor market further inflexible.
On a separate occasion last week, the organization came forward to rebuff criticism that large corporations have been sitting on huge cash reserves while slow to increase investment and employment. It said the 10 listed firms holding the largest amount of retained earnings increased their investment by 54.1 percent from a year earlier in 2015, compared with a 45.1 percent decrease for the 10 companies at the bottom.
Corporate officials appear to worry that the controversy over a rise in retained earnings of large corporations will flare up further, exacerbating antibusiness sentiment in some quarters of society.
According to data from the FKI, retained earnings of the country’s 1,707 listed firms climbed from 636.8 trillion won in 2011 to 831.5 trillion won last year.
Opposition lawmakers view the increase as proving the measures taken by the previous administration of President Lee Myung-bak and upheld by the Park government to cut corporate taxes have only led to letting big, profitable companies pile up cash reserves.
A similar perception lay behind the steps taken by then-Finance Minister Choi Kyung-hwan two years ago to impose levies on a certain portion of corporate profits not used to increase investment, wages or dividends.
But the government has continued to stand by large corporations in opposing opposition legislators’ push for raising corporate taxes, saying the move would be out of step with the global trend and further weaken the competitiveness of local companies.
Corporate officials say only about 20 percent of retained earnings are held in the form of cash, with the remainder having been invested in facilities and research and development. But some large companies are not free of criticism that they have increased only dividends for major shareholders and reserved cash for the arbitrary use by owners rather than meeting needs for future investment.
Given this, experts note, it may be desirable to give more benefits to corporate steps toward increasing wages and investment.
They say bridging wide gaps between the views held by opposition lawmakers and corporate executives is an indispensable part of efforts to revitalize the economy by reducing inefficiency and strengthening growth potential.
By Kim Kyung-ho (khkim@heraldcorp.com)