The Future Direction of Takeover Law in Korea

Abstract

This Essay compares the legal takeover regimes of Korea and the United States and observes that important institutional differences exist between Korea and the United States (the model for many of Koreas recent corporate governance-related reforms including Regulation FD and Sarbanes-Oxley Act-like reforms). Controlling shareholders dominate Korean Chaebol firms. Irrespective of whether Korea eventually adopts poison pills and other defensive tactics, the large control position of the Korean Chaebol firms represent a potent antitakeover defensive tactic, shielding Chaebol firms from market pressures. Korea also lacks a specialty corporate court and a well-developed plaintiffs attorney bar. These differences call for a different emphasis in the package of laws controlling agency costs

within Korean firms. Deciding upon the exact set of laws that is optimal for Korean companies is a difficult task —particularly since market participants are constantly evolving the techniques used in corporate control transactions. The Essay offers several suggestions —including expanded fiduciary duties, fixed bounties for private class action attorneys, and reverse tag-along rights for minority shareholders in the case of a failed hostile takeover bid against a Chaebol member firm.