South Korea’s fork in the road

by Stephanie Lin, ACGA

7 March 2022

As election day looms, ACGA Research Manager Stephanie Lin looks at the good, bad and ugly prospects for ESG in the polarised candidates’ pledges

The South Korean presidential election takes place on 9 March 2022 and polls suggest a tight race between the two major candidates, Lee Jae-myung of the ruling Democratic Party and Yoon Suk-yeol from the opposition People Power Party (PPP). The campaign has been marked by salacious allegations, diverting attention from each candidate’s campaign platform. ACGA has decided to delve into the rivals’ respective policy agendas to find out how the election outcome might affect the development of ESG in the market.

Environment: nuclear fissure

Lee, former governor of South Korea’s most populous Gyeonggi Province, has put carbon neutrality and renewable energy at the top of his political agenda. Over the course of his campaign, Lee has advocated for a more ambitious climate target for South Korea’s Nationally Determined Contribution (NDC) for 2030 and a faster timeline for net zero before 2050. He has also talked significantly about creating new infrastructure for renewable sources, such as the construction of an “energy superhighway” to enable the transfer and sale of electricity generated through solar and wind power. Lee has also said that he will establish a new Ministry of Climate Change and Energy with a specific focus on climate change, green growth and the transformation of energy and industrial sectors.

On nuclear power, Lee opposes construction of any new atomic plants. His policies are fairly well aligned with those of the current Moon Jae-in administration, but with a more moderate stance when it comes to nuclear power plant reduction and reactors which are already under construction.

Lee has also been vocal in requesting that conglomerates employ more young people for their ESG initiatives as a way to create more job opportunities for their generation.

As the opposition party candidate, Yoon’s environmental proposals are in sharp contrast to those of Lee. Yoon is a big believer in nuclear power. He has vowed to abolish the Moon administration’s nuclear phase-out plans and resume construction of nuclear reactors Shin-Hanul No.3 and No.4, both suspended since 2017 as part of this policy. Yoon also says he will export 10 nuclear power plants by 2030, claiming this order will generate 100,000 jobs.

While Yoon is not opposed to renewable energy, he has challenged Lee’s commitment on several occasions. In a presidential debate in early February he argued that 100% renewable energy by 2050 would be impossible. He also seemed unaware that Korea had launched its own version of RE100, a global clean energy campaign.

Yoon also wants to alter South Korea’s carbon neutrality timeline, arguing that the target was set “without sufficient discussion”. Yoon believes that carbon neutrality can only be achieved through the combination of renewable and nuclear energy, which he said should account for 30% of total energy generation.

Overall, the ruling party candidate Lee does seem to be more eco-friendly.

Social: battle of the sexes

While contemporary elections tend to see voters split by political or religious ideology, it is gender which divides the voter base in 2022’s South Korea. Generation Z males attribute their disadvantages in the job market to gender equality policies: one survey conducted by Realmeter, in 2018 for example revealed that 76% of men in their 20s strongly oppose feminism and any feminism-friendly progressive party (exit polls also showed that nearly 73% of men in their 20s voted for the PPP candidate in Seoul’s mayoral election earlier in 2021). As a result, both candidates have been fighting hard to win the hearts of these young men, prompting women and feminist groups to dub the race a “misogynist presidential election”.

Yoon has wholeheartedly embraced young men’s demonization of feminism, speaking out against the #MeToo movement and blaming feminism for the country’s low birth rate (because it apparently prevents young people from having proper relationships). The conservative candidate has also pledged to abolish the Ministry of Gender Equality and Family (MOGEF)—which only comprises 0.2% of the total national budget—for its alleged failure to perform its functions properly and for portraying men as “potential criminals”. His ratings jumped by more than 6% on the proposal. Yoon’s strategy to court the young male voter base was reportedly advised by Lee Jun-seok, the youngest chair of a Korean political party in history who became popular with young male voters due to his anti-feminist viewpoint.

A traditionally more progressive Democratic Party candidate, Lee has tried to downplay gender issues in this election, saying “just as you should not be discriminated against because you are a woman, it is also not right to be discriminated against because you are a man”. While he did not endorse abolishing MOGEF, he proposes to reorganize it, renaming it the “Ministry of Equality and Family”. But at least Lee recognises the existing obstacles women face in the workforce, including a gender wage gap, discrimination in hiring and limited political participation, and has promised to introduce measures to tackle these issues.

When it comes to workers’ rights protection, the future of employment looks bleak in South Korea with Yoon advocating an end to the current 52-hour week, incredulously suggesting people instead slave away for 120 hours a week. This was met with some criticism, particularly given the increasing number of deaths from overwork.

While many say that voters are choosing between the lesser of the two evils when it comes to women's issues for this election, Lee should still receive some credit for recognising the problems that women face in the workforce as these are also issues that need to be addressed to increase the percentage of female representation on corporate boards. Yoon’s stance on the other hand is major steps backward from the small progress that has been made on gender equality.

Governance: chaebol, what chaebol?

Both candidates appear aligned on a desire to build a healthy capital market and protect minority shareholder rights, urging stern punishment for market manipulation. Lee advocates improving market transparency and tackling the so-called “Korea discount” where local stocks are undervalued by foreign and institutional investors amid geopolitical instability and governance issues related to the chaebol.

The Democratic Party candidate is also vowing to revive the stock market and push South Korea to attain developed market status on the MSCI. Some of the key issues that have kept the country from obtaining its developed market status are its lack of English information disclosure, concerns over corporate governance, the absence of offshore trading of the Korean won and restrictions on short-selling.

Similarly, Yoon emphasizes the need to improve transparency in local firm governance structures and the poor quality of financial accounting. He has also announced plans to introduce a “Compulsory Tender Offer” process for M&A transactions to protect minority shareholders. Yoon proposed a toned down version of the mandatory takeover rule, allowing shareholders of outstanding shares to sell at the market price to the new acquiring company.

While the topic of chaebol reform has largely been missing in this year’s presidential election, Lee has made calls to disband the chaebol system, which he associates with insider trading, unfair inheritance and abuse of power. This was the same stance that Lee, as the mayor of Seongnam from 2010 to 2018, advocated when he made a presidential bid to be the Democratic Party nominee in 2017.

Another uncertainty looming over South Korea’s corporate governance development is the fate of Lee Jae-yong (JY Lee), the de facto head of the country’s biggest conglomerate, Samsung. While new South Korean presidents have a long history of pardoning chaebol executives sent to prison, Moon has never pardoned JY Lee, though he has been released on parole. Given Yoon’s pro-business and establishment leanings, a pardon for JY Lee is not unimaginable should the conservative candidate be elected to the Blue House. Yoon has also stated that he would pardon former presidents Lee Myung-bak and Park Geun-hye once elected, whose investigations were both overseen by himself. The ruling party’s Lee rejected the proposal to pardon Lee Myung-bak, although Park was already pardoned by Moon, an action viewed by many as the current president’s effort to garner support from conservative voters for the upcoming election.

However, Lee’s aggressive push to adopt a “labour board system” in the private sector—nominating worker or employee representatives as directors—has warranted concern among shareholders. There is a fear it will pass too much power to the unions and heighten conflict between workers and management, potentially undermining the interests of shareholders.

While both candidates want to please investors with pledges to improve transparency and the health of the capital market, Yoon’s close links to the conservative side of politics will give him less room to manoeuvre when facing pressure from the chaebols. Lee’s stance, on the other hand, has been pretty consistent throughout.

Who are the leading candidates?

Lee Jae-myung, 57, was previously the Governor of Gyeonggi, South Korea’s largest province. Growing up in a poor family, he reportedly had to drop out of school and worked at a factory due to his family’s financial difficulty. Lee started out as a civil rights lawyer before he entered politics. In 2010, he was elected mayor of Seongnam and then re-elected in 2014. Lee gained recognition through his push for creating one of the most comprehensive social welfare programs for elderly citizens and youth. Lee also strongly advocated for a universal basic income.

Yoon Suk-yeol, 61, was the country’s Prosecutor General under President Moon Jae-in’s administration until March 2021. It was not until last June that he officially embarked on his political career. Yoon made his name by investigating and eventually convicting two former Presidents from the conservative camp, Park Geun-hye and Lee Myung-bak, for corruption. Yoon seems to be running on a platform to reverse many of the policies and reforms the Moon Jae-in administration has set in place.


About the Author(s)

Stephanie Lin
Research Manager, ACGA

Stephanie Lin
 joined ACGA in October 2021 as Research Manager to support ACGA’s ongoing research into corporate governance and ESG development in 12 markets across Asia-Pacific. Previously, Stephanie was a business consultant for five years, advising multinational investment and corporate clients on regulatory, legal and reputational risks.

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