FTC puts off plan to hold foreign CEO more responsible

South Korea’s antitrust regulator has decided to put a brake on its plan to hold foreign business leaders of large corporations here amid looming concerns it could trigger a trade dispute with the US.

According to multiple sources at the government and local reports, the Fair Trade Commission has canceled its plan to make a preliminary announcement next week on the revision of the enforcement decree of the monopoly regulation and fair trade act that aimed at designating foreigners as the de facto leaders of companies with over 5 trillion won ($3.82 billion) in total assets. The regulator has named a person of a large company, usually a conglomerate, who controls the operation of the business entity, such as Lee Jae-yong as the head of Samsung. Foreign CEOs, meanwhile, have been off the list, even though the size of their business operations exceed the 5 trillion won mark.

The FTC backtracking on its drive to hold foreign CEOs more responsible for their business operations, however, was met with concerns that such move could hinder attracting foreign investment and that a review is needed on whether or not it violates the US‘ status as most favored nation under its bilateral trade agreement with Korea. The most favored nation status refers to an economic position in which a country enjoys the best trade terms given by its trading partners.

It is reported that the US has already expressed disagreement on the FTC move during a working level talk between the two countries in May that the revision targets Coupang founder Kim Bom-suk, a Korean American who holds US citizenship, in order to put him under tighter supervision. He would then be required to file details on inter-affiliate transactions and changes in his shares. If a head of a large business fails to provide the FTC with such information, he or she can face criminal punishment.

The regulator refuted that the revision would be applied to other CEOs of other nationalities, such as S-Oil, a Korean refiner whose 63.4 percent of stake is owned by the Saudi Arabian oil company Aramco and is spearheaded by Saudi Arabian executive Hussain A. Al-Qahtani. Korea has a total of 76 corporations with asset worth more than 5 trillion won. Coupang and S-Oil are among 11 corporations of the 5 trillion won club operating without the FTC‘s label of the designated leader because their representatives are either foreigners or for other reasons.

Since last year, the FTC, however, has been facing demand to have the Coupang founder on the list, with its competitors citing the need to apply the same yardstick to the NYSE-listed e-commerce giant.

The FTC is reportedly to discuss the matter closely with related ministries before making any announcement.

By Hong Yoo (yoohong@heraldcorp.com)