Exclusive Coupang warns US investors that Korea has special risks

“There are special risks to investing in Korean companies.”

This is one part of the Coupang stock report that decided to be listed on the New York Stock Exchange. “In case of an emergency, the Korean government may be regulated,” Coupang said. “There is a risk of criminal penalties for corporate executives directly or according to their supervisory responsibilities.” It is a warning to US investors who are not familiar with the Korean legal system in advance of the risk factors in management, and it is evaluated that the economy has clearly revealed the’unfamiliarity’ of the Korean corporate environment.

“A special risk unique to Korea”

According to a stock report filed by Coupang to the Securities and Exchange Commission (SEC) on the 22nd,’the risks related to business activities in Korea’ are separately specified.

In this passage, Coupang emphasized, “There is a risk that corporate managers will be subject to investigation or criminal punishment for the conduct of the company or its employees.” “If there is an intellectual property infringement, labor standards law, fair trade law violation, and product-related defects, companies as well as management can be prosecuted or investigated,” he said. “These risks change over time.”

Coupang cited this as a special management environment in Korea, saying, “In Korea, individual executives are often subject to investigations.” He also said, “There are many cases where it is recognized that the management is not responsible.”

In fact, in Korea, excessive criminal punishment for businessmen is a problem. According to the Korea Economic Research Institute, out of 285 economic laws and regulations in Korea, 2657 items (as of 2019) were criminal penalties for companies and businessmen. There are also considerable penalties for illegal activities of employees, such as overtime work and gender discrimination, which are difficult for the CEO to realistically grasp or control.

Choi Jun-sun, an emeritus professor at Sungkyunkwan University Law School, said, “In Korea, there are a lot of punishment laws for CEOs that say that businessmen walk on the prison fence.” He pointed out that “a management factor different from the US, where penalties are mostly penalized for economic crimes.”

Various regulations are also mentioned in detail

Coupang mentioned in detail as the ruling Democratic Party put the Serious Accidents Act, which pushed against the opposition of large corporations and SMEs, as a management risk factor. The Severe Accident Penalty Act is a law that allows a person in charge of management to be imprisoned for at least one year if one or more workers die in a workplace. Although there are many causes of serious disasters, it was pointed out that it was excessive to only blame the management, but the ruling party enforced it within a month and a half after the law was introduced.

Coupang said, “The Major Disaster Punishment Act passed the National Assembly plenary session on January 8th. According to this law, if a personal accident occurs due to a violation of the obligation to ensure safety and health at the workplace or to prevent risk, the company or the management manager will be punished by criminal penalties. He said, “We can bear the reinforced responsibility, including.” “There is a possibility of financial liability, including criminal punishment, public announcement of punishment, and punitive damages liability up to five times the actual damage due to the Serious Disaster Punishment Act.” In addition, even those who have the authority and responsibility to represent and oversee the business can be held accountable,” he warned.

Warning of “bad performance”

Coupang also has various regulations promoted by the government and the ruling party, such as the enactment of the Act on the Fairness of Online Platform Brokerage Transactions (Online Platform Act) to regulate online retailers, and the amendment to the Commercial Act, which focuses on the introduction of punitive damages in all fields It was presented as a’future risk factor’. “If (new) legislation is legislated and implemented, it could lead to a lack of focus on Coupang’s core business areas,” said Coupang. “In the end, this could lead to adverse effects on Coupang’s business, financial condition, and performance.” Warned.

A business official said, “In the United States, if management risk factors are not detailed in the stock report, it is inevitable for investors to sue when problems arise in the future. Paradoxically, the listing of Coupang was an opportunity to reveal the harsh corporate environment in Korea.” Evaluated.

Reporter Mi-Hyun Cho [email protected]