There is a special risk only in Korea, Coupang … Warning to American investors

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

This is a part of Coupang’s stock report that it decided to list on the New York Stock Exchange. Coupang said: “In an emergency, there may be a regulation by the Korean government.” It is a warning to American investors who are not familiar with Korean legislation before risk factors in management, and it is assessed that the economic world has clearly revealed the ‘unfamiliarity’ of the Korean business environment.

“A special risk exclusive to Korea”

According to a stock exchange report submitted by Coupang to the Securities and Exchange Commission (SEC) on the 22nd, “the risks related to doing business in Korea” are specified separately.

In this passage, Coupang emphasized that “there is a risk that corporate managers will be subject to investigation or criminal penalties for the conduct of the company or its employees.” “If there is an infringement of intellectual property, labor regulations, infringement of the fair trade law and defects related to products, companies and 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 said: “There are many cases where it is recognized that management is not responsible.”

Source = Coupang Values ​​Report

In fact, in Korea, excessive criminal punishment for entrepreneurs is a problem. According to the Korea Economic Research Institute, out of 285 economic laws and regulations in Korea, 2,657 items (as of 2019) were criminally sanctioned for businesses and entrepreneurs. There are also considerable penalties for illegal employee activities, such as overtime work and gender discrimination, which are difficult for the CEO to understand or realistically control.

Choi Jun-sun, professor emeritus at Sungkyunkwan University School of Law, said: “In Korea, there are many punishment laws for CEOs that say that businessmen walk on the prison fence.” He noted that “a different management factor from the United States, where penalties are primarily penalized for economic crimes.”

Various regulations are also mentioned in detail

Coupang mentioned in detail how the ruling Democratic Party put the Serious Accident Law, which lobbied against opposition from large corporations and SMEs, as a management risk factor. The Serious Accident Penalties 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 the workplace. Although there are many causes of serious disasters, it was pointed out that it was excessive to just blame management, but the ruling party enforced it within a month and a half after the enactment of the law.

Coupang said: “The Law on Punishment for Major Disasters was approved in the plenary session of the National Assembly on January 8. According to this law, if a personal accident occurs due to a violation of the obligation to ensure safety and security health in the workplace or prevent risks, the company or the management manager will be punished with criminal penalties. He said: “We can assume even reinforced responsibility.” “There is a possibility of financial responsibility, including criminal punishment, public announcement of the punishment and responsibility for punitive damages up to five times the actual damage due to the Law of Punishment for Serious Disasters. “In addition, even those who have the authority and responsibility to represent and manage the business may be liable,” he warned .

Warning of “poor performance”

Coupang also has various regulations promoted by the government and the ruling party, such as the enactment of the Online Platform Brokerage Transactions Fairness Act (Online Platforms Act) to regulate online retailers, and the amendment to the Commercial Law, which is the core of the introduction of punitive compensation systems for damages in all fields, which was presented as a “future risk factor”. “If (new) legislation is enacted and implemented, it could lead to a lack of focus on Coupang’s core business areas,” Coupang said.

A trade official said: “In the United States, if the management risk factors are not detailed in the equity report, it is inevitable that investors will file a lawsuit when problems arise in the future. Paradoxically, the price of Coupang was an opportunity to reveal the tough business environment in Korea. ” Evaluated.

Reporter Mi-Hyun Cho [email protected]