Having set reducing inequality and strengthening the social safety net as core policy objectives, the current administration of President Lee Jae-Myung, inaugurated on June 4, 2025, has been accelerating statutory reform. As part of this agenda, the government has consistently signaled its intention both to impose heightened economic sanctions for breaches of corporate compliance obligations and to hold senior executives personally accountable. In light of this policy direction, companies’ efforts to review and enhance the effectiveness of their compliance programs have become more important than ever in 2026.
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Amended Korean Commercial Code: Expanded Director’s Fiduciary Duty
Article 382-3 of the Korean Commercial Code, effective July 22, 2025, imposes on directors the obligations to “faithfully perform their duties for the company and its shareholders” and to “protect the interests of the controlling shareholder and ensure equal treatment of all shareholders.” Consequently, where a company breaches its compliance obligations, it is far more likely than in the past that the absence or insufficiency of a compliance regime will give rise to claims that shareholder value has been impaired. Given the recent judicial trend toward progressively expanding the scope of directors’ obligations with respect to internal controls, companies must pay attention to the fact that a director’s failure to discharge their supervisory duties with respect to violations of law from business operations may directly constitute a breach of the duty of loyalty to shareholders, leading to legal liability.
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Government Policy Direction: Strengthening Overall Regulations
The government has also emphasized corporate and senior-management responsibility in specific compliance areas such as information-security incidents, occupational accidents, and labor law violations. Notably, in December 2025, senior government officials declared with respect to personal data breaches that if regulatory violations cause public harm, severe economic sanctions should be imposed on the company to the extent that its very existence is at stake, indicating an intent to increase punitive administrative surcharges. Regarding repeated occurrence of serious accidents, the government indicated that recurring serious accidents and subsequent disclosures should cause the company’s share price to plunge, suggesting that, in addition to existing criminal and administrative liabilities, comprehensive sanctions such as punitive damages and restrictions on lending may also be imposed.
The ruling party has proposed strong legislative measures consistent with this policy direction. Key proposals include amendments to: (i) the Personal Information Protection Act (raising punitive administrative surcharges up to 10% of total revenue); (ii) the Act on Promotion of Information and Communications Network Utilization (establishing administrative surcharges for repeated breaches); and (iii) the Serious Accidents Punishment Act (imposing administrative surcharges of up to 4% of total revenue for repeated occurrences). Considering that the ruling party currently holds an overwhelming majority in the National Assembly, the likelihood that these bills will be enacted appears to be very high.
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Implications: Establishing Effective Compliance Governance to Protect Management
Against this backdrop of increasing, comprehensive pressure on senior management and companies, businesses must seriously consider: (i) whether their existing compliance framework conforms to the current government policy stance and legal standards; (ii) whether, in the event of an incident, the company would be recognized as having exercised “reasonable care and supervision”; and (iii) whether sufficient documentary evidence exists to demonstrate that management fulfilled its supervisory duties. Courts regard the presence and extent of compliance efforts not only when assessing management’s awareness of illegality but also as an important mitigating factor in decisions on detention and sentencing. Investigation authorities likewise closely scrutinize an executive's commitment to compliance during the investigation, prosecution, and sentencing recommendation stages.
Accordingly, many leading companies are concentrating on establishing effective compliance governance structures that ensure management and the board maintain active oversight and that facilitate immediate reporting of any legal issues. Beyond merely adopting formal rules, these companies are seeking ways to embed compliance systems into the daily operations of all employees to ensure they translate into practice. To proactively protect management, companies are implementing concrete measures such as bolstering board protocols, empowering relevant subcommittees, and refining the documentation of minutes and resolutions, often in coordination with external counsel.
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[Korean Version]
