S Korea business leaders agree on class-action suits

South Korea's business community yesterday accepted to a key plank of President Roh Moo-Hyun's reform drive against corporate corruption by supporting the introduction of class action suits by minority shareholders.

The agreement came at a meeting of five business organizations, including the Federation of Korean Industries (FKI), which represents the interests of the giant conglomerates known as chaebols.

FKI chairman Hyun Myung-Kwan said the organizations agreed in principle to allow minority shareholders to file class action suits over corporate irregularities.

But Hyun called for strict rules to stop minority shareholders from abusing class action rights. He also demanded the new system not be introduced until next year and should be reviewed after five years.

"After running the system for five years, we will demand revisions to the laws, rather than calling for the abolition of the laws," he said.

Roh, who took office last month, has vowed to introduce the class actions and other reforms in a bid to end corporate corruption and illegal share transactions used by chaebol owners to tighten their grip on their groups.

The drive has sparked corporate protests, with business leaders arguing the reforms would hurt the economy.

Such concerns intensified last week when prosecutors indicted 10 SK Group executives, including the group's controlling shareholder Chey Tae-Won, for falsifying accounts to inflate earnings. Chey was jailed last month on charges of misappropriation relating to share deals between group subsidiaries.

Roh yesterday in a speech to businessmen that South Korea's economy was being pressured by high oil prices and the stand-off over North Korea's nuclear ambitions.

"Our economy faces considerable difficulties. It's time for us to take firm countermeasures," he said.

But he stressed he would push ahead with reforms to rein in the chaebols, whose over-expansion and iron grip on the economy hampered the country's ability to compete and contributed to the 1997 to 1998 economic crisis.

"We have to implement reform in economic, political and all other quarters. Reform is a prerequisite to enhance competitiveness," he said.