Korea Passes New Employee Ownership Legislation

Korea has created the framework for a new employee ownership law. Under existing law, Korea has an employee stock purchase program not unlike those in the U.S. Take-up on the plan, however, is light. Under the new law, companies will be able to make tax-deductible contributions to employee ownership pans, and, like leveraged ESOPs in the U.S., will be able to borrow money to buy shares, repaying the loans in pretax dollars. Employees will also be able to purchase shares on a tax-favored basis. Details of the new law need to be developed before it becomes effective next year. There is still considerable skepticism about the concept of employee ownership, however, from both the corporate and union sides.