South Korea's market watchdog issued a warning that firms might be subject to fines if they fail to increase shareholder returns over the long term.

This warning indicated a more stringent system, which comes after a reform package that was intended to encourage voluntary efforts was received with market disappointment.

Penalties Awaiting for Non-Compliant Firms

During a news conference on Wednesday, February 28, Lee Bok-hyun, governor of the Financial Supervisory Service, said that officials are "discussing various measures to deal with firms failing to meet certain criteria regarding shareholder returns," as reported by Reuters.

The initiatives being discussed were not part of the business reform package that was unveiled earlier this week, but according to Lee, they will be included once the specifics are finalized.

Lee said non-compliant corporations might face penalties such as being removed from the stock market. He also said that it would be tough for firms to be listed for an extended period of time without making any progress.

Vice Finance Minister Kim Byoung-hwan separately stated on Wednesday that the program "will not end up as a one-time, short-term task but is part of continuous, mid- to long-term efforts."

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The Corporate Value-up Program

Launched on Monday, February 25, the Corporate Value-up Program is the reform plan for listed firms with the stated goal of increasing shareholder returns and decreasing the "Korea discount" on stock prices, according to The Chosun Daily.

The Korea discount refers to South Korean corporations' lower values than global rivals owing to poor dividend distributions and the domination of rich business families.

Unfortunately, many experts felt the reform package fell short due to its lack of clarity and the fact that it did not include any incentives, such as tax breaks or fines, to encourage businesses to make the necessary modifications.

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