The government is considering adopting a three-year road map for market reform that focuses on improving the ownership and corporate governance structure of chaebol.

However, chaebol _ sprawling family-owned conglomerates _ strongly oppose the planned road map, which they said came off the desk of policymakers not well versed in the real business world.

The FTC plans to use the inter-subsidiary investment ceiling regulation imposed on chaebol, which were originally mapped out as a tool to curb conglomerates from blindly expanding their businesses, as leverage to induce major conglomerates to change their corporate governance structure.

The road map contains an apparent message that the government will provide a legal loophole for conglomerates, if such regulations really act as a burden to their business activities, with the aim of encouraging self-policing.

Under the current Fair Trade Law, affiliates of conglomerates are barred from holding stakes or making equity investments in sister and non-affiliated companies in excess of 25 percent of their net worth.

However, chaebol affiliates with debt-to-equity ratios equal to or less than 100 percent are exempt from the inter-subsidiary investment ceiling regulation.

According to the draft road map, the FTC would not apply those rules to conglomerates that have effective systems to prevent arbitrary decisions by owners.

As a tool to avoid investment ceiling regulation, the FTC forwarded the adoption of a holding company system.

This means the FTC considers corporate governance structure of companies more important than the financial structure. It believes the adoption of the holding company system would naturally block inter-subsidiary investments between firms affiliated with chabeol, thus simplifying the ownership structure of the conglomerate.

The FTC expects three to four chaebol with total assets of more than 5 trillion won to adopt the holding company system. LG Group, for instance, has already adopted the holding company system, marking a first for South Korea.

The FTC also forwarded the cumulative voting system, which strengthens the clout of small shareholders, and granting more authority to outside directors to act as a check on chaebol leaders.

The commission also proposed chaebol owners and their family members trim their actual voting rights in affiliated firms to an extent that matches the amount of shares they own in the companies.

The move is a direct attack on major shareholders exercising voting rights beyond the legal limit.

The agency said in July that the heads of South Korea¡¯s 11 largest chaebol have voting rights more than 10 times the size of their individual share holdings. It wants chaebol to reduce their voting rights to a maximum of twice the actual share holdings.

In addition, chaebol with small numbers of affiliates can be exempted from cross-investment ceiling regulations.

Meanwhile, the FTC plans to regularize its probe of illegal inter-subsidiary trading among chaebol affiliates.

The FTC is reviewing the forming of a committee of outside directors to supervise intra-affiliate financial transactions.

However, conglomerates oppose such moves by the FTC, claiming such restrictive measures would only strengthen the voices of small shareholders. Still, the FTC plans to ask conglomerates with total assets of over 2 trillion won to adopt the cumulative voting system.

Chaebol quickly contended the plan might infringe upon the right of companies to manage themselves.