This paper analyzes the environmental changes in corporate governance that Korean companies are newly confronting—the threat of hostile takeovers by foreign entities and employees' demands for participation in management—through a political economy approach, and proposes countermeasures. Hostile takeovers and employee participation in management are institutions influenced by political ideology. In simplified terms, in Europe, where the social democratic tradition is strong, hostile takeovers are difficult but worker participation in management is widely permitted, whereas in the United States, founded on liberal democracy, hostile takeovers are relatively easy but employee participation in management is rare. Although the number of citizens in Korea who prefer social democracy is increasing, given the structural characteristics of the Korean economy, the American model is judged to be more suitable than the European model. Since Korea still has weak corporate governance and product market competition, and the phenomenon of undervaluation of corporate value is severe, it is desirable to make the hostile takeover market a "contestable market" so that the potential management threat from foreign financial investors serves as a powerful disciplinary mechanism for corporations. Therefore, the management defense mechanisms demanded by the business community should be introduced cautiously and selectively. Meanwhile, the heightened employment risk of workers since the foreign exchange crisis can, in principle, be resolved through employee participation in management or reduction of employees' income risk. However, it is desirable to accept employee participation in management in Korea only in a limited manner, and the appropriate form of employee participation in management for Korea is judged to be the revitalization of the Labor-Management Council under the "Act on Workers' Participation and Cooperation Promotion" rather than the German or Japanese models. Additionally, to reduce employees' income risk, this paper proposes the introduction of a "guaranteed employee stock ownership plan" and a "retirement compensation fund" (tentative names). Finally, since corporate governance and labor-management relations—the most pressing issues in the Korean economy—are interconnected through politics, active interdisciplinary research across the social sciences, including management, economics, law, and political science, is needed in the future.