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2 Chaebol justice in South
Korea By Donald Kirk
well as the rising value of the won
- in sagging sales at home and abroad.
Factoring in the rising value of the won
against both the US dollar and the euro, the
results are startling - the corporation's net
income last year was about $1.7 billion, down from
about $2.3 billion the year before. "Won
appreciation," said the official, "has forced
readjustment of our export strategy" with added emphasis
on
smaller vehicles.
Whether Hyundai
Automotive - Korea's second-largest chaebol
after the Samsung group - will change in terms of
corporate governance is another matter.
"Definitely this case demonstrates the
past practices will not be accepted in the
future," said Nam Sang-koo, president of the Korea
Corporate Governance Service, which rates the
level of corporate governance under the Korea
Stock Exchange and places Hyundai Motor and Kia in
the mediocre "B" category. "It will have an
impact."
As long as the economy keeps
growing by 4% or 5% a year, however, demands for
sweeping reform remain muted. Chaebol
chieftains routinely give to politicians on both
sides of the fence - though obviously they're
likely to hand over more to conservatives.
South Korean presidents for their part
typically issue scores of pardons and amnesties on
important holidays - a practice that gives them
the opportunity to let off political as well as
business figures in a culture in which top
chaebol chieftains often are exonerated -
or let off with suspended sentences and hefty
fines - while their subordinates are made to
suffer in prison.
Such munificence may
rescue Kim Woo-choong, the 71-year-old former
chairman of the Daewoo Group, which went belly-up
with losses of more than $80 billion in 1999 as a
result of the economic crisis. Kim returned to
South Korea in 2005 to face trial in a scandal in
which two dozen of his executives went to jail,
including the president of Daewoo Motors.
The company was later taken over by
General Motors to form GM Daewoo. Kim now spends
his days in a hospital hoping for a reprieve from
a 10-year sentence - and a $22 billion fine - for
ordering his minions to cook the books, claiming
assets that did not exist, and for illegally
borrowing hundreds of millions of
dollars.
More recently, two Samsung
executives received suspended sentences last year
for bond deals calculated to ensure that chairman
Lee Kun-hee's only son, an executive at Samsung
Electronics, succeeded him.
Lee is just as
anxious as Chung Mong-koo to perpetuate his
legacy. He appears to have put off government
zealots by offering a huge "contribution to
society" after an investigation into the scheme
for ensuring the succession of his only son, Lee
Jae-yong, by increasing shares in the group's main
holding company, Everland Amusement Park.
Chung Mong-koo loved that idea. A lineup
of his top executives went through a head-bowing
apology in which they topped Samsung's offer of
800 billion won, nearly $800 million, with an
offer of 1 trillion won as Hyundai's own
contribution. The gesture was not in vain. The
judge, in suspending Chung's sentence, told him to
be sure to make the contribution as promised.
Over at SK, the third-largest
chaebol, Chey Tae-won, head of the group,
went to jail for several months four years ago as
a result of a share-swapping scheme similar to the
one at Hyundai Automotive. Despite the scandal,
Chey rides high over SK after fending off a
hostile takeover bid by Dubai-based Sovereign
Asset Management, which failed in an aggressive
attempt to get Chey removed.
As chairman
of the SK Corp and scion of the controlling
family, Chey was finally given probation in a
scandal in which he and nine underlings were
convicted of manipulating shares to strengthen his
grip. Against this background, Tariq Hussein never
doubted that Chung Mong-koo would get off.
"My gut feeling is the Korean soul will
prevail," he told Asia Times Online before the
final appeal. "People are screaming - without him
at the helm, it's difficult to make decisions.
Hyundai Automotive is the pillar of the corporate
structure, and that consideration will prevail
over other concerns."
Journalist
Donald Kirk has been covering Korea - and
the confrontation of forces in Northeast Asia -
for more than 30 years. (Copyright 2007
Asia Times Online Ltd. All rights reserved. Please
contact us about sales, syndication and republishing.)
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