The
sleaze that shames Seoul By
Aidan Foster-Carter
Quite a contrast,
aren't they, the two Koreas? One is a weird,
weepy-creepy, nasty dynastic dinosaur. The other
is ultra-modern, hi-tech, dynamic and vibrant: a
stunning success story. So much so that in
November the Economist headlined a feature on
South Korea: "What do you do when you reach the
top?" [1] (Their answer: Tweak a few things here
and there.)
Top of what, though? Exports
are one thing, but virtue is another. Those of us
who enthuse and root for South Korea have a
problem. Amid all the glitter, there are some bits
that stink.
I keep a running file on Korea
called "Corpulent Governance" (geddit?). It's
always full, sad to say. Right now, it's
overflowing. So here are
some tales to make you hold your nose - or retch,
or weep. It gives me no pleasure to write thus,
but this stuff has to be faced up to.
First up, the chaebol
(conglomerates). Many top Korean companies,
including household names, are run by crooks.
That's not a libel; it's a fact. The chairmen of
Samsung, Hyundai Motor, SK and Hanwha - the first,
second, third and tenth largest business groups -
have all been convicted of crimes in Korean courts
of law. And three of them (guess the exception)
have spent time behind bars - though only serving
a fraction of their supposed sentences.
Usually it's financial, but not always. In
2007 Kim Seung-youn, the chairman of Hanwha -
founded as Korea Explosives, but now inter alia
Korea's second largest non-bank financial group,
big in insurance - hired goons to beat up some
guys who got in a fight with his son; even
wielding a metal bar himself. [2]
Sentenced to 18 months, Kim pleaded
ill-health and was out in no time. The Korea Times
recently called Kim a "Dragon CEO" (he was born in
1952), noting wryly that the mythical beast may
remind people of this event. [3] No one seems to
care.
Unbelievably, this was the man whom
last year South Korea chose as a leading lobbyist
in its (successful) bid to host the 2018 Winter
Olympics. As the Financial Times commented: "Let's
hope he has some more gentle means of persuasion
at his disposal than steel pipes." [4] Seoul must
have decided it needed to send a heavy hitter, if
you'll pardon the expression.
Another such
thug is at least behind bars where he belongs.
Chey Chul-won - a cousin of SK chairman Chey
Tae-won, and former CEO of SK's logistics
affiliate, the aptly named Might & Main
(M&M) - received an 18-month jail sentence
last February for beating a laid-off truck driver
with a baseball bat.
Yoo Hong-joon had
staged a one-man protest for months outside group
headquarters in Seoul. One day Chey called him in,
hit him repeatedly with other executives present,
and then threw checks at him as "compensation".
[5] Charming.
In his defense, Chey claimed
that what he did was no worse than goes on in the
army every day. (South Korea still has universal
male conscription.) It turned out he'd earlier
threatened a woman living in the apartment below
his - again with a baseball bat, and with three
club-wielding goons in tow - after she complained
about "extreme" noise from upstairs. Police were
called, but laid no charges. Afraid, the woman and
her family moved out, sharpish. [6]
But
more often, as I said, it's money. Take the three
largest chaebol. Though successful as
businesses, all are marred by financial
malpractice - but have only had their wrists
slapped.
Since the old Hyundai group broke
up, Hyundai Motor is the number two conglomerate.
It has grown to become the world's fifth largest
car-maker, led by Chung Mong-koo - who in 2006
spent two months in jail prior to conviction in
2007 for embezzling US$100 million to create slush
funds. Sentenced to three years, he never went
back inside; a judge ruled that the economy needed
him. And in 2009 he got a special pardon from
President Lee Myung-bak. [7]
So did the
ultimate teflon tycoon, Samsung's Lee Kun-hee.
Like Chung, Lee's business nous is not in doubt.
But nor are his convictions. In July 2008, Lee was
fined $109 million for tax evasion. [8] Two years
later, he was again fined US$89 million plus a
three year suspended jail term for illegal bond
trading back in 1996: part of a ploy to line up
his son Jae-yong as his successor. [9] (As in
North Korea, so at Samsung. In both cases the kid
had better be good.)
The fines are peanuts
to Korea's richest man, whose wealth Forbes put at
US$9.3 billion last year. [10] When the tax fuss
broke he resigned as group chairman, but bounced
back in 2010 to chair its flagship Samsung
Electronics (the shareholders weren't consulted)
after President Lee - as an ex-Hyundai CEO, a
chaebol man himself - pardoned him on all
counts. [11] Handy.
Some say the rot runs
deeper yet. Samsung's former top legal counsel
turned whistleblower in a book published in 2010,
which sold 120,000 copies though no Korean paper
dared even mention it - for fear the wrathful
behemoth would withdraw advertising. If you
believe Kim Yong-chul, Samsung has much of the
Seoul establishment in its pay. Prosecutors called
that baseless, and Samsung said it was "seething"
at this "pile of excrement" - but it didn't sue.
[12]
We've already mentioned SK (formerly
known as Sunkyong). While not a global name like
Samsung or Hyundai, the number three
chaebol has grown rapidly in the past
decade. Last year, it posted sales of $114
billion, up 30% from 2010. Originally a textile
manufacturer, SK's assets now include Korea's
largest oil refinery and its leading mobile phone
network.
And would you like chips with
that, Mr Chey? Don't mind if I do. SK's latest
acquisition is Hynix, the world's number two
memory chipmaker (Samsung is number one). It
bought this from the creditor banks which have
long run it (it once was part of Hyundai) for $3
billion, in a rather farcical "auction": SK was
the sole bidder, after shipping group STX pulled
out.
In his new year message, issued on
January 18, SK chairman Chey Tae-won vowed to make
Hynix the world's top chipmaker. Isn't this a bit
late for a new year message? - unless they had
decided to Asianize, and mark the Year of the
Dragon instead of the Western one.
Indeed,
normally the message would have come out a month
earlier. The reason it didn't, and also for SK
canceling its regular new year's meeting for the
first time in 59 years, is that Chey currently
finds himself in a spot of bother. On January 5,
prosecutors indicted him and his brother, SK vice
chairman Chey Jae-won (who is being held in
custody). The charge is that they used $170
million in company funds to cover personal losses
on futures trading.[13]
The Cheys are
innocent until proven guilty. But Chey Tae-won has
form. In 2003, he was convicted of a $1.2 billion
accounting fraud: no small potatoes. You can guess
the rest, or maybe you remember. After a few
months in jail, Chey was out and back in charge.
That riled Sovereign Asset Management, a
New Zealand-owned fund which had invested in SK.
Battle ensued, as Sovereign tried and failed to
oust Chey. Koreans rallied round their compatriot,
while other foreign investors mostly watched.
Eventually Sovereign cashed out - for a huge
profit. SK's governance was much improved, but
with a felon still at the helm.
In law
that's no longer so, since - you guessed, again -
Lee Myung-bak gave Chey Tae-won a pardon in 2008.
Two years later, Chey was chosen to be the face of
Korean business to the world, when he hosted the
business summit held alongside the Seoul Group of
20 summit. A highly respected and doubtless able
figure, he's a regular at the World Economic Forum
and is probably heading to Davos even as I write;
he hasn't missed one since 1998.
Depressing, isn't it? Samsung, Hyundai
Motor and SK - I'm not so sure about Hanwha - are
all in many ways great companies, indeed world
beaters. (That's enough beating - Ed.)
And
yet all are run by men who, whatever their
business acumen, also have convictions (and I
don't mean their beliefs). In many if not most
other countries, East or West, such a criminal
record would either formally disbar them from
office, or would be regarded as so shameful that
they could not in conscience continue. Bad image
for the company, and for the country.
But
not in South Korea. That saddens me. It can't be
right, or good in the long run. But who will do
anything about it? Politicians, maybe? Park
Geun-hye, a leading contender for the presidency -
Lee Myung-bak's successor will be elected on
December 19 this year - hinted recently that if
elected she may tighten up on the chaebol -
even though she is a conservative who now leads
the ruling Grand National Party, albeit no friend
of Lee MB. [14]
Yet many South Koreans
would snort at the idea that politicians can clean
up the chaebol, or anything else - because
they too are mired in scandals. That is a second
and separate sad Seoul saga, and a tale to be told
in another article. Watch this space.
Aidan Foster-Carter is
honorary senior research fellow in sociology and
modern Korea at Leeds University, and a freelance
consultant, writer and broadcaster on Korean
affairs. He has visited South Korea some 25 times
in the past 30 years, starting in 1982.
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