Legal penalties needed for change say critics

By Kim Tae-gyu

Seven major Korean conglomerates have been listed as failing to work together with domestic suppliers and subcontractors, a key industry objective set by President Lee Myung-bak’s administration.

The Commission on Shared Growth for Large and Small Companies (CSG) announced Thursday the results of a year-long survey of 56 conglomerate subsidiaries on the extent to which cooperation existed between major and small businesses.

The seven that failed the grade were Dongbu Engineering & Construction, Hanjin Heavy Industries & Construction, Hyundai Mipo Dockyard, Home Plus, LG Uplus, STX Offshore & Shipbuilding and Hyosung Corp.

The CSG said the companies were not completely guilty as they have shown a willingness to take care of their suppliers compared to those excluded from the research.

In contrast one Seoul analyst on condition of anonymity said the results of the survey were accurate, revealing and demanding change.

“The CSG visited more than 5,000 subcontractors of the 56 companies to learn how they were being treated by the big firms. In such an extensive study the data must be accurate in gauging chaebol efforts to build win-win relationships. The seven players at the bottom will have to redouble their efforts.”

In the face of the criticism that his business-friendly policies benefit merely big firms at the expenses of smaller ones, President Lee has spurred the initiative of shared growth a priority in industry. The establishment of the CSG in 2010, a presidential committee, also mirrored his solid desire to set up such an agency.

Those who garnered “superior” and “good” in the CSG report will get special treatment from the administration — they will be exempt from some investigations by the nation’s anti-trust watchdog as well as being given an advantage when applying for government projects.

Underachieving companies will not be punished but the CSG plans to offer consulting services so they can improve.

Some critics suggest that the CSG should come up with measures that contain legal obligations.

“I wonder how much conglomerates will be affected by the announcement of the CSG, because the steps do not carry legal binding force at all,” professor Lee Phil-sang at Korea University said

The CSG looked at various aspects of win-win business cooperation in order to produce the publication in which 56 companies were placed in four categories: “superior,” “good,” “pass,” and “fail.”

A total of 23 companies barely made the cut and failed to get respectable grades, among these were GS Caltex, S-Oil, SK Telecom, KT, GM Korea and Hynix Semiconductors.

In comparison, Hyundai Motor Group gained an impressive appraisal with six out of its seven affiliates surveyed receiving one of the two top grades.

Flagships of the automotive group, Hyundai Motors and Kia Motors got the highest scores along with Samsung Mobile Display, POSCO, Samsung Electronics and Samsung Electro-Mechanics.