By Lee Hyo-sik
Korea's large business groups are struggling to cope with growing risks associated with the influence-peddling scandal involving President Park Geun-hye's confidant Choi Soon-sil.
According to chaebol watchers Wednesday, the unprecedented controversy is turning things from bad to worse for Samsung, Hyundai Motor, SK, Lotte and other family-controlled conglomerates, which have long been dealing with falling exports, sluggish domestic consumption and other unfavorable business conditions.
With growing uncertainties that the leaders of large business groups may be embroiled in legal trouble over their donations to Choi's two scandal-ridden foundations, the companies haven't been able to map out business plans for 2017. It is also increasingly unclear whether they can implement a year-end reshuffle of their top management.
"Normally, companies have an idea about what their business plans will be like around this time of the year. But as far as I know, many haven't even begun drawing up plans yet due to increasing uncertainties," said an executive at one of Korea's major business associations, who declined to be named.
"It seems businesses don't even know whether they will be able to carry out the year-end personnel reshuffle. I think the Choi scandal has compounded problems for chaebol," he said.
Business conditions at home and abroad have been deteriorating as local firms struggle to sell their goods in foreign markets, with domestic consumption remaining fragile. Donald Trump's surprise win in the U.S. presidential election has added more uncertainty to the global economy.
"Companies are already overwhelmed by a slew of risks in and outside the country. Worse, they may also have to deal with possible CEO risks if their leaders face a prosecution investigation over the Choi scandal," the executive said.
According to prosecutors, 19 business groups raised a combined 48.6 billion won ($43 million) for the Mir Foundation and 28.8 billion won for the K-Sports Foundation. The groups said they voluntarily gave money at the request of the Federation of Korean Industries (FKI), adding they were told that the money would be used to finance diverse cultural and sports-related projects.
However, it has been alleged that businesses may have demanded undue favors from the government in return, following the revelation that they met with President Park behind closed doors last year.
On July 24 and 25, 2015, Park held the one-on-one meetings with the heads of Korea's seven largest conglomerates, allegedly asking them to provide tens of billions of won to the foundations.
According to the prosecution, the President met the chairmen of the five largest business groups again in February: Samsung Electronics Vice Chairman Lee Jae-yong; Hyundai Motor Chairman Chung Mong-koo; LG Group Chairman Koo Bon-moo; SK Group Chairman Chey Tae-won; and Lotte Group Chairman Shin Dong-bin. She also held a meeting with GS Group Chairman Huh Chang-soo, who is the FKI chairman.
Park allegedly demanded the six chaebol heads donate more money to the Mir and K-Sports foundations.
Investigators summoned and questioned those who met with the President in private over the nature of their donations to the foundations. The leaders were also quizzed about whether they asked for favors in return for providing funds.
The executive said the prosecution's investigation into businesses should end as soon as possible to minimize its adverse effects on corporate activities. "Business must go on as usual. Any uncertainties surrounding chaebol leaders should be cleared up as quickly as possible."
According to online corporate management evaluator CEO Score, Korea's 30 largest business groups invested a combined 45.3 trillion won in the first nine months of the year, down 24 percent from the same period in 2015.
They have also downsized their workforces by a combined 14,000. Samsung Group slashed its payroll by 10,000, and the nation's three major shipbuilders dismissed 6,000 workers.
Korea's large business groups are struggling to cope with growing risks associated with the influence-peddling scandal involving President Park Geun-hye's confidant Choi Soon-sil.
According to chaebol watchers Wednesday, the unprecedented controversy is turning things from bad to worse for Samsung, Hyundai Motor, SK, Lotte and other family-controlled conglomerates, which have long been dealing with falling exports, sluggish domestic consumption and other unfavorable business conditions.
With growing uncertainties that the leaders of large business groups may be embroiled in legal trouble over their donations to Choi's two scandal-ridden foundations, the companies haven't been able to map out business plans for 2017. It is also increasingly unclear whether they can implement a year-end reshuffle of their top management.
"Normally, companies have an idea about what their business plans will be like around this time of the year. But as far as I know, many haven't even begun drawing up plans yet due to increasing uncertainties," said an executive at one of Korea's major business associations, who declined to be named.
"It seems businesses don't even know whether they will be able to carry out the year-end personnel reshuffle. I think the Choi scandal has compounded problems for chaebol," he said.
Business conditions at home and abroad have been deteriorating as local firms struggle to sell their goods in foreign markets, with domestic consumption remaining fragile. Donald Trump's surprise win in the U.S. presidential election has added more uncertainty to the global economy.
"Companies are already overwhelmed by a slew of risks in and outside the country. Worse, they may also have to deal with possible CEO risks if their leaders face a prosecution investigation over the Choi scandal," the executive said.
According to prosecutors, 19 business groups raised a combined 48.6 billion won ($43 million) for the Mir Foundation and 28.8 billion won for the K-Sports Foundation. The groups said they voluntarily gave money at the request of the Federation of Korean Industries (FKI), adding they were told that the money would be used to finance diverse cultural and sports-related projects.
However, it has been alleged that businesses may have demanded undue favors from the government in return, following the revelation that they met with President Park behind closed doors last year.
On July 24 and 25, 2015, Park held the one-on-one meetings with the heads of Korea's seven largest conglomerates, allegedly asking them to provide tens of billions of won to the foundations.
According to the prosecution, the President met the chairmen of the five largest business groups again in February: Samsung Electronics Vice Chairman Lee Jae-yong; Hyundai Motor Chairman Chung Mong-koo; LG Group Chairman Koo Bon-moo; SK Group Chairman Chey Tae-won; and Lotte Group Chairman Shin Dong-bin. She also held a meeting with GS Group Chairman Huh Chang-soo, who is the FKI chairman.
Park allegedly demanded the six chaebol heads donate more money to the Mir and K-Sports foundations.
Investigators summoned and questioned those who met with the President in private over the nature of their donations to the foundations. The leaders were also quizzed about whether they asked for favors in return for providing funds.
The executive said the prosecution's investigation into businesses should end as soon as possible to minimize its adverse effects on corporate activities. "Business must go on as usual. Any uncertainties surrounding chaebol leaders should be cleared up as quickly as possible."
According to online corporate management evaluator CEO Score, Korea's 30 largest business groups invested a combined 45.3 trillion won in the first nine months of the year, down 24 percent from the same period in 2015.
They have also downsized their workforces by a combined 14,000. Samsung Group slashed its payroll by 10,000, and the nation's three major shipbuilders dismissed 6,000 workers.
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