Park tones down on chaebol reform
After speechifying about reforming big businesses for months, Park Geun-hye, presidential candidate of the conservative ruling party, Saenuri, appeared Friday to backtrack toward her corporate supporters.
In announcing a 35-point reform plan on business, jobs and the welfare of workers, Park excluded much of her initial suggestions for reforming chaebol, the country’s family-owned conglomerates, frequently accused of monopolistic behavior and unlawfully transferring corporate wealth to their founding families.
However, she stressed commitment toward strengthening fair-trade regulations to improve business parity in markets, help small- and medium-sized firms and encourage entrepreneurship, which would be critical for creating more jobs.
“If cross-shareholding is restricted, our enterprises could be vulnerable to hostile merger and acquisition (M&A) attempts by foreign companies. Dramatic changes will also cause too much business sector disruption,” Park told reporters while explaining why she turned down the suggestions to ban circular equity investment in chaebol firms.
“However, all new circular equity investment will be restricted. The priority is to give the country the best shot at overcoming the economic crisis.”
Recommendations for writing a new law regarding the governance of chaebol and allowing civilians to participate as juries in the trials for corporate leaders convicted of business irregularities and other crimes were also dropped as well.
“Democratization” of the economy has been a buzzword in the Korean president election. Park and her rivals Moon Jae-in, the candidate from the Democratic United Party (DUP), and Ahn Cheol-soo, a popular independent contender, had been racing to offer new ideas to loosen the chaebol grip on the economy and improve living standards for working class Koreans.
However, with the economy taking a turn for the worse as worsening global conditions decimate exports, the talks about democratizing the economy have been receding, with candidates putting growth back on the front burner.
Park’s backtracking on chaebol reform issues was predictable because she recently split with Kim Chong-in, who had been one of was her key strategists on economic policies and touted as a flag-bearer for economic democratization.
Circular equity investment allows chaebol to weave a complex web of corporate ownership that accelerates the transfer of wealth to the founding families.
For example, Samsung Electronics Chairman Lee Kun-hee owns 20.76 percent of Samsung Life, while Samsung Everland, essentially the holding company of the Samsung business empire, is the second-largest shareholder with a 19.34 percent stake. And the majority shareholder of Samsung Everland is Lee’s son, Jae-yong, a Samsung Electronics president.
Essentially, this means that Chairman Lee gets to maintain dominant control over his corporate empire by leveraging the assets of Samsung Life’s insurance customers.
About rejecting the idea to establish a separate law regulating big businesses, Park said: “There has been no such precedent in other countries around the world. That kind of a law would also clash with existing laws. Legislation is a long-term task and can’t be done in haste.”
Park also believes that strengthening punishment for corporate crimes would be a better approach than inviting regular people in to the courtroom.
Election observers believe that Park’s step changes are an attempt to massage the egos of corporate leaders and conservative voters, who remain her main support base.
“I will solve the problems of discrimination between regular and non-regular workers. I will also eradicate the act of injustice that large-scale distributors commit on traditional markets,” she said.