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Politics editor
The ugly family feud over the reins of Lotte Group has reignited long-simmering public anger against chaebol, or family controlled conglomerates.
Politicians are capitalizing on the public sentiment to bash Lotte's owner family ― and some are going so far as to demand fundamental measures to limit the power of chaebol owners and change the way the companies are run.
The families may feel this unfair because what's happening in Lotte is not their fault. However, the reason why this is not simply a family matter is that similar problems exist in most Korean chaebol.
One shocking aspect of how Lotte has been managed was the revelation that directives from its founder Shin Kyuk-ho have always been put before board decisions or shareholder opinions.
This "rule" applied when starting new businesses, opening new branches and even selecting executives of subsidiaries. The situation could be different in other conglomerates, but this kind of corporate culture is quite common in Korea.
The Lotte case has shed light not only on families controlling entire business groups with only a small portion of shares through a complicated cross-holding structure, but also on their business malpractices.
The chaebol played a central role in the age of rapid industrialization and increasing national wealth, but are now the root cause of many structural problems in Korean society. Their dominance is making it difficult for Korea Inc. to shift gears and foster an innovative economy that requires creative thinking.
It is not a new story that they are preventing the growth of small and medium-sized companies that employ nearly 90 percent of workers.
Chaebol's dominance is also evident in the justice system.
Under past administrations, many chaebol owners were imprisoned after being convicted of embezzlement, bribery, accounting fraud or other charges. However, they were pardoned before finishing their terms.
And this sad and shameful history could be repeated again under the Park Geun-hye administration as it is considering special pardons for convicted tycoons on the occasion of the Aug. 15 Liberation Day.
Park's predecessors made empty promises to reform chaebol in their early days of presidency, but ultimately chose to maintain the status quo. And it appears that Park is following in their footsteps as well.
Park is backpedaling on her earlier pledges not to pardon convicted businessmen.
What's happening in Korea is in stark contrast to Park's presidential campaign pledge ― she vowed to achieve "economic democratization" by avoiding pardons for chaebol owners and ensuring fair competition between large and small firms.
For example, the administration has become soft-handed on inter-affiliate deals that have been abused by chaebol owners to expand their business empires. Tax officials have reduced the scope of audits into conglomerates, and the finance ministry is moving to ease regulations to spur investment by the chaebol and create more jobs.
Focusing on these short-term benefits and maintaining the chaebol-oriented system will make the problem worse and worse. Without correcting this, the country's economy will become more disoriented. Keeping the chaebol as they are will do more harm than good.
The drama in Lotte has serious ramifications for Korea Inc. Reforming the chaebol is about building a new country.
This is why Park should not overlook the calls for chaebol reform. She must grab this golden opportunity to put the country on the right track and to keep the promises she made to the people.
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