Wide gap between government, activists over chaebol reform
By Choi Sung-jin
In the run-up to parliamentary elections, the Park Geun-hye administration is praising itself for “economic democratization,” i.e. reforming family-controlled conglomerates.
According to Cheong Wa Dae and the Fair Trade Commission Monday, the Park administration has either completed legal revision or sent bills to the National Assembly for 13 out of 20 items on its legislative agenda, and is examining the rest closely.
Yoo Il-ho, the new deputy prime minister for the economy, gave 80 out of 100 points to the government’s performance in this area.
But civic groups point out many of the revised laws and regulations are too ineffective to bring about substantial changes.
A case point is the new law aimed at preventing chaebol families’ swindling money for private interests. New regulations keep the chaebol from concentrating orders in group subsidiaries and usurping corporate opportunities as well as obligate the chaebol to make public every quarter families’ equity ratios in unlisted companies and the share of intra-group transactions.
In reality, however, the revised law allows them to slip through loopholes if such transaction is worth less than 20 billion won ($16.7 million) and accounts for less than 12 percent of total sales of the other party to the deal. The chaebol also has only to make mandatory public disclosure once, not four times, a year.
The government also boasts it has effectively banned circular investments among chaebol affiliates. Yet the revised law permits them to sever just any existing link or two from the cobweb of corporate ownership, not exactly the newly formed or enhanced links, while allowing new circular investments through overseas subsidiaries.
Punitive damage reimbursement will only be made to far more limited cases than expected, and the qualifications of major shareholders have been restricted to largest shareholders while omitting their agents.
A bigger problem is that the government seems to have little interest in tackling the remaining tasks, civic activists say. There have been no discussions at all about issues aimed at improving corporate governance, such as the separate selection of auditors and outside directors, and introducing a concentrated electronic voting system and multiple representative actions.
Most people will not feel the effects of reforms, either.
According to an Economic Reform Research Institute survey, 78.4 percent said economic democratization had not made much progress at the 19th National Assembly, and blamed the government (43.2 percent), opposition party (21.9 percent) and ruling party (15.1 percent) for the sluggish reforms.
Moreover, there has been lots of popular criticism about chaebol-related scandals since this administration took office - such as the Hyundai Group’s purchase of land at an exorbitant price, Korean Air heiress’s “peanut rage,” Samsung E&C’s unfair merger, and Lotte Group’s “war of princes” - but the government has yet to make any plausible countermeasures, critics say.
“The Park administration has made some progress in chaebol reform,” said Kim Sang-jo, head of Solidarity for Economic Reform. “It can hardly be more than a ‘half success,’ however, unless it strictly enforces laws by introducing a concentrated voting system and enhancing the voting rights of the National Pension Fund.”