Chaebol hit for collusive ties with policy makers

By Kim Rahn

Four in 10 outside directors appointed by the nation’s top 10 conglomerates are former top policymakers, such as cabinet ministers, Cheong Wa Dae officials, heads of the tax agency and antitrust commission, or prosecutors, according to a market researcher.

The conglomerates are being criticized for employing the former high-ranking officials as “lobbyists” to take advantage of their ties to incumbent policymakers.

Chaebul.com, an online market research provider, stated Sunday that 93 listed affiliates of the top 10 conglomerates have appointed or will soon appoint a total of 126 outside directors at their regular shareholders’ meetings, many of which are scheduled for this month.

Of them, 46 people, or 36.5 percent, are from government branches including the presidential office, ministries, the National Tax Service, the Fair Trade Commission, the Financial Supervisory Service (FSS) and the prosecution. The rest are professors or former businesspeople.

Critics point out that the outside director system, which was adopted to check chaebol owners’ abuse of power for personal purposes, is being misused to cement collusive ties between politics and big business.

“As tax offices and other government agencies are strengthening inspections and regulations on conglomerates, it seems that more companies are appointing former policymakers to take advantage of their links to the authorities,” Jeong Seon-seop, head of Chaebul.com, said.

Chae Yi-bai, a researcher at the Center for Good Corporate Governance, also said, “They work as lobbyists when the conglomerates have problems in business because current policymakers are their former co-workers or juniors.”

It is said that incumbent government officials sometimes pressure companies to appoint senior staff retirees as outside directors. It is similar to “parachute appointments,” through which such retirees take highly-paid jobs at government institutions.

As controversy continues over such practices, Strategy and Finance Minister Hyun Oh-seok vowed to disqualify people with no proven track record in related fields from taking up such positions, in a report to President Park Geun-hye last month.

However, four former ruling Saenuri Party members and those in Park’s election camp took auditor and outside director positions in public companies one week after Hyun’s pledge.

“Those who take outside director jobs through their connections with chaebol owners or CEOs usually do not raise any objections to their managerial decisions. They cannot fulfill their duty independently as outside directors,” Chae said.

In shareholder meetings, both Samsung Life Insurance and SK Gas plan to reappoint former Planning and Budget Minister Park Bong-heum as an outside director, while LG International will have former Vice Knowledge Economy Minister Kim Jeong-gwan.

Another former economy minister, Lee Jae-hoon, will work for SK Telecom; Chung Dong-ki, former senior presidential secretary for civil affairs, for Lotte Chemical; Yoon Dae-hee, former senior presidential secretary for economic affairs, for LG; Hur Yong-suk, former Korea Customs Service commissioner, for SK Networks; and Park Dong-yeol, former head of Daejeon Regional Tax Office, for Lotte Shopping.

From the FSS, former Deputy Governor Kang Young-ku, another former Deputy Governor Yang Seong-yong, and former Senior Deputy Governor Lee Jang-yung will become outside directors at Lotte Non-Life Insurance, Samsung Card and Hyundai Heavy Industries, respectively.

Other retired officials being given director positions include former Korea Deposit Insurance Corp. Chairman Lee Sang-yong and former Export-Import Bank of Korea CEO Shin Dong-kyu.