Corporate Responsibility

Conglomerates Need to Show Greater Entrepreneurship

No news could be more welcome for the moribund national economy than massive investment plans major conglomerates announced last week.

All the more so, because these giant, family-controlled business groups had not stirred an inch since the onset of the global recession, despite continued requests, persuasion and coercion to make capital spending to jumpstart the economy, from all levels of government officials, including President Lee Myung-bak.

The government, which has frontloaded 60 percent of its annual budget in the first six months, had few other choices but to resort to conglomerate investment. Private consumption, the other pillar of economic recovery, has yet to show visible signs of a pickup.

We hope the chaebol's turnaround is attributable to the recent series of optimistic forecasts for the global economy, including one from Professor Nouriel Roubini, or Dr. Doom, of New York University, rather than to the near threatening from Cheong Wa Dae, although the seemingly coordinated announcement by the nation's top-5 or 6 conglomerates leaves some bitter aftertaste.

Coerced investment of course runs counter to the free market principle, but the big businesses need to think about their responsibility to society, especially since the inauguration of the incumbent administration, which has resolved almost all of their long-cherished desires, including the abolition of the ceiling for equity investment, the ban on jumping into the banking business and the introduction of poison pills to help cement their grip on the managerial controls.

They should also think how the term, ``corporate social responsibility,'' which originally means the businesses' contribution to sustainable, or environment-friendly, growth, or donation to social causes, have come to mean capital spending, one of the most basic corporate activities, in this country.

The days seem to be long gone when Korean entrepreneurs stunned the world with their hardly imaginable ventures, such as the late Hyundai Group founder Chung Ju-yung's legendary receipt of orders abroad for large ships by presenting only the design drawing of a shipyard as well as the former Samsung Group chairman Lee Kun-hee's do-or-die venture into the semiconductor business, which turned his group from a third-rate TV maker into a global IT giant.

Their successors, probably scared by the Asian financial crisis of a decade ago, are bent more on shrinking from risks, while hoarding cash more than 10 times their capital. Worse, some of them are encroaching upon the domain of mom-and-pop stores under the pretext of modernizing distribution industry or failing to shed their time-honored habit of heavy-handed dealing with subcontractors and parts suppliers by delaying payments or slashing prices.

The time has long past for these conglomerates to show more entrepreneurship with global competitors, while leadership or social responsibility for their smaller partners and consumers at home. This is also one way for chaebol to win back some respect from the public, something the Korean conglomerates are disturbingly lacking.