In his new book The Millionaire was a Mole: The Twisted Life of
David Karr, Harvey Klehr, the distinguished historian of
Communism, recounts the colorful, sordid, and altogether unlikely
story of a man who, born into an ordinary middle-class Brooklyn
family in 1918, was, in turn, a writer for Communist newspapers like
the Daily Worker, an employee of the Office of War Information
in Washington, a flunky for the syndicated D.C.-based columnist Drew
Pearson, a PR guy in New York, the CEO of a major defense contractor,
a corporate raider, a Broadway and Hollywood producer, the general
manager of the George V Hotel in Paris, and – finally, from 1973
until his mysterious death in 1979, which has been attributed
variously to the CIA, the Mossad, the Mafia, and the KGB – a Soviet
Along the way, Karr acquired a multitude of friends, enemies, and
acquaintances in high places, becoming a target during his years with
Pearson of Senator Joseph McCarthy and columnist Westbrook Pegler;
after relocating to France, he became a business partner of Aristotle
Onassis and a friend of Kennedy clan member Sargent Shriver, who
introduced him to famous oil tycoon Armand Hammer. In turn, Hammer,
who had enjoyed close ties to the Kremlin since 1919, and who helped
fund Communist operations in the U.S. and Europe in exchange for
business concessions in the Soviet Union, introduced Karr to Soviet
officials and ended up with a lucrative job helping U.S. firms set up
business in the USSR. It was Karr, for example, who set up the
financing for the first Western hotel constructed in the Soviet
What exactly did Karr do during his brief stint as a KGB agent? He
provided his Kremlin bosses with inside information on the
presidential campaigns of several Democratic candidates – Shriver,
Henry Jackson, Jerry Brown, and Jimmy Carter. “He tried to
insinuate himself in the Gerald Ford White House,” said Klehr in an
“He probably also worked for the Mossad.” Was he a convinced
Communist, betraying his country in the name of principle, however
misguided? No. Throughout his life, Karr seems to have been a man who
believed only in advancing his career and lining his pockets. Almost
certainly, he committed treason – serving the interests of
America’s totalitarian enemy – only because it was profitable.
When you think about it, becoming a Kremlin pawn was the natural last
act in the career of this sleazy, thoroughly unscrupulous character.
During the past few weeks, we’ve been covering the brief but crowded and fascinating history of Twitter bans. We’ve noted that while Twitter, when asked to explain a user ban, cites its impartial-sounding “Twitter Rules” and “Terms of Service,” the rules seem to work, politically speaking, in only one direction.
As we’ve seen, a flamboyant, wisecracking opponent of identity politics got kicked off Twitter – while the terrorist group that fomented violence to prevent him speaking at Berkeley has kept its Twitter account.
Similarly, a virulently anti-Semitic
freshman Senator has retained her coveted “blue check” – while
a Twitter user who pointed out her anti-Semitism got the boot.
Now, as we’ve already reported, it’s our turn. In mid February, one of us opened up our Twitter account to find a big red banner informing us of our suspension.
All our tweets had been removed. Nearly
four years’ worth. It was not possible to post new ones.
We then wrote back, asking to know the
specific reason for our suspension. Twitter Support’s answer? “Your
account has been suspended due to multiple or repeat violations of
the Twitter Rules: https://twitter.com/rules.”
We responded with an e-mail stating
that our suspension “seems unfair, given that there was no warning
or mention what the violation was.” We then received an e-mail
chiding us for trying “to update a case that has been closed” and
telling us to “submit a new case.”
We did so. Once again, we were informed
that “Your account has been suspended due to multiple or repeat
violations of the Twitter Rules: https://twitter.com/rules.”
What do you call it when a social-media
platform bans you without telling you? As we’ve previously
discussed, it’s called a shadow ban. But Twitter doesn’t shadow
ban! It must be true, because it says
so on Twitter’s own company blog.
Let’s make one thing clear. Here at
Useful Stooges, we’re believers in democratic capitalism. We
understand the argument that Twitter, which is traded on the New York
Stock Exchange (NYSE), is a private company and has a right to
permanently suspend whichever users it wants to.
Then again, Con Edison, which provides
energy to residents of New York City and environs, is also a private
company. It’s also traded on the NYSE. Does it have a right to deny
electricity to users whose opinions it disapproves of?
What about your local phone company?
Does it have a right to turn off your phone service if it doesn’t
approve of your voting record?
These aren’t idle questions or
ridiculous comparisons. The fact is that over the last few years
Twitter, like Facebook and YouTube, has become a major site of public
debate on the issues of the day. Once these platforms have attained a
certain level of importance, they can no longer be considered private
in the same way they once were. They’re part of the public square.
They’re more important than even the largest newspapers and network
The President of United States famously
uses Twitter to react to news developments in real time. Is it fair
to deny Twitter access to U.S. citizens who want to know what their
President has to say?
Some observers have argued that Twitter
and other social-media platforms qualify under US law as public
accommodations – which would mean that in at least some
jurisdictions it would be illegal for them to ban users because of
their political views.
What now? Well,
we’re not giving in. Because it’s not just about us. And it’s
not just about Twitter. It’s about this whole social-media
landscape which, for good or ill, is where we have a great many of
our important conversations nowadays. For the gatekeepers of this
territory to close that space off to people whose politics they don’t
like is scary stuff. It’s anti-democratic. It’s anti-American. It
doesn’t bode well for our future, and our children’s future.
We here at Useful Stooges have done a
lot of writing in recent years in the cause of freedom. It’s time,
apparently, for us to do more than write. It’s time for us to act.
Two weeks ago we reported here that
we’ve been banned from Twitter and been given no coherent reason
for it. Last week we served up a list of prominent people with strong
opinions who’ve also been banned for reasons that remain obscure.
To compare this list of people – each
of whom had a great many followers and whose views fall well within
the mainstream of American and Western opinion – to a roster of
people who’ve kept their Twitter accounts is…what shall we say?
Is it puzzling? Or is it illuminating?
Take the British activist and
journalist Tommy Robinson, who in addition to being kicked off of
Twitter last year was removed from Facebook recently – one day, in
fact, after his BBC exposé Panodrama was posted there.
Robinson is a vigorous critic of
Islamic ideology. But he is no bigot. He consistently makes
distinctions between an ideology that calls for the murder of Jews,
gays, and apostates and hundreds of millions of people who, while
calling themselves Muslims, somehow managing to distance themselves
from those monstrous teachings.
Robinson’s allies, colleagues, and
supporters, moreover, come from a wide range of backgrounds. His
closest friends include black Caribbeans and gay people. In any event
– and here’s the big point – he doesn’t have anything
remotely resembling the comprehensive record of hate that has been
compiled by, say, Nation of Islam leader Louis Farrakhan.
Farrakhan, as everyone knows, has
described Jews as “satanic.” He has called them “termites.”
Henry Louis Gates, Jr., a black scholar who heads the Afro-American
Studies Department at Harvard, has characterized a book by Farrakhan
as “the bible of new anti-Semitism.” Of all the most famous
people in America, Farrakhan is one of the vilest.
Yet although Facebook banned him in
May, he still has a Twitter account that has never been even
He’s far from alone. Also still
tweeting away is Linda Sarsour, who claims to be a feminist but is a
bosom buddy of Farrakhan, a constant wearer of hijab, and a
passionate supporter of sharia law.
Also still on Twitter is BAMN, the violence-prone Trotskyite organization that both the FBI and the Defense Department consider to be a terrorist group. BAMN was behind the riot that prevented Milo Yiannopoulos from speaking at Berkeley in 2017. But while Twitter has banned Yiannopoulos, who never encouraged violence in his life, BAMN is a blue-check member (a status reserved for public figures and established organizations).
Also surviving perfectly well on
Twitter, thank you very much, is that gang of vandals and thugs known
as New York City Antifa. Ditto Sarah Jeong, the New York Times
board member who gained notoriety last year for her prodigious
use of Twitter to savage white people. And the list goes on.
Of course, allowing some perfectly horrible people to stay on Twitter is defensible. Cuba’s dictator, Raúl Castro, and dictator-in-waiting, Miguel Díaz-Canel, have blue-check accounts. But fine – it’s useful to know what’s on their nefarious minds.
Some Twitter bans are arguably
defensible, too. The service has banned a number of groups and
individuals on the right that practice and encourage violence. Yet at
the same time it’s left any number of violent, hate-spewing users
on the left entirely untouched. And that’s where the question of
inequality comes in.
We’ve criticized the New York
Times frequently enough on this site for its readiness to
soft-pedal the evils of Communism, to sentimentalize the enduring
devotion of aging Stalinists, and to assert that in some ways the
ideology that gave us the Gulag, the Killing Fields, and the Cultural
Revolution was, quite simply, preferable to our own.
But we have to give credit where it’s
due, and the Times did deserve a thumbs-up when, in April of
last year, it ran a piece
by Alexandra Stevenson about the ominous way in which the Chinese
Communist Party is asserting its power over international firms doing
business within its borders.
Even more ominous is the alacrity with
which the firms are knuckling under.
Stevenson provided some specifics: “Honda, the Japanese automaker, changed its legal documents to give the party a say in how its Chinese factories are run.” When Cummins, an engine manufacturer based in Indiana, named a new manager for one of its Chinese subsidiaries, Beijing put the kibosh on the appointment, and Cummins obediently agreed to new “articles of association” with the Communist state.
Since Stevenson’s article appeared,
things seem to have gone from bad to worse. At least that’s the
impression one gets from a recent Associated Pressstory
about Kentucky Fried Chicken (KFC). On March 5, according to the
report, the fried-chicken empire opened a new restaurant in the city
of Changsha in the province of Hunan that is specifically dedicated
to the memory of its local hero, Lei Feng.
You may have heard of Horst Wessel, the
storm trooper who died at age 22 and who was thereafter transformed
into the center of a Nazi personality cult. The official anthem of
the Nazi Party was called the “Horst Wessel Song.”
Think of Feng, who coincidentally also
died at age 22, as Communist China’s answer to Horst Wessel. After
his death in 1962 when a telephone pole fell on him, he began, at the
direction of Mao himself, to be officially celebrated as the perfect
embodiment of Communist virtue. As one Guardian reporter has
it, he was depicted as “the epitome of selflessness, socialist
spirit and devotion to Mao.”
The problem is that even ordinary
Chinese citizens recognize the whole thing as a crock. Feng’s
published “diary,” a book-length paean to the virtues of Mao, is
said to be an obvious posthumous forgery. Also fishy, to quote the
Guardian, are “the numerous, professional-quality
photographs that mysteriously captured every good deed by a then
But who cares about the truth when you’re out to make a buck? KFC, like other international companies in love with Chinese cash (it has some 6000 restaurants in the People’s Republic), has decided to go along with the Party propaganda. “Lei Feng has been the role model for generations of Chinese,” KFC’s Hunan honcho, He Min, told the Xinhua News Agency, adding that the new KFC branch “will spare no effort to promote his spirit.”
The date of the KFC branch opening was
no coincidence: in China, March 5 is Lei Feng Day.
5, The Diplomat ran an article
by Tae-jun Kang whose headline asked the question: “Is Moon Jae-in
Becoming a Lame Duck?” Noting that presidents of South Korea serve
five-year terms and are ineligible for re-election, Kang explained
that there’s a saying in that country: “the nightmare of the
third year makes the president a lame duck.” As it happens,
President Moon, the incumbent, will begin his third year in office in
May – and “signs of the ‘nightmare’ for Moon and his
government,” wrote Kang, “have already begun to emerge.”
It sounds fatalistic – as if Moon’s
“nightmare” were foreordained. In fact, as Kang goes on to
explain, Moon would appear to have surrounded himself with a bunch of
crooks. There are so many of them that it can be hard to keep track
of them all.
One of them is legislator Sohn Hye-won, who is suspected of covert involvement in the purchase of properties that were later officially designated as cultural assets, thus automatically enhancing their values. In late January, in a bizarre effort to prove her innocence, she offered to donate her collection of lacquerware to the government.
Another of Moon’s party hacks is legislator Seo Young-kyo, who purportedly asked a judge to reduce the punishment for a crony’s son accused of attempted sexual abuse. Yet another member of the party, Moon’s economic advisor Kim Hyun-chul, resigned on January 29 over some remarks about South Korean retirees and allies that were deemed offensive.
Then there’s Moon’s daughter, Moon Da-hye, who recently moved out of the country with her husband and children, the supposed reason for which was that her husband had embezzled $2.7 million of a government subsidy received by his employer and left the country to protect his assets from seizure.
Finally, there’s Kim Kyung-soo, governor of the South Gyeongsang province and a former Moon campaign aide, who was sentenced on January 30 to two years behind bars for helping to rig an opinion survey.
As a result of all this, Moon’s
approval rating has dropped from a high of over 70 percent to below
In a January 22 piece
for the East Asia Forum, Kim Kee-seok, a political scientist at
Kangwon National University, was even blunter than Kang. Whereas
Kang’s headline ended in a question mark, Kim’s made a firm
statement: “Moon’s popularity wanes as South Korea’s economy
stalls.” As the headline indicates, Kim, unlike Kang, cited the
nation’s faltering economy as a reason for Moon’s declining
fortunes. Kim also mentioned the failure of the North Korea peace
initiative to bear any fruit thus far.
But Kim, like Kang, also focused on
corruption. Whereas Kang itemized the sleazy presidential sidekicks
and family members who are dropping like flies, Kim attended not to
these specifics but to the general issue of reform.
As Kim put it, South Korean voters who
“demanded fundamental innovation of the political system,”
including changes in the constitution, electoral process, and
judicial system, become “sceptical of the prospects for innovations
of this kind as the Moon administration continues to lose golden
time.” We could hardly put it better ourselves. In 2017, Moon
Jae-in made big promises to an electorate that’s increasingly sick
of routine corruption at the highest levels of politics and business
– and he’s utterly failed to deliver on them.
This would all make an interesting movie – full of colorful characters, intense conflict, mounting tension, and stunning reversals – except for the fact that it’s all just too sprawling a story, with too many villains and, so far, no hero.
What are we talking about here? We’re talking about the large-scale corruption at the uppermost levels of the South Korean government and business sector that, in the last couple of years, has made for some high drama, complete with palace intrigue, smoking guns, and courtroom clashes. What is required here is a screenwriter who can tame this tale and foreground a single arresting plot line.
But what to
foreground? OK, take a deep breath, here goes: in the brief period
since 2017, we’ve seen the removal from office – and long-term
imprisonment – of South Korea’s first female president (Park
Geun-hye) after she was caught doing underhanded deals, through her
shady best friend (Choi Soon-sil), with top business leaders – who,
as usual, went scot-free – and her replacement by a self-styled
“reform” president (Moon Jae-in), who, making bold promises to
rein in the power and corruption of the increasingly unpopular
chaebols – those massive, family-run conglomerates that dominate
that nation’s economy and that operate with impunity – installed
an antitrust czar (Kim Sang-jo), widely styled the “chaebol
sniper,” who started off his three-year term with a lot of tough
rhetoric about cutting Samsung, Hyundai, and other chaebols down to
size, only to tone down his language in recent months and talk,
instead, in pathetically humble language, about requesting modest
alterations in the chaebols’ organizational charts, even as the
president himself began getting all chummy with the chaebol leaders,
apparently having decided that he needed them on his side if he
wanted to kick his country’s weak economy back into high gear.
Phew. So does
that mean we’re back at square one? Not exactly. Because, as we’ve
mentioned before, while President Moon and his “sniper” seem to
have dwindled into impotence and irrelevance, the cause has been
taken up by some of the people who actually own sizable chunks of the
chaebols but who, in keeping with the curious (indeed, unique)
traditions of the chaebols, have been systematically denied any
meaningful input into the governance of the conglomerates. The
bizarre fact, which remains unchanged, is that in most cases, the
families that founded the chaebols and that still hold the key
leadership positions in them don’t own a majority or even a
plurality of shares in those firms. Indeed, some of the chaebol royal
families would, under ordinary Western circumstances, be considered
negligible minority stockholders.
then, that as the South Korean economy falters and the chaebols,
immense though they are, look more and more as if their best years
are behind them, investors – most of them foreigners, many of them
Americans – who have plunged large sums of money into the chaebols
are increasingly frustrated at their own lack of power to initiate
significant changes. The unfortunate truth is that while the men who
founded the chaebols were business wizards, their children and
grandchildren, who now sit behind the big desks in the corner
offices, don’t necessarily have what it takes to run some of the
world’s largest corporations. Meanwhile, many of those investors
have proven track records at turning failing businesses around – at
spinning off or closing down certain subsidiaries, at recognizing the
need to hire or fire certain executives, and at successfully
restructuring extraordinarily diversified conglomerates to maximize
efficiency and profits.
So it is that, as Kim Jaewon of Nikkei reported on January 21, Korea Corporate Governance Improvement (KCGI), a newly founded South Korean activist fund that is now the second largest shareholder in the Hanjin Group (whose most famous holding is Korean Air), is pushing it to sell its hotel chain, which includes the Wilshire Grand Hotel in L.A. and the Waikiki Resort Hotel in Hawaii, and to form an independent committee that would select Hanjin’s CEO and other top leaders. Now that would be real reform – a change in policy that would actually make it possible to remove from office the scarifyingly rich and corrupt members of one of the chaebol royal families – in this case, the notorious Cho clan, which owns 29% of Hanjin – and replace them with new, competent, and even (could it be?) clean outsiders.
Such a transformation would mean the departure of company chairman Cho Yang-ho, who last year was indicted on embezzlement charges; of his wife, who has been probed for smuggling; of his daughter Cho Hyun-min, who was accused of assaulting an ad-agency executive; and of another daughter, Cho Hyun Ah, whose outrage at a flight attendant who served her macadamias in a bag and not on a plate led to a scandal and a legal mess that made headlines worldwide. In short, it’s a family that Hanjin, and South Korea generally, would be much better off without.
Bottom line: the
protagonists in this drama may turn out, in the end, to be these
so-called activist investors. Screenwriters, stay tuned.
recounted in some detail on this site, South Korea is going through a
rough patch, economically speaking. In the decades after the Korean
War, the country grew with remarkable rapidity from an undeveloped
backwater into an international powerhouse. Leading this spectacular
advance was a relative handful of family-run conglomerates, known as
chaebols (the plural in English is often rendered as “chaebol”),
whose names – Samsung, Hyundai, etc. – have become famous around
For decades, the
chaebols were the engines of the South Korean economy. The nation’s
populace looked up to them. The dearest hope of South Korean parents
was that their kids would someday go to work for one of the chaebols.
In recent years, however, there has been a discernible shift in
public attitudes toward the chaebols. For one thing, they’ve
increasingly been seen as crowding out new businesses and thus
stifling both competition and innovation – thereby making it hard
for the South Korean economy to grow even further. For another thing,
as ordinary South Korean citizens have grown more and more accustomed
to the idea of democracy and equal treatment under the law, they’ve
also grown tired of the shameless double standards that have allowed
the chaebol dynasties to get away with corruption on a massive scale.
When Moon Jae-in became president in 2017, he promised to clean up the chaebols. Other presidents before him had made the same promise – among them his immediate predecessor, Park Geun-hye, who is now in prison because of illegal transactions with chaebol kingpins. But Moon insisted he really intended to tackle chaebol corruption. To prove it, he put the nation’s Fair Trade Commission in the hands of a fellow named Kim Sang-jo, who called himself the “chaebol sniper.” One gathered that President Moon had put the toughest guy he could find on the job – a sort of cross between Clint Eastwood’s Dirty Harry and the Charles Bronson character in Death Wish. A fella who would make the bigwigs at Hyundai and Samsung tremble in their office towers and give them nightmares in their lavish mansions.
In fact, when it came to scaring the heck out of South Korea’s industrial giants, Kim
turned out to be more like Kim Novak than Clint Eastwood. As we’ve
noted, Kim, who at first came out with guns blazing, has more
recently presented himself as a “reasonable reformist” who wants
to nudge the chaebols, ever so gently, toward “evolutionary
reform.” On January 3, in response to an extensive interview with
Kim that appeared in the Korea Herald, we concluded that Kim was now yet another public official in Seoul whose posture toward the chaebols was that of a “servile brownnoser.”
Well, it turns
out that the Korea Herald story
wasn’t the last word on Kim Sang-jo. On January 17, Kim Jaewon and
Sotaro Suzuki reported
in the NikkeiAsianReview
that the sometime “chaebol sniper” was now – gasp – actually
taking an adversarial position toward the chaebols. Or, at least,
toward the people who run them. The ruling chaebol families, said
Kim, “have lost the aggressive entrepreneurship that was shown by
the generations of their founding grandfathers and fathers.” The
current chaebol bosses, Kim continued, “were born as if they were
princes in a kingdom. As the character of the families has changed,
the decisive and quick decision-making process of the past has been
replaced by a policy that focuses on the status quo to preserve their
True enough. Funny it took him so long to say so. Everybody else already had.
Kim went on to
suggest that the people who have inherited their positions of power
at the chaebols need to step down – or at least step away – from
their posts, perhaps exchanging the title of CEO for that of
Chairman, and choosing to concentrate on long-term strategy while
allowing professional managers to make day-to-day decisions.
sound like a bad idea, at least to start with. But is Kim going to use his power to pressure
the chaebol dynasties to do this? Or was this simply meant to be a
modest suggestion from a man who, with every major media exposure,
seems more and more determined to project a modest image? Apparently
the latter. For Kim then went on to say: “If you thought I am a
chaebol killer, you misunderstood me. The only way to succeed in
chaebol reform is to make it predictable and sustainable.” Meaning
what? Well, one’s first reaction is that this comment seems to
have been formulated in such a way as to mean just about anything to
just about anybody. It’s not a policy statement but a political slogan, every bit as empty and
meaningless as “hope and change” or “stronger together.” No
wonder both Moon and Kim are plunging in the polls.
In South Korea,
the year has kicked off with a bang. On January 8, the South
China Morning Post reported
that President Moon Jae-in had made some drastic changes in his
administration. Moon, who was scoring big in the polls in the months
after his inauguration in May 2017, has seen his popularity erode
along with his country’s economy.
How to turn
things around? Fire some people. Moon has dismissed his chief of
staff, his senior political affairs secretary, and his senior press
secretary. No sign, however, of him doing what he actually promised
to do when he took office – namely, tame the chaebols, the corrupt,
family-run business empires that are at one the engines and the
anchors of the South Korean economy.
On January 10
came another tidbit of news
from the Blue House (which, of course, is Seoul’s answer to the
White House). While Trump was slashing taxes and regulations,
reported the Australian Financial
Review, Moon was trying to cure his
country’s economic ills by doing the opposite. Surprise! “So
far,” wrote Michael Schuman, “it has not worked out as planned.”
up. Growth is down. Wages are flat. Both employers and employees are
restive. And small businesses are suffering. Their costs are rising,
but they’re not in a position to pass those costs on to buyers.
Consequently, they’re shedding employees and finding other ways to
All this might
have been prevented if Moon had kept his promises and tackled the
Great White Whale – the chaebols. But he chickened out. He would
probably reject that characterization, pointing out that his budget
for 2019 contains policy changes that are intended to reduce the
power of the chaebols and help out smaller enterprises.
argue that these initiatives are too little, too late. That Moon,
take him for all in all, is essentially kicking the ball down the
field. And allowing the South Korean economy to continue experiencing
the consequences of his relative inaction.
Then, on January 11, Choe Sang-hun of the New York Times reported on a unprecedented development in South Korea. Yang Sung-tae, a former justice of the Supreme Court, had been confronted by prosecutors over charges that he had “conspired to delay a case that could upset relations with Japan.”
The case was
brought by a group of South Koreans who, during the Japanese
occupation, were subjected to forced labor by such firms at
Mitsubishi. Yang will probably be indicted – a first in the
voluminous annals of modern South Korean corruption.
government, then, is on shaky ground. The South Korean judiciary has
experienced a major embarrassment. The country’s small businesses
are even more precariously positioned than they were a couple of
years ago. And the ordinary citizens of South Korea are having more
and more trouble making ends meet.
But amid all this
loss and insecurity and scandal, the chaebols, as always, continue to
chapter in the history of the chaebols continues to develop
in exceedingly interesting ways.
As we have
been discussing on a regular basis at this site in recent
weeks, these massive, heavily diversified, internationally
famous, and family-run conglomerates – which have dominated
the South Korean economy since shortly after the Korean War,
raising the nation up from indigence to prosperity even as
its government moved gradually closer to real democracy –
have hit on challenging times. Once engines of growth, the
chaebols are now barriers to further growth, so large and
powerful that they’re capable of crushing, with little
effort, the development of new firms and stifling the spirit
As a result,
in South Korea there is hardly any way to make a
respectable career in business other than to find a job at
one of the chaebols. And however talented and motivated one
may be, there is no way to rise to the very top of one
of the chaebols unless one happens to have been born into
the right family. This state of affairs has led to growing
resentment toward the chaebols – a resentment intensified
by the corrupt ties between the chaebol dynasties and the
country’s political elites, and, perhaps most bizarre of
all, by the fact that the people who hold tight to the
reins of power in these conglomerates are not necessarily
the same people who own the lion’s share of their stock.
On the contrary, it is rare indeed for the stockholders in
the chaebols to have much say at all in their actual
As we’ve discussed here, and as Kim Jaewon noted in a recent article for Nikkei, South Korean Moon Jae-in, upon his inauguration in May 2017, promised major chaebol reform. To be sure, it is a tradition for newly installed South Korean presidents to vow chaebol reform. But Moon spoke so insistently about the matter that he persuaded a good many citizens of his country that he really meant to do something. As the weeks and months have gone by since he took power, however, fewer and fewer have looked upon his assurances with confidence; and, as the usual arrests for corruption have taken place, followed by the usual pardons for the chaebol executives involved and the usual prison terms for the politicians, once again cynicism about the chaebols has been on the upswing.
It is in this atmosphere that a few bold chaebol shareholders are finally standing up to the perverse power arrangement that they have quietly accepted for so long. These activist investors, observed Jaewon, “have scored minor victories at Samsung and Hyundai, while the parent of Korean Air Lines has been called to account by a domestic fund.” At the head of the list of these investors, wrote Jaewon, is the New York-based Elliott Management, the world’s largest activist fund, which has been campaigning “to force Samsung Electronics and Hyundai Motor to increase shareholder returns.”
by activist investors has already begun to bear fruit. In
early December, Samsung Electronics “retired 7% of its
common stock and 8.9% of its preferred stock worth 4.9
trillion won ($4.4 billion)” in an effort to provide
shareholders with greater benefits. Hyundai Motor recently
announced plans to “buy 2.8 million treasury shares worth
254.7 billion won by the end of February to boost its
stock price and shareholders’ value.” In December, it even
took the action – surprising within a South Korean context
– of “promoting several foreign executives to senior
roles, a first step toward the management diversification
long demanded by minority shareholders.”
There’s nothing quite like them anywhere else in the world. The clans that run the South Korean chaebols – the relatively small number of sprawling, internationally famous conglomerates that have dominated that country’s economy since not long after the Korean War – have long been viewed as royal families. The top executive positions at these companies pass down from generation to generation; the men (they are almost invariably men) who hold these offices wield enormous power over the nation’s political class; and the sons and daughters of these bosses are celebrities, whose social lives are followed closely in the popular media, and who are often, indeed, described as princes and princesses.
One thing that these chaebol families have in common with actual royal dynasties is the high level of intermarriage between them. According to a new survey, 49.3% members of the founding generation of the chaebol clans – the people who actually established these firms in the second half of the last century – are or were married to spouses who also belonged to families that founded chaebols. Among members of the second generation of chaebol ruling families,the figure is even higher: 52.7% of the people whose parents founded chaebols married other people who parents also founded chaebols.
In South Korea, just as the management of chaebols is almost universally dynastic matter, politics is also very often a family game. Former President Park Geun-hye, for instance, who is currently behind bars because of her involvement in chaebol corruption, is the daughter of former President Park Chung-hee. Many chaebol family members who do not marry into other chaebol families have, instead, married into powerful political families, which both reflects and reinforces the intimate ties that bind chaebol CEOs and Chairmen to officials at the highest level of the South Korean government. Among members of the first generation of chaebols, 23.4% were or are married to members of “powerful” political families; in the second generation, this figure declined to 7.4%.
The survey produced some other interesting findings. Of all the chaebols, the GS Group, had the highest number of “in-law relations” with other chaebols, namely seven. GS, like most of these conglomerates, is highly diversified, although in its case there is a particular emphasis on oil, gas, and other energy-related products. The second chaebol on the list, with six “in-law relations,” was the LS Group, which manufactures power cables, electrical equipment, machinery, and other such products.
Why does any of this matter? Because these statistics serve to reinforce the perception, on the part of many ordinary South Koreans, that their country – in which democracy has, admittedly, made great strides over the last several decades – is still, to a deplorable extent, governed by a network of business and political kingpins, people who are tied to one another not only by shared financial interests and systematic corruption but, yes, by the most intimate of family bonds.