Corruption at the chaebols

Yesterday we began looking at the chaebols, the family-controlled conglomerates that dominate the South Korean business world. Here’s a quick overview of three of the very largest chaebols. See if you notice any running themes:

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    Lee Kun-hee

    Samsung – the largest of all the chaebols, making up no less than 17% of the South Korean economy – is chaired by Lee Kun-hee, son of the firm’s founder. Lee resigned in 2008 after being caught with a secret slush fund that he used to bribe government officials, but was pardoned by President Lee Myung-bak and promptly resumed his chairmanship. He continues to stay in office despite a book, published in 2010, that describes in detail how he stole about $9 billion of Samsung’s money.

Hyundai Motor Chairman Chung Mong-koo attends the company's opening ceremony for the year in Seoul in this January 2, 2012 file photo. South Korea's smartphones and cars may have won global acceptance, but back home Koreans are increasingly disturbed by the influence the chaebol have over their lives. That very public anxiety is coming at a sensitive time for the conglomerates as they prepare the transtion to a third generation of family owners and face a strong, unwelcome, focus of attention in the run-up to 2012's parliamentary election. Hyundai Motor's Chung Mong-koo was sentenced to a three year jail term in 2007 for fraud which was suspended in exchange for community service and a $1 billion charity donation as he was deemed too important to the economy to be jailed. To match Insight KOREA-CHAEBOL/ REUTERS/Kim Hong-Ji/Files
Chung Mong-koo
  • Hyundai is another of the so-called “Big Four” chaebols. Its chairman, Chung Mong-koo, son of the firm’s founder, was convicted in 2007 of embezzling $100 million to bribe government officials, but he was pardoned by Lee Myung-bak and remained in office.

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    Choi Tae-won

    Yet another one of the “Big Four,” SK Group, is chaired by Choi Tae-won, son of the group’s founder. In 2013, Choi was found guilty of embezzling over $40 million and sentenced to four years behind bars, but was pardoned by President Park Geun-hye and still runs the company.

South Koreans have – to put it mildly – mixed feelings about the families that run the chaebols. They still respect the firms’ very elderly or (mostly) deceased founders who made South Korea rich; but they increasingly resent the outrageous sense of privilege enjoyed by those founders’ children and (especially) grandchildren – who are widely resented for their unearned wealth, their princely airs, their thoroughgoing corruption, and the impunity they enjoy no matter how massive their crimes.

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Koo Bon-moo, CEO of LG

The simple fact is that pretty much everybody in the South Korean government is on the chaebols’ payrolls – or wants to be. And the growing popular resentment of this grand corruption is an extremely good sign. It tells us that a people who, not so long ago, were comfortable with a degree of authoritarianism are now impatient for more democracy. People who were accustomed to class division want more equal opportunity. Though grateful to the chaebols for their contribution to South Korea’s development, they’re not happy that those chaebols have developed into arrogant aristocratic dynasties, that they use their wealth to buy off public officials, and that their domination of the economy is impeding further development.

South Korean President Lee Myung-bak speaks to the nation during a news conference at the presidential house in Seoul November 29, 2010. Lee on Monday labelled North Korea's artillery attack on a southern island a crime against humanity and said Pyongyang will pay the price for any further provocation. REUTERS/Ahn Young-joon/Pool (SOUTH KOREA - Tags: POLITICS CIVIL UNREST)
South Korean President Lee Myung-bak

How do they impede development? Well, for one thing, they make it extremely tough for aspiring entrepreneurs to make a go of it. “It’s almost impossible for a small Korean business to take on a chaebol subsidiary – and everything is a chaebol subsidiary,” wrote one observer in 2013. The chaebols’ dominance, reported the Toronto Globe and Mail last year, “is now suffocating the country’s attempt to shift gears and foster a more innovative services-oriented economy powered by small businesses.”

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Former South Korean president Roh Tae-woo

Note well: what we’re talking about here isn’t ordinary crony capitalism or the kind of revolving-door system whereby state officials often go on to become corporate execs. And vice-versa. No, it’s more as if the chaebols are a separate, permanent branch of government, whose political sway is founded partly on decades-long personal ties (Choi Tae-won’s wife is the daughter of former President Roh Tae-woo), partly on those vast slush funds that they use to grease officials’ palms, and partly on everyone’s keen awareness that the country’s fate is inextricably tied to that of the chaebols, the top ten of which account for fully 80% of South Korea’s GDP.

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Entrepreneur Ahn Cheol-soo

Simply put: at times it can be hard to know where the elected South Korean government ends and the unelected government of the chaebols begins. Not only do the chaebol kings hold sway over elected officials; they also wield extraordinary power over their mid- to lower-level employees – who have little leverage at contract time, because there’s not really anyplace else for them to go. (Chaebols, according to software start-up founder Ahn Cheol-soo, treat workers like “caged animals in a zoo”.) Operating in a mind-boggling range of sectors – Samsung has its fingers in everything from financial services to shipbuilding – they have the reach and resources to effortlessly crush fledgling would-be competitors in any of them.

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A graph showing Samsung’s shareholder structure

Last but not least – and this is one bizarre detail that must certainly be unique to South Korea – not even the chaebols’ boards of directors can stand up to the hegemony of the family dynasties, even if the directors hold large stakes in the firms and the latter own almost no stock at all. Indeed, a 2012 study found that eight chaebol chairmen weren’t even on their firms’ boards, meaning that they exercised enormous power without shouldering a concomitant amount of responsibility.

What this means, in practice, is that however criminal or incompetent the head of a chaebol may be, he enjoys invulnerability and unaccountability on a scale unheard of in any other developed democracy. As one South Korean business journal has put it: “At companies in advanced countries, a faulty CEO is replaced. But at South Korean conglomerates, the head of a conglomerate wields absolute authority and is not replaced no matter how grievous his mistakes are.” Or how horrendous his crimes.

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A family tree showing the descendants of Samsung founder Lee Byung Chul, color-coding their involvement in different subsidiaries and their intermarriage with members of other chaebol families

No, the situation south of the DMZ isn’t remotely comparable to that in Kim Jong-un’s Hermit Kingdom. But, thanks to the chaebols, South Korea’s business community is characterized by a thuggishness, a creepiness, a crookedness, of which the outside world is almost entirely unaware. And those who continue to prop all this up – either out of some misguided sense of loyalty to dead or dying national idols, or out of sheer personal self-interest – are, quite simply, stooges, aiding and abetting a corrupt system that’s actively preventing the emergence of an even freer, more equitable, and more prosperous South Korea.

Ted Turner: pimping for Pyongyang

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Ted Turner

Ted Turner: founder of CNN, ex-husband of Jane Fonda, billionaire. Yesterday we looked at his hypocrisy about the environment (28 homes, a “Save the Planet” bumper sticker on his car) and about population growth (father of five kids, supporter of a proposal for an an internationally enforced one-child law). But now for the most sordid part of all – his lamentable tendency to defend totalitarians.

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The late Kim Jong-Il

Case in point: in 2005 Turner visited North Korea, and after returning to the U.S. shared his experiences and conclusions in a stunning interview with CNN’s Wolf Blitzer. Describing himself as having “had a great time,” Turner said, apropos of a new arms deal: “I am absolutely convinced that the North Koreans are absolutely sincere. There’s really no reason – no reason for them to cheat.” When Blitzer pointed out that North Korea had violated similar deals before, Turner said: “I mean, you know, just because somebody’s done something wrong in the past doesn’t mean they can’t do right in the future or in the present.”

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The king in his kingdom

The transcript continues – but, before quoting it, let us just interject that we’ll be reproducing excerpts from this and one or two other interview transcripts at some length. Why? Because Ted Turner, for all his power and wealth and purported business savvy, has a special gift, in such conversations, of revealing just how staggeringly uninformed and unreflective he is on the subject of dictatorship. It’s as if he just can’t grasp the idea that foreign leaders who are chummy with him at a dinner table could possibly be guilty of doing anything terrible to anyone else. Anyway, back to his exchange with Blitzer:

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Mass “mourning” upon the death of Kim Jong-Il

BLITZER: But this is one of the most despotic regimes and Kim Jong Il is one of the worst men on Earth. Isn’t that a fair assessment?

TURNER: Well, I didn’t get, I didn’t get to meet him, but he didn’t look, in the pictures that I’ve seen of him on CNN, he didn’t look too much different than most other people.

BLITZER: But look at the way, look at the way he’s, look at the way he’s treating his own people.

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The DMZ

TURNER: Well, hey, listen. I saw a lot of people over there. They were thin and they were riding bicycles instead of driving in cars, but ah –

BLITZER: Lot of those people are starving.

TURNER: I didn’t see, I didn’t see any, I didn’t see any brutality in the capital or out in the, on the DMZ….I think they want to join the western world and improve the quality of life for their people just like everybody else. And I think that we should give them another chance. It doesn’t cost us anything. We already have agreements. And North Korea never posed any significant threat to the United States. I mean, the whole economy of North Korea’s only $30 billion a year. It’s less than the city of Detroit. It’s a small place, and we do not have to worry about them attacking us.

ted_turner_pointingBLITZER: You know, they have a million troops within literally a few miles.

TURNER: A half million.

BLITZER: Well, best estimates are a million. A million troops along the DMZ.

TURNER: We have a half a million troops, of which 28,000 are Americans and they’ve been there for 50 years. One of the things I said in both North and South Korea is it’s time to end the Korean War officially and move on. And get those hundreds of thousands of young men that are sitting there back building hospitals and roads and schools in North and South Korea and improving the gross national product. It’s just a waste of time and energy for them to sit there.

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Okay, this is photoshopped. In reality Turner hasn’t yet won the Gold Star identifying him as a Hero of the Democratic Repubic of North Korea. Yet.

BLITZER: I think the bottom line, though, Ted, and I think you’d agree, they had this opportunity in the ’90s, when they signed this first agreement and they cheated. They didn’t live up to it. Now they have a second chance. I hope you’re right. I certainly do.

TURNER: Well I hope I’m right, too. But you know it’s, in the Bible says you’re supposed to forgive seven times seventy, or something like that….Let’s give ’em a break. Give ’em a break. And besides, even if they do – even if they do threaten us again, the threat is non-existent to the United States. They can’t threaten us. I mean, it’s like a [flea] attacking an elephant.

Well, there it is. Yes, this is the all-powerful Ted Turner speaking. Pick your jaw back up off the floor. And come back tomorrow. There’s more where this came from.

Sic transit Gloria

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Gloria Steinem in her heyday

It won’t be news to readers of this website that Kim Jung-un presides over a country that can fairly be compared not just to a prison – that’s far too mild an analogy – but to an extermination camp. Terror and torture, arbitrary arrests and executions, the total denial of civil rights and absence of any kind of freedom, a society perpetually starving, thoroughly saturated in propaganda, utterly cut off from the outside world, and armed to the teeth, its mad leader constantly rattling his saber: this is North Korea today. There’s only one way, of course, to bring an end to this nightmare: bring in Gloria Steinem.

On May 24, the feminist icon led a group of 30 or so women on a “walk for peace” across the border between the two Koreas, starting in the north and crossing to the south. “Our purpose,” she told the Washington Post, was “to call attention to this unresolved conflict that I suspect most people or many people have forgotten.” She and her fellow activists were going to North Korea “to listen and learn, to say we care by being physically present” because there’s “no substitute for putting your bodies where your concerns are” and “conflicts are far more likely to be solved when people sit down together.”

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Steinem and her fellow activists at a pre-event press conference in Beijing

Yes, that’s the way to solve the North Korea dilemma: we need to “sit down” with Kim’s henchmen so we can “listen and learn.” Learn what? Asked whether she planned “to address women’s/human rights issues” while in North Korea, she replied: “Yes, we will say what our experience is and ask what their experience is and hope that one informs the other.” As if any North Koreans were free to say anything honest about “their experience”! Could Steinem’s entire premise be more naive, more misguided? “It’s hard to imagine any more physical symbol of the insanity of dividing human beings,” she said about the DMZ – as if the root problem were the division itself, and not Kim’s totalitarianism.

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Steinem and pals crossing the border

The title of Lizzie Crocker’s article in the Daily Beast asked the right question: “Is Gloria Steinem a Propaganda Tool For North Korea?” Crocker noted that Steinem and her co-leader in the “walk for peace,” Korean-American activist Christine Ahn, were “calling on the UN to broker a peace treaty between the North and South, and asking the U.S. to lift sanctions against the North,” but had said nothing about the “executions, rape, forced starvation, and enslavement” for which the Kim regime is responsible; indeed, Steinem’s statements had “been decidedly anodyne.”

But Ahn was even worse. Lots worse. We’ll get to her tomorrow.