The clueless “chaebol sniper”

Kim Sang-yo: almost as tough and scary as Kim Novak

On December 18, the Korea Herald published the most extensive interview we’ve seen yet with Kim Sang-jo, who was appointed to a three-year term as head of South Korea’s Fair Trade Commission in June 2017 and who, tasked with reining in the power of the chaebols – the family-run conglomerates that are at once the engines of that country’s economy and the greatest hindrances to its growth – calls himself the “chaebol hunter.” Shin Ji-hye, the Herald’s reporter, maintained that Kim had made some progress, proposing key revisions to the Fair Trade Act that were approved by the Cabinet in November and await ratification by the National Assembly. Shin also sought to portray Kim as a sympathetic man in the middle, criticized from both sides, one of which assails him for failing to bring about promised reforms and the other of which accuses him of going too far in his purported war on the chaebols.

Hyundai headquarters, Seoul

In the interview, Kim also sought to depict himself as a man of balance – a “reasonable reformist,” who appreciates the value of the chaebols to South Korea and who seeks not to blunt their economic impact, let alone destroy them, but to make them competitive. In fact, it turns out that Kim no longer calls himself the “chaebol sniper” but, rather, wants to be known as an “evolutionary reformer” who “walk[s] the middle line.”

According to Kim, the key to proper chaebol reform, in Shin’s paraphrase, is “to put an end to ‘gapjil,’ unfair business practices employed by market monopolies, as well as undue inter-affiliate trading. Doing away with both is the main objective of the FTC’s proposed bills to amend the Fair Trade Act.”

Samsung headquarters, Seoul

Yet when it came to one of the major issues involving the chaebols — the most prominent of which include Samsung, Hyundai, and LG –Kim was as stubborn as any chaebol CEO. Noting that the U.S. Chamber of Commerce and four of its counterparts in other countries had signed a statement in November challenging South Korean regulations as well as the FTC’s approach to investigation, Kim defended the chaebol system and argued that it wasn’t reasonable for U.S. businesses to expect other countries to model their corporate structures on its own.

As for American investors who are major chaebol shareholders but who, in keeping with the antiquated traditions of the system, have been denied the kind of influence on corporate decision-making that they would enjoy in Western firms – and who, of late, have been raising their voices more loudly to complain about this unfair state of affairs – Kim said, “This is a sensitive issue,” then said of the most prominent of those investors that “its understanding of Korea still remains insufficient.”

LG headquarters, Seoul

In fact, when Kim swipes at a major international investment firm for its supposedly “insufficient” understanding of Korea he is confessing to the very provincialism that lies at the heart of the chaebol problem. It is no exaggeration to say that Kim’s remark is by far the most telling part of the interview, indeed the only part that really matters. It underscores the fact that chaebol reform has been placed in the hands of a man who, however well-intentioned he may be, just doesn’t get it.

He doesn’t grasp, in short, that halfway measures, parochial measures, are just not enough; he doesn’t realize that he’s thinking inside of a very narrow box, a South Korean box, when what is called for in this situation is a major adjustment in South Korean business practice and business thinking — an adjustment that will result in a system that conforms to international norms and will allow for international investment on the same terms that obtain elsewhere in the developed world. Kim’s interview leaves the unfortunate impression that, until South Korea puts the future of the chaebols in charge of another individual, someone with a more global perspective, hope for real chaebol reform will be entirely in vain.