Wherein we take yet another snipe at the pathetic “chaebol sniper”

Now here’s a new twist.

As we’ve 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 the world.

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.

Moon Jae-in

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.

Kim Sang-jo

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.”

Samsung honcho Jay Y. Lee being arrested last year for massive corruption; in accordance with time-honored South Korean practice, he was later given a suspended sentence

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 Nikkei Asian Review 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 established power.”

True enough. Funny it took him so long to say so. Everybody else already had.

Hyundai chairman Chung Mong-koo

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.

It doesn’t 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.

A new Moon

Moon Jae-in

It’s a new year – and a new Moon Jae-in. Before he became president of South Korea, Moon referred to the chaebols – those hugely successful but profoundly corrupt and immensely powerful family-run conglomerates that dominate that country’s economy – as a “deep-rooted evil.” When Moon rose to the presidency in May 2017, he promised a serious campaign of chaebol reform. Yes, several of his predecessors had made similar promises, but Moon said his promises were for real. He appointed a so-called “chaebol sniper,” one Kim Sang-jo, whom he tasked with bringing the chaebols to heel.

Kim Sang-jo

In the more than year and a half since his inauguration, however, the South Korean people have seen very little in the way of reform. Once again, the promises have proven empty. As we saw a couple of weeks ago, Kim, in a recent interview, presented himself not as an anti-chaebol warrior but as a “reasonable reformist” who respects the chaebols and, far from cutting them down to size, seeks to render them competitive through “evolutionary reform.”

Jay Y. Lee, top dog at Samsung

Now Moon, too, is singing a new tune. As the Korea Times reported on January 6, “the President appears to be expanding communication channels to win backing from the country’s leading industrial conglomerates.” According to a spoksman for Moon, the President planned to meet with chaebol leaders some time in January and would ask them “to hire more and spend more,” in exchange for which his government would provide increased “tax benefits and administrative support.” Partly in order to win votes from younger members of the electorate who are in the job market, according to top government officials, Moon needs “to reach out his hands to Samsung, LG, SK and Hyundai,” the country’s “top four family-controlled businesses.”

Hyundai Motor Chairman Chung Mong-koo

That’s quite an about-face, even by high-stakes political standards. The man who vowed to be an anti-chaebol crusader is now going to the chaebols, hat in hand, and begging them for what is essentially a political favor – and, in response, offering to cut their taxes. In other words, it’s back to business as usual in South Korea, with the head of state and the chaebol kings scratching each other’s backs.

Already, reported the Times, “chief presidential policy chief Kim Soo-hyun met with senior executives at Samsung, LG and SK in a Seoul hotel late last year” in order to set the groundwork for the shift in approach. The question, it seems, is not whether Moon plans to woo the chaebol bosses; it is how the bosses will respond to his bootlicking.

LG Group headquarters

You see, they’re not all that happy with Moon, partly because of the aggressive anti-chaebol rhetoric with which he started his administration, and partly because his hike in the minimum wage has blunted their competitiveness abroad. It’s predicted that South Korean economy will grow only 2.5 percent this year, and the chaebols put a lot of blame for that at Moon’s feet.

The worm, then, has turned. The sometime chaebol slayer has become a servile brownnoser, trucking to the big boys at the “big four” – Samsung, Hyundai, LG, and SK – and hoping that they’ll respond positively to his kowtowing.

A bad year for the chaebols

Samsung headquarters

The verdict is in. Briefly put, 2018 was a bad year for the chaebols. A very bad year.

This news should not come as a big surprise to regular readers of this site.

In recent months, we’ve seen that entrepreneurs in South Korea have become increasingly outspoken in their resentment toward the giant family-run conglomerates, whose massive power enables them to smother competitors in their cradles.

Hyundai headquarters

We’ve seen that the chaebols’ continued dominance of the South Korean economy, by preventing the flowering of major new firms, has kept that economy from growing as fast as it used to.

We’ve seen that South Koreans generally are getting more and more tired of the privileged position of chaebol families, one consequence of which is that corruption in their ranks routinely goes unpunished.

LG headquarters

Not least, we’ve seen that foreign chaebol stockholders who have begun to challenge the distinctively South Korean policies that deny those stockholders the ability to influence major chaebol decisions, even if they own bigger shares of the companies than the ruling families do.

Now all of these critics of the chaebols have more ammunition to use against the system. On December 27, 2018, it was reported that South Korea’s ten largest chaebols experienced a twenty percent reduction in market value over the course of 2018.

SK headquarters

That’s a stunning number, especially given how robustly other Western economies – such as that of the U.S. – performed during the same year.

By the end of 2018, the combined value of the top ten chaebols was $173 billion. All by itself, Samsung, the largest of the chaebols, accounted for half of the loss. One of the companies that make up the Samsung Group, Samsung Electronics, dropped a full 30 percent in value.

Hanjin headquarters

But Samsung wasn’t alone in bleeding badly. LG Group lost 21 percent of its value. SK and Hyundai also posted huge losses. Only two major chaebols – Hyundai and GS – had a good year.

Obviously, these lousy results aren’t good news for the legendary families that run the chaebols. On the contrary. They also mean that shareholders in these firms lost a lot of money. And given the central importance of the chaebols to the South Korean economy, these figures will have a negative impact on South Koreans as a whole.

Then again, this isn’t entirely bad news. A dramatically poor showing almost all the way across the chaebol board may well help speed efforts at substantial systematic reform. One South Korean president after another has promised such reform and failed to deliver. The current president, Moon Jae-in, installed a so-called “chaebol sniper” who has proven to be a paper tiger.

Moon Jae-in

Repeatedly, critics of the chaebols have been told that the chaebols are simply too vital to the South Korean economy to justify major overhauls. Break up Samsung? Knock the chaebol dynasties down a peg or two? Impossible! But numbers like the ones we’ve seen here may open up more people in power to the possibility of real change. South Koreans won’t endure too many years of chaebol contraction without accepting – indeed, clamoring for – radical transformation.

In short, 2019 promises to be an interesting year for the chaebols. Stay tuned.

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.

Chaebol progress?

 

The current chapter in the history of the chaebols continues to develop in exceedingly interesting ways.

Hyundai headquarters, Seoul

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 of entrepreneurship.

Samsung headquarters, Seoul

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 management.

Moon Jae-in

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.

Lee Kung-hee, chairman of Samsung Electronics

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.”

Hyundai Motor Chairman Chung Mong-koo

This campaign 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.”

Finally: street protests against chaebol corruption!

Moon Jae-in

On this site we’ve been reporting for some time on the lavish vows by South Korean President Moon Jae-in to reform the chaebols, those massive family-run conglomerates that have served as the foundation of that country’s economy since not long after the Korean War – and that have increasingly been viewed with disfavor by that country’s citizens because of their extraordinary levels of corruption, nepotism, and impunity, not to mention their power to choke potential competitors in the cradle.

We’ve introduced our readers to Kim Sang-jo, not exactly intimidating man who was supposedly delegated by Moon with the task of challenging chaebol corruption and who, laughably, calls himself the “chaebol sniper.” And we’ve discussed the chaebol shareholders who, after years of biting their tongues, are finally starting to rebel against the bizarre system whereby clans that own only a small percentage of their companies nonetheless rule them with an iron hand.

Kim Sang-jo

Now comes some encouraging news. On November 21, with the backing of the Korean Confederation of Trade Unions (KCTU), more than 150,000 South Korean workers walked out of factories at firms like Samsung and Hyundai in protest against the utter failure of Moon’s government to come across with the chaebol reforms he promised.

The KCTU did not mince words in describing the situation in South Korea. “There has not been any real progress in chaebol reform,” it said. The KCTU added: “We think our labour rights as well as corporate reform have actually worsened under the Moon administration.”

Park Geun-hye

The KCTU further noted that the chaebol kingpins Lee Jae-yong (Samsung) and Shin Dong-bin (Lotte) had recently been arrested, tried, and convicted of bribing former President Park Geun-hye (who left office in disgrace because of the scandal) only to be given suspended sentences. Such special treatment for chaebol top guns is a longstanding tradition in South Korean politics and jurisprudence, and one that is making the nation’s citizens increasingly restive.

Hence the worker walkout.

Lee Myung-bak

That November 21 protest, moreover, was only one part of a growing nationwide uprising against President Moon. Every weekend of late, South Koreans have poured into the streets of Seoul in huge numbers to express their rage over Moon’s failure to keep his pledges. Describing these demonstrations as “raucous,” the Financial Times noted that while President Park and another former president, Lee Myung-bak, have ended up behind bars for corruption, the chaebol masters who were involved in the same acts of corruption still seem to be above the law.

According to FT, the probability that a chaebol boss convicted of corruption will get a suspended sentence exceeds 70% – while the comparable rate among non-chaebol leaders is 40%. As for poor schlubs who are found guilty of “street crimes,” such as petty theft, only 20% of them can expect to have their sentences suspended, even though the scale of their crimes is, of course, outrageously trivial compared to the monstrous malfeasances routinely committed by chaebol royalty.

Chaebols: are the “ants” finally rebelling?

The South China Morning Post recently ran a fascinating piece by Geoffrey Cain and Max Kim. Its premise, as stated in the first sentence, was as follows: “The family-run conglomerates that power South Korea’s economy have long been above listening to individual shareholders – or ants. But as the scandals mount, and take down presidents, those ants are fighting back.”

Samsung headquarters, Seoul

We’ve written frequently at this site, of course, about those South Korean conglomerates – known as chaebols – that are notorious for their outsized power and corruption and for the perverse fact that the power is in the hands of families that own small percentages of these behemoths and not in the hands of shareholders.

Just as a certain 2016 presidential candidate called ordinary Americans who work hard and pay taxes “deplorables,” the people who actually inject their own cash into these companies – and are therefore, technically, their owners – are called “ants.”

Hyundai headquarters, Seoul

Cain and Kim noted a couple of the high-profile corruption trials and convictions that have taken place in the last year or so and that we’ve written about here. But they added this highly interesting point: “In fried chicken and beer joints, in coffee shops in Seoul’s financial district of Yeouido, and in mobile app chats where investors circulate industry gossip, individual shareholders – known as ‘ants’ in investment circles – are getting rowdy and putting up a fight.”

LG headquarters, Seoul

About time. To some of us, the passivity of chaebol shareholders has never made a great deal of sense. It can only be understood as a cultural thing, a sign of the near-reverence with which the chaebol families have long been regarded. After the Korean War, these families founded these companies, and these companies, in turn, raised South Korea up from an impoverished Third World land to an economic powerhouse. Hence the family patriarchs came to be viewed as virtual royalty.

Hanjin headquarters, Seoul

But no more. “Corporate shareholder meetings have stretched for more than a dozen hours,” wrote Cain and Kim, “as shareholders barrage CEOs with questions; others have stormed the microphone, only to be removed by security.” They quote one “ant’s” summing-up of the way South Koreans have been trained to think about these things: “Finance is like the written word of ancient times,” he said. “It is the privilege of the ruling class. It is the preserve of the elite.” Well, if these signs of revolt are portents of a new era, then that kind of old-fashioned deference to a handful of powerful clans may well be on the way out. Which, it has to be said, is a healthy sign for South Korean democracy.

The chaebol suicides

Samsung headquarters, Seoul

Another week, another stroll down memory lane. Chaebol memory lane, to be specific. In recent weeks we’ve been recounting the stories of various top-level executives of these massive South Korean conglomerates – men who, as is their wont, have ended up in hot water, and often in courtrooms (and, sometimes, at least briefly in prison cells) because of their corruption.

To be sure, chaebol leaders who get caught with their hands in the till don’t always end up arrested or imprisoned or pardoned. The South Korean shame culture leads some of them to take their lives. You might wonder why, if the shame culture is a powerful enough psychological phenomenon to drive these people to suicide, it doesn’t keep them from bribing and embezzling and so on in the first place. But that question is perhaps beyond the scope of this blog.

Chung Mong-hun

Here are a few examples of high-level South Korean self-slaughter. On August 4, 2003, Chung Mong-hun, the chairman of Hyundai and the son of its founder, jumped to his death from his 12th-floor office window. As the New York Times put it, Hyundai was South Korea’s “economic ambassador to the Communist North”; Chung had played a key role in arranging an historic summit in June 2000 between Kim Jong Il and South Korean president Kim Dae Jung. Afterward, however, South Korean auditors looked into the behind-the-scenes dealings relating to the summit and found that Chung had illegally paid a massive bribe to Pyongyang. He was about to be arrested for this crime when he chose to take the leap from his office window.

Roh Moo-hyun

On May 23, 2009, Roh Moo-hyun, who had served as president of South Korea from 2003 to 2008, killed himself by jumping off a cliff near his home. He had been under investigation for accepting $6 million in bribes from the business sector during his presidency. He had already been interrogated, and his wife was scheduled for questioning by investigators on the day of his death. He had already said that he “was losing face and that he was disappointing his supporters”; in a suicide note, he wrote: “nothing is left in my life but to be a burden to others….Don’t be too sad. Aren’t life and death both a piece of nature? Don’t be sorry. Don’t blame anyone. It is fate.”

Lee In-won


Two years ago it was Lee In-won’s turn. Lee, the #2 man at the Lotte Group, which at the time was South Korea’s fifth largest conglomerate, when he was
found dead in August 2016 beside a walking and cycling path near Seoul; he had hanged himself from a tree with his necktie. Lee, age 69, had spent 43 years at Lotte, where he was the highest ranking official not belonging to the conglomerate’s ruling Shin family. His suicide took place two months after police – tipped off about crooked deals among Lotte subsidiaries that led to the formation of a slush fund – raided the firm’s offices in search of evidence of those crooked deals. At the time of Lee’s suicide, he was scheduled to be grilled by prosecutors about these irregularities.

Lotte has less of an international profile than other major chaebols such as Samsung and Hyundai because its wealth is derived not from high-tech products exported around the world but primarily from apartment buildings, hotels, malls, cinemas, fast-food restaurants, and other such busineses in South Korea. It has about 80 subsidiaries and over 300,000 employees. The New York Times reported that Lee “was one of the professional executives commonly known in South Korea as vassals, for their loyalty to the families that control the business empires. These executives rarely betray their bosses during corruption investigations.”

What the hell is wrong with the chaebols?

Samsung headquarters, Seoul

We’ve been writing a good deal lately about the chaebols, those immense, influential, and staggeringly corrupt family-run conglomerates (think Samsung, Hyundai, LG, and Daewoo) that have dominated the increasingly dynamic South Korean economy during the more than half century since the Korean War. In recent decades, one government after another has promised to tame them, but, as we’ve seen, their power has yet to be seriously diminished.

We’ve wondered: what is it about Korean culture and the Korean sensibility that made the chaebols possible in the first place? How have the same crooked families – who over the years have been caught giving and taking massive bribes and embezzling fortunes from their firms – been able to maintain absolute control of them from generation to generation?

Hyundai headquarters, Seoul

After all, in most cases, these families don’t even own anywhere near a majority of company stock. The clan that runs Samsung, for example, holds just over one percent of total shares in that firm; the family that holds the reins at Hyundai owns about one-thirtieth of it. Indeed, on average, the chaebol royal families own only about three percent of the conglomerates that they run with iron fists.

But that doesn’t matter. As South Korean observers have pointed out, there’s something in the Korean mentality, with its fixation on family, that makes it well-nigh impossible for most citizens to accept the idea that the shareholders in a firm are its actual owners; instead, they reflexively view the chaebol dynasties, however little stock in their own companies they may have in their portfolios, as the real owners.

LG headquarters, Seoul

Yes, the passing down of company management from one generation of a family to the next is a worldwide phenomenon. But family is an even bigger thing in South Korea than elsewhere. There are, as it happens, ancient religious roots – Confucian roots – to this way of thinking. It’s no exaggeration, in other words, to say that in Korea, the idea of family is swathed in a kind of reverence. Especially in a time of rapid transformation in social and cultural structures, family continuity is widely seen as providing needed continuity and even giving those structures a kind of legitimacy that they otherwise would lack. From one perspective, of course, this may be an admirable way of thinking. From another, however, it is a sensibility that can create all kinds of problems for a large twenty-first-century business operating on the international financial stage.

Daewoo headquarters, Seoul

For the fact is that the curious structure of the chaebols renders shareholders all but powerless. Their investments are at the mercy of top executives who have inherited their positions and who may or may not know what they’re doing in those jobs, which are, frankly, nothing more or less than sinecures. Virtually nothing can dislodge these dynastic figures from their perches – not manifest incompetence, not proven corruption, and not an established pattern of business decisions that are obviously meant to serve their own families’ interests rather than the interests of shareholders, workers, or the firms themselves. Yes, the South Korean government is supposedly pushing reforms. But they’re weak reforms, insufficient reforms, and the degree to which the government is pushing for them is, frankly, pathetic. One thing is clear: if there’s going to be anything close to genuine change at the chaebols, the shareholders need to raise their voices more loudly, assert the power that’s rightfully theirs, and demand that these conglomerates shake off their Confucian roots and fully join the modern world economy. 

One ex-prez down, several chaebol CEOs to go

Samsung headquarters, Seoul

In recent weeks, we’ve been reporting – with a good degree of skepticism – on claims by the South Korean government that it’s engaged in a serious, vigorous, and comprehensive effort to curb the power of the nation’s largest capitalist monopolies. We’re referring, of course, to the chaebols, those massive, family-run conglomerates (including Samsung, Hyundai, and LG) that have dominated the South Korean economy over the last half century and more – so much so, indeed, that they routinely kill potential competitors in the womb and thus (as has been increasingly recognized and resented) stifle economic growth, discourage entrepreneurship, and squelch innovation.

Jay Y. Lee

Our skepticism on this front has been undergirded by such events as the sudden and unexpected release from prison, earlier this year, of Jay Y. Lee (Lee Jae-yong), the vice chairman and de facto head of Samsung (and arguably his country’s most powerful figure), after serving only a few months of a five-year sentence for corruption.

As if his release weren’t disappointing enough, Lee has since been invited by President Moon Jae-in, who poses as an anti-corruption warrior, to accompany him and a group of other chaebol bosses on a flight to Pyongyang, where they all explored possible business ties with the fanatically totalitarian, slave-labor-dependent Kim regime. Some reform!  

Lee Myung-bak

Well, there’s news from the supposed chaebol wars. No, a chaebol bigwig hasn’t been tossed in the clink. But another nabob has. On October 5, seventy-six-year-old Lee Myung-bak, who was President of South Korea from 2008 to 2013, was jailed for corruption. Arrested on March 22, he had been charged with receiving hefty bribes from Samsung and other firms, embezzling funds from the government treasury that had been appropriated for use by the nation’s intelligence services, and embezzling $21 million from an auto parts company that he owned through his brother. His sentence: fifteen years behind bars plus a $16 million fine.

Park Geun-hye

He’s not the only former president of South Korea who is currently serving time for corruption. His successor, Park Geun-hye, is six months into a thirty-three-year sentence. Two other South Korean presidents, as it happens, have also spent time in the slammer: Chun Doo-hwan, who held the high office from 1980 to 1988, and Roh Tae-woo, who succeeded Chun in 1988-93, were both convicted of bribery and sedition in 1996, and both were pardoned a year later.

Kim Sang-jo

If there is anything resembling reform underway in South Korea today, it may consist in the fact that corrupt presidents are now more likely to serve out their terms instead of being pardoned after a brief period of incarceration. But of course it remains to be seen whether Park and Lee are in the can for the duration or whether, like Chun and Roh, they’ll get sprung after the headlines die down. In the meantime, the self-styled “chaebol sniper,” Fair Trade Commissioner Kim Sang-jo, has yet to prove that he’s prepared to be as tough on current chaebol leaders as on the former presidents – who are, after all, being put away for engaging in illegal shenanigans with those very leaders.