Korean Chaebol EthicsStudy on the issues of Chaebol companies inKorea such as Samsung, LG, Daewoo, Hyundai, SK
Agenda• Chaebol overview• Ethical crisis of Chaebol leaders• Chaebol’s controversial issues• Government activities• Conclusion
Chaebol overview• Korean Chaebols are in various ways but what iscommon in every definition is– A big business conglomerate.– Comprising a large number of diversified affiliatecompanies.– Controlled by an emperor -like owner chairman.• In 2012 total sales of Korea’s 10 biggestcompanies, like Samsung and Hyundai Motor,was 946.1 trillion won (US$83.1 billion). Thisaccounted for 76.5% of Korea’s GDP (according to dataposted by the website www.chaebul.com )
Ethical Crisis of Chaebol Leaders (1)• In 2007, Mr. Kim Seung-youn, chairman ofHanwha. (beat bar workers at a building site withthe help of his own goons).• In 2006, Mr. Chung Mong-koo, the chairman ofHyundai. (was convicted of embezzling about$90m from his company misappropriation ofcorporate funds).• Mr. Chey Tae-won, of SK Group. (was convicted in2003 of illegal share swaps designed to keep themost lucrative parts of the group in his familyscontrol).
Ethical Crisis of Chaebol Leaders (2)• In 2008, Mr. Lee Kun-hee, the formerchairman of Samsung. (was convicted ofembezzlement and tax evasion).• In 1999, Mr. Kim Woo Choong, founder of thedefunct Daewoo Group. (was convicted offraud and embezzlement).• In 2013, Mr. Chey Tae-won, of SK Group wasfound guilty of embezzling and was sentencedto 4 years in prison by the Seoul District Court.
Ethical Crisis of Chaebol Leaders (3)• In 2012, Hanwha Group Chairman, Mr. KimSeung Youn was sentenced to 4 years in jailand fined 5.1 billion won ($4.5 million) forembezzlement amid a presidential electioncampaign that’s increasing scrutiny of SouthKorean executives. (http://www.bloomberg.com/)
Chaebol’s controversial issues (1)• In general debates:– These Chaebols spend far more on advertising thanseems justified by the demands of brand promotion.– Indirect cross-shareholding to control the tower ofmanagement governance.• The Chaebols were protected from:– Competition.– Assured access to capital.– Held to low standards of disclosure.
Chaebol’s controversial issues (2)• Domestic debates have been mostly focusedon the negative aspects of Chaebols:– Excessive concentration– The collusion between government and Chaebols– The lack of transparency as ethical background– Unfairness of owner -managers’ running the groupaffiliates with small stakes– Imbalance against SMEs.
Government activities & effects (1)• In 2008, The President Lee Myung-bak pardoned manyChaebols leaders.• President Lee also appealed to Chaebols leaders toboost investment and jobs.• In 2009, President Lee Myung-bak pardoned Lee Kun-hee.• President Lee Myung-bak granted a special amnesty toMr. Lee Kun-hee:– Retain the membership at the International OlympicCommittee.– Lead a campaign by the South Korean city of PyeongChangto host the 2018 Winter Olympics.
Government activities & effects (2)• But South Koreans civilian feel:– Increasingly angry about unequal justice.– Pressured the courts and politicians to end thecycle of light sentencing and pardons.• People believe that too little of Chaebols’growth is sharing down to the public andSMEs.
But… In conclusion• Is it really need a new policy for Chaebols? Isthe changing will bring only a good things?• Many people feel proud of theaccomplishments of various Samsungcompanies.• Many others fear any harm to theconglomerate (Chaebols) could lead to abreakup that would open the door to foreigncompanies and investors acquiring some units.