Korean Chaebol Ethics

Study on the issues of Chaebol companies in Korea 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 is common in every definition is – A big business conglomerate.– Comprising a large number of diversified affiliate

companies.– Controlled by an emperor -like owner chairman.

• In 2012 total sales of Korea’s 10 biggest companies, like Samsung and Hyundai Motor, was 946.1 trillion won (US$83.1 billion). This accounted for 76.5% of Korea’s GDP (according to data posted by the website www.chaebul.com )

Ethical Crisis of Chaebol Leaders (1)

• In 2007, Mr. Kim Seung-youn, chairman of Hanwha. (beat bar workers at a building site with the help of his own goons).

• In 2006, Mr. Chung Mong-koo, the chairman of Hyundai. (was convicted of embezzling about $90m from his company misappropriation of corporate funds).

• Mr. Chey Tae-won, of SK Group. (was convicted in 2003 of illegal share swaps designed to keep the most lucrative parts of the group in his family's control).

Ethical Crisis of Chaebol Leaders (2)

• In 2008, Mr. Lee Kun-hee, the former chairman of Samsung. (was convicted of embezzlement and tax evasion).

• In 1999, Mr. Kim Woo Choong, founder of the defunct Daewoo Group. (was convicted of fraud and embezzlement).

• In 2013, Mr. Chey Tae-won, of SK Group was found guilty of embezzling and was sentenced to 4 years in prison by the Seoul District Court.

Ethical Crisis of Chaebol Leaders (3)

• In 2012, Hanwha Group Chairman, Mr. Kim Seung Youn was sentenced to 4 years in jail and fined 5.1 billion won ($4.5 million) for embezzlement amid a presidential election campaign that’s increasing scrutiny of South Korean executives. (http://www.bloomberg.com/)

Chaebol’s controversial issues (1)

• In general debates:– These Chaebols spend far more on advertising than

seems justified by the demands of brand promotion.– Indirect cross-shareholding to control the tower of

management 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 focused on 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 group

affiliates with small stakes– Imbalance against SMEs.

Government activities & effects (1)

• In 2008, The President Lee Myung-bak pardoned many Chaebols leaders.

• President Lee also appealed to Chaebols leaders to boost investment and jobs.

• In 2009, President Lee Myung-bak pardoned Lee Kun-hee.• President Lee Myung-bak granted a special amnesty to

Mr. Lee Kun-hee:– Retain the membership at the International Olympic

Committee. – Lead a campaign by the South Korean city of PyeongChang to

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 the

cycle of light sentencing and pardons.• People believe that too little of Chaebols’

growth is sharing down to the public and SMEs.

But… In conclusion

• Is it really need a new policy for Chaebols? Is the changing will bring only a good things?

• Many people feel proud of the accomplishments of various Samsung companies.

• Many others fear any harm to the conglomerate (Chaebols) could lead to a breakup that would open the door to foreign companies and investors acquiring some units.

FAQ ?

Thanh you!