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More Pressure for Reforms for Conglomerates

15:02 July 10, 2017 replay time01:56

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Conglomerates favoring their subsidiaries in giving work and expediency for passing on wealth and management rights are considered as the biggest social ills that should be eradicated from society.

As the new government is expected to push forward with new reforms, people are paying attention on how such reforms will bring changes to the conglomerate's dominate structure and management culture.

Kim Jong-seong has more.


Cho Yang-ho, the chairman of Korean Air, is being investigated by the police on allegations that company funds were used to pay for construction work for his house.

If the allegation turns out to be true, this would be embezzlement and a breach of trust.

Prior to this, the Fair Trade Commission reported Cho Won-tae, the president of Korean Air, and son of Cho Yang-ho, to prosecutors, stating that he favored unlisted subsidiaries belonging to his family members.

According to Mirae Asset, there are speculations that they would be the first target under President Moon's pledge to reform financial groups through integrated inspections.

The reason for this is that conglomerates are avoiding regulations on a holding company by using expedients and favoring their subsidiaries with contracts.

Kim Sang-jo, the commissioner of the Fair Trade Commission, criticized this in the past saying, "The dominating structure of Mirae Asset includes all of the expedients of other conglomerates for expedient giving and governance," and he also said, "It is worse than other conglomerates, such as Samsung."

The same story applies to Harim Co., Ltd. Harim started as a poultry company and later developed to the top 30 in the financial sector.

This issue kicked off when the 25-year-old son of Kim Hong-kuk, chairman of Harim Co., Ltd., obtained management rights of Harim Group valued at 10 trillion won. However, during this give-away, only 10 billion won was paid in taxes.

Han Seung-hee, the new director of the National Tax Service, openly announced that he would not overlook such issues.

<Han Seung-hee / Director of the National Tax Service> "Thorough inspections should be made for irregular donations and giving procedures of conglomerates and the wealthy that recently gained huge interest in society."

Moreover, institutional investors, such as the National Pension Service, are pushing ahead with the introduction of the voting right directive, which obligates the retaining shares of voting rights to be used in accordance with the improvement of corporate governance and shareholder value.

Such reform pressures on chaebol are speculated to be realized through various policies during this year.

This will make the market and citizens pay more attention on how such pressures might change the adamant attitudes of chaebol.

Kim Jong-seong reporting for Yonhap News TV.

Yonhap News TV: 02-398-4441 (Inquiry on article) 4409 (Report), Kakaotalk/Line: jebo23

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