Reform of Chaebol Still Needed

Chung Mong-hun, a CEO of Hyundai Corporations, is going to hold a press confrence to explain its 'breakthrough' management plan. The plan will include the advance dismantling of Hyundai Group CEOs Council and the Group Restructuring Coordination Headquarters.

In addition, corporations other than Hyundai's core companies, such as Hyundai Electronics and Hyundai Engineering and Construction, will be managed by professional managers. This means that Hyundai will no longer be a family-managed firm. Though still not perfect, this should be evaluated as a very good plan, given that the competition for management right succession brought about embarrassment and ill effects on business, both domestically and externally.

Hyundai should keep in mind that it is not well-organized plans, but true change, that matters now. Besides Hyundai, Samsung, LG, and SK have done their best to renovate themselves over the last two years. Though forced by external power, they removed many secretary offices and the offices of planning and coordination as well as establishing external auditing systems and outside-the-company-director systems.

However, in spite of these efforts, many people still do not believe that Hyundai has become transparent in their managment. This can be seen when major sources of authority, such as promotion and finance, which the secretary offices of the CEO used to be in charge of, had their control transfered to the Group Restructuring Coordination Headquarters, even though the headquarters has no legal authority in these areas. Moreover, the corporate governance did not change and has remained concentrated in the firms' owner. Several events have created a poor reputation for the company, such as irregular transfers of extreamly high values in assets to the minor children of owners to avoid taxes and other fees and artificial manupulation of stock price. Finally, Hyundai's competition over management rights have once again marred the improved Chaebol image.

Given these conditions, chaebols, including Hyundai, need to urgently recover the trust of the people and continue their voluntary efforts for innovation. We can clearly see that any firm, which can not efficiently respond to the fast changing business world of the digital economy and globalization, will, without exeption, face the crisis of collapse.

In addition, I have one more thing to ask from the government. The government should not approach these events, which involve Hyundai, with a chaebol-killing attitude. Enterprises and the government should work in concert to develop the national economy. The government should not push firms to dismantle their Group Restructuring Coordination Headquarters, rather, it should suggest good alternatives, for example a reform of the holding company system. The government also has a good reason to reinforce its inspection of unfair trade, irregular transfers of wealth, or abuses by large shareholders. In conclusion, the government had better consider institutional measures.

by Kim Wang-ke