Chaebol Rules Stir Political Juices

The high-decibel public debate over the relaxation of business regulations continued Tuesday, as top government officials and ruling party policymakers met over breakfast to discuss the course of corporate reform. When they emerged from the meeting, the officials said they had not yet come up with a policy which would put an end to the debate, which by now, observers say, has turned into a political catfight.

The Millennium Democratic Party's chief policymaker, Lee Hae-chan, said after the meeting that the administration must look more closely into the progress made by conglomerates on improving their corporate structure. But, he said, the level of total equity investments by the top 30 business groups continues to exceed 30 percent of the groups' net assets, adding, "There has not been much change to the conglomerates' expansionary management."

But the government officials, led by Deputy Prime Minister Jin Nyum, and the ruling party lawmakers left themselves some wiggle room by not completely ruling out policy changes. The group decided, they said, to maintain restrictions on equity investments and the designation of the top 30 business groups but to allow greater exceptions to the application of antitrust law when the need can be justified. "Any modification to the law must be clearly conditional on improving corporate governance and profitability, Mr. Lee said.

The officials did not refrain from some finger-pointing, however. A Finance Ministry officer said, "The issue could have been more easily resolved if the business community had kept its distance." The comment referred to the recent series of demands made by business organizations calling for the relaxation of government regulations applied to larger corporate groups. The antitrust law designates top 30 business groups by total assets and places various restrictions on them.

Many outside observers tend to side with the business sector. They point to a business environment that is changing, in part with the introduction of laws and regulations designed to strengthen shareholder rights. "There are measures in place to improve corporate governance, such as the consolidated financial statement requirement, provisions for collective shareholder voting and outside directorships and the class action suit system," Hongik University Professor Park Won-am said. "If these controls work, then the restrictions would be unnecessary. The market and the shareholders would evaluate the company's activities." A Korea Development Institute analyst said the issue should not be solved with a political compromise.

by Song Sang-hoon