Hyundai Deal Exposes HypocrisyOn Thursday Chung Mong-koo, the chairman of Hyundai Motor, met with his younger brother Chung Mong-hun, who was reappointed chairman of Hyundai Engineering and Construction Co. on Wednesday. At the meeting the elder Mr. Chung expressed his intention to provide more than 200 billion won ($176 million) in assistance to Hyundai Construction by buying back the construction unit''s shares of Hyundai Motor stock. Many Koreans are happy to see thebrothers set aside their differences and hope the move will restore Hyundai Construction.
There are, however, some troubling aspects to this event. Lee Keun-young, chairman of the Financial Supervisory Commission, met with Chung Mong-koo on Wednesday to request that he help Hyundai Construction. We believe the government should not have intervened. Although Mr. Lee is calling his intervention a "request," we feel that in the light of current government-corporate relations it could be construed as coercion. Jin Nyum, the minister of finance and economy, had previously made such requests to no avail, and Chung Mong-hun''s numerous calls for meetings with his brother were shunned. We find it rather odd that Chung Mong-koo should agree to meet with his brother the day after his meeting with Mr. Lee. Even if Mr. Lee merely made a request, it still begs the question: Why should a government that espouses free market principles ask a corporation to buy something that the corporation has said it has no interest in?
Through such meddling the government is going against the very principles it claims to advocate. While trying to reform Korean conglomerates into "loose federations of independent entities," the government has at the same time continued to insulate affiliates from each other in order to prevent a chain of bankruptcies. Even if the support one Hyundai company provides another remains within legal bounds, it still goes against the direction the government has set for restructuring. It is unfair for the government to apply a different rule to Hyundai. No Korean wants to see the demise of a corporation with dozens of subcontractors and more than 500,000 workers, but the same procedures and principles must be applied to all troubled firms. In view of the government''s handling of this case, we are concerned about how principled and fair the government will be in the restructuring of the financial sector and public utilities