[EDITORIALS]SK crisis could mushroomThe adverse effects from the investigation into SK Global Co.’s book rigging are serious. The stock market reacted sensitively, and stocks of SK Group affiliates and its creditor banks were affected significantly. With rumors of further investigations, the effects are spreading to unrelated companies. Investors are selling funds whose portfolios include bonds of SK affiliates and concern is rising about foreign banks calling in loan guarantees by SK for SK Global’s foreign subsidiary. Financial markets, already unstable, are quaking more.
The end of the SK Global investigation will not be the end of the problem. As in the case of Enron in the United States, there is a possibility that the shock will affect Korean businesses and the entire Korean economy. The foreign media have already expressed strong distrust of Korean companies. SK Group, its creditors and the government should concentrate their efforts on resolving the issues as soon as possible and minimizing the negative side effects.
First of all, the entire SK Group should not be undermined. Although there are fewer reciprocal debt payment guarantees between its affiliates than in the past, some SK affiliates will suffer. Even though SK Global Chairman Chey Tae-won vowed to take full responsibility, including contributing some of his own wealth, that would not be sufficient. SK Group’s major shareholders and its affiliates should prepare for the worst case, including the possibility that the SK Group could disintegrate.
SK Group’s creditors should realize that the incident could send shock waves through the domestic financial market and the entire Korean economy, and act in a way that promotes the universal good rather than their short-term interests. The government must attempt to resolve the situation quickly and to settle people’s anxiety.
The incident shows that account manipulating by domestic companies has reached a point that it cannot be ignored. The government should improve its regulations on the basis that reviving confidence in our companies is a vital issue for the Korean economy. The government must punish accounting manipulations and negligent auditing practices more seriously and drastically strengthen its supervision. If the problems are not taken care of completely, Korea could face an even bigger crisis.