&#91EDITORIALS&#93Punishing only ourselves

Crest Securities, a British investment fund, has become SK Corp.’s largest single shareholder, holding a 12 percent stake of the company’s shares. Crest is now in a position to threaten the management of SK Corp., the flagship company of the SK Group. Although Crest’s maneuver has not yet developed into a hostile takeover bid, Crest Securities now surely can exert great influence over the management of SK Group. It is shocking to see a business group with assets of 47 trillion won ($39 billion) wobbling because a foreign investment fund has grabbed 170 billion won worth of it.
The fundamental reason that this has happened is the government’s policy on conglomerates, particularly in the regulation limiting mutual investment among affiliate companies of a business group. The Fair Trade Act, for the sake of reining in the juggernaut expansion of conglomerates, limits voting rights of shares bought by other companies in excess of 25 percent of their own net assets. As a result, although SK affiliates in total own more than 35 percent of SK Corp.’s shares, the shares with voting rights in fact amount to only 10.9 percent. But there are no such restrictions on foreign capital.
SK Corp.’s current predicament under this ill-conceived law shows that Korean companies are defenseless to resist hostile takeover attempts by foreign capital. We cannot exclude the possibility of a second or third SK Corp. in the future. Accordingly, we need to comprehensively review and mend the clause on the investment ceiling. It is important to prohibit conglomerates from expanding boundlessly and their owners from managing them like emperors. But to do so, can we let one Korean company after another be turned over to the hands of foreign capital at very cheap prices?
Major shareholders should make management more transparent to be more competitive. But the investment ceiling cannot be seen anywhere else besides Korea. If the ceiling perversely discriminates against domestic companies so that their management is threatened by foreign capital, the regulation is not up to global standards.