[VIEWPOINT]Kim Woo-choong’s two facesKim Woo-choong, the founder and former chairman of Daewoo Group, has finally returned to Korea, five years and eight months after he left his homeland to wander overseas with the collapse of Daewoo in 1999. As soon as he arrived at Incheon International Airport Tuesday, he headed for questioning to the Supreme Public Prosecutors Office, which had issued a warrant for his arrest in March 2001 and decided to suspend prosecution in May of the same year.
Mr. Kim has left us with two starkly contrasting images. One is the face of the passionate businessman who steered the ship that was the Korean economy. Despite its late entrance into the corporate world, behind the Samsung, Hyundai, LG and SK conglomerates, Daewoo Group grew at marvelous speed to become the country’s second-largest business group, ahead of Samsung, as the Fair Trade Commission announced in April 1999, just before Daewoo was split up.
As head of the Federation of Korean Industries, Mr. Kim tried with all his might to overcome the foreign exchange crisis of 1997-98, together with then-President Kim Dae-jung. His arguments for achieving “global management” and a $50 billion trade surplus have given us great encouragement.
At the same time, Mr. Kim has another face ― that of the leader of an insolvent enterprise. His constant pursuit of expansion left Daewoo with a debt of 68 trillion won ($67 billion) in 1999, seven times that of Kia Group at the time of its crisis in 1997. Daewoo had all the problems with excessive growth and management with borrowed capital that were characteristic of Korean business at the time.
In Nov. 2002, the Supreme Court ruled that Daewoo Group had committed accounting fraud amounting to 41 trillion won. Former Daewoo officials were fined 23 trillion won and sentenced to prison. Daewoo’s fall had enormous repercussions for the nation’s economy, and for the lives of many people.
There is a difference of opinion about how to handle Mr. Kim. Some argue that his case should lead to a National Assembly investigation of state affairs and another probe of presidential campaign finance. Others predict that he will be acquitted in the end, or that he will be released on bail for health reasons. In any case, Mr. Kim cannot escape responsibility for his violation of the law.
Mr. Kim has been a wanted fugitive on charges of immense accounting irregularities, of using Daewoo’s fabricated books to secure bank loans under false pretenses and of misallocating Daewoo funds overseas. Charges of bribery and misappropriating public funds may be added. He is also involved in various civil proceedings.
Discussion of his achievements and faults aside, the Daewoo crisis caused a huge shock for Korea. With the class-action lawsuit system having taken effect this year, a failure to punish Mr. Kim could cause long-lasting problems. After six years of delay, this should not be left unresolved any longer. To resolve the Daewoo crisis, Mr. Kim should bear final responsibility as the one who ordered the illegal acts.
Once the legal process has led to a final, conclusive decision, Mr. Kim may be punished, and perhaps sent to prison. But it should be taken into account that punishment is not everything. During the past five years and eight months, Mr. Kim may have undergone far more suffering than he would in prison. He may even have thought to himself that it would have been better for him to have gone to prison at the beginning. What about giving him a chance to work for his fatherland after some time has passed, with the acknowledgment that he has already paid a considerable price for his crimes?
Mr. Kim’s personal network and his information network are very precious assets. In the world of global business, there will be many ways for Mr. Kim to serve the country and pay the price for his crime. Perhaps he will be given another chance to do many things in the world.
But his moral and legal responsibilities should be addressed first. The principle of managerial judgment holds that in general, except where there have been material mistakes, management is not held legally responsible for improper decisions or behavior in the course of duties. But in the case of a large conglomerate, where there are complicated interests at stake, management’s failure to sustain the business brings about tremendous losses. It should not be overlooked that as a trustee of capital and a payer of debts, a manager bears heavy responsibility along with his enormous authority. This may be the biggest lesson to be learned from the Kim Woo-choong case.
* The writer is a professor of business administration at Hongik University. Translation by the JoongAng Daily staff.
by Kim Yong-yul