[EDITORIALS]Corporate governance rights

The Fair Trade Commission has announced the results of a survey on the corporate governance of big businesses. The survey found that the heads of conglomerates still hold big voting rights with small share holdings, and strengthen their managerial grip with investments made by their financial affiliates. The commission said, “Owners exercise 7 to 9 times more voting rights than their share holdings.” It also pointed out, “It is problematic that the financial affiliates utilize customers’ deposits for strengthening their bosses’ grip on management.”
It can be interpreted that the survey had a good intention of encouraging healthy governance among big businesses. The problem of distorted governance that results from complicated cross-unit investments must be addressed someday. However, it can also be misunderstood as a counterattack on businesses that object to moves to restrict the voting rights of financial affiliates. As a result, anti-business sentiments spread, and big businesses are labeled as immoral.
But Korea’s representative companies, like Samsung Electronics and Hyundai Motors, were born as a result of investments made by group affiliates. The rapid increase in circular cross-unit investments is only the result of the groups’ active participation in affiliates’ capital increases and financial support to their insolvent subsidiaries according to the government’s order to reduce groups’ debt ratio. The commission knows this well. It is difficult to understand, therefore, why it has made public the governance of businesses after investigating even unlisted companies. At the moment, the owners are continuously increasing their share holdings. Making public the complicated composition of share holdings can touch off unproductive controversy, exposing businesses to the danger of international mergers.
There is no answer to what is the most effective business governance policy. The companies that make large profits and return more in taxes and dividends are good companies. It is time to throw away the obsolete concept of concentration of economic power and jealousy toward profit-making businesses. The fair trade watchdog must heed the Financial Supervisory Commission chairman’s comment: “In this era of global competition, it is a matter to be decided by individual companies, not forced by the government, what business governance is most effective.”