[EDITORIALS]People or profits, Mr. Jang?

The Korea Corporate Governance Fund, created by shareholder activists to help companies improve their management, recently bought a 5.15-percent stake in Daehan Synthetic, the textile business company belonging to the Taekwang Group. Known as the “Jang Ha-sung Fund,” after the dean of the Korea University Business School who is a living symbol for corporate governance, it is mostly foreign investments and is estimated to hold around 130 billion won ($135 million). According to Mr. Jang, the fund invested in Daehan because its share price was only one-fifth that of its net asset value and the company had fundamental problems in its management structure. The message was that Daehan’s share prices could go far higher if the company only improved its management structure. The company’s share price doubled after the purchase.
We do not want to question the earnestness of Mr. Jang. He is a well-known activist who has advocated the protection of minority shareholders by criticizing the conglomerates’ structures and management practices for over 10 years. Unfortunately, good intentions do not always bring the best results. It is a rare thing for civic rights movements that champion the people’s interest to mix with funds pursuing commercial interests. The corporate governance fund uses its influence over a company to demand management reforms after buying the shares, but its ultimate objective is to make a profit.
So far, it has been reported that the root of the Jang Ha-sung Fund is located in Ireland, where it is exempt from taxes. The fund is operated by Lazard Asset Management, which acted as an advisor for Sovereign Asset Management in its dispute with SK Corp. over the control of the SK Group in 2004. Sovereign withdrew from Korea after earning over 800 billion won. Mr. Jang claims that the investment would be long-term, lasting from five to 10 years, but he doesn’t have the final say in this. He admits that Lazard makes the final decisions when it comes to actual investments.
The stock market is having a ball over the fund. Suddenly, “asset stocks” have become a new favorite for investors. There is even a rumor that the share prices of companies that have “Daehan” or “Hankuk” ― terms for Korea ― in their names are going up because the names give the impression that the companies have a long history and therefore own many assets.
Already, some businesses profess to be under pressure from the Korea Corporate Governance Fund. If businesses shirk from investing because of its influence, there will be even fewer jobs and the economy will slow down even more. While reforming corporate management is a good cause that needs to be tended to, Mr. Jang, as a central figure in this movement, should be more careful.