[Outlook]A model for the future

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[Outlook]A model for the future

The incumbent president of Harvard University, which was established in 1636, is its 28th. Seoul National University, which was established in 1946, 310 years later than the American university, is now on its 24th president. This suggests there is a serious problem with the way Korea’s universities are governed and managed. This is what Dr. Henry Rosovsky at Harvard University says. Many presidents of Harvard University have tenures of 20 years or more so they are committed to developing the university as their life’s work. In Korea, professors vote to elect their presidents in order to prevent people who have influential connections but inadequate qualifications from being employed and they serve just one four-year term. By the time a president develops the right skills and experience in managing a university, which is a complex entity, he or she leaves.
A journalist at the Economist, who is an expert on the United States, said Harvard University is the oldest company in the United States.
Is a university a company?
Of course, it is. Public universities are public companies and private universities are private, non-profit companies.
All organizations that produce goods and services are companies be they a university, a hospital, a restaurant or a civil engineering company. In Korea, there are many public universities that should be privatized to improve their management. A similar problem was revealed by the recent scandal of an overseas trip by auditors at a public company.
What is an ideal way to govern private companies? Recently, Harvard Business School held an international conference on different types of influences on company management. The conclusion was that there are three types of influences that govern company management -- an American style, a Japanese style and a German style. That is, American companies are heavily influenced by the stock market, Japanese companies are under the control of conglomerates and in Germany the banks exert the strongest influence. There is no right answer about which is best. That is up to individual companies.
Peter Drucker, who helped create business management as a legitimate academic field, had a similar argument. According to Drucker, there are three management models -- American, Japanese and German style. American companies emphasize profits, Japanese companies prioritize human networks, and German companies focus on equality. He added that Korea must develop its own model, instead of copying one of the three as Korean companies have been doing so for long.
The Massachusetts Institute of Technology released its second report on competitiveness titled “How Do We Compete,” after the first one, “Made in America.” A research team of 13 professors and students interviewed some 500 companies in 12 countries over five years. Professor Suzanne Burger, the head of the research team, said that there is no single answer for the best management style or the best way to control or govern enterprises. The right answer, she said is for companies to be competitive on the global stage.
She said many assume that companies which compete fiercely on the global stage will have more or less the same management style and will be governed by the same forces, but, in reality the opposite is true. They become more diverse and such diversity continues because companies have been developed in different ways, and government policies and laws are very different from country to country.
Korea must improve the structure of its business management.
First, we should improve the management of public companies. For private companies, there are no right answers so they can choose the way they want and they must be left to choose the best ways for them, including establishing holding companies.
Second, the law that prohibits industrial capital from controlling financial capital is anachronistic These days, different industries are fused. Industrial companies and financial companies are fused into one, too. In General Electric, the world’s most respected company, industry and finance are combined. In Germany, banks and manufacturers are connected through cross-shareholdings and the exchange of executives. In Japan, each company group has a main creditor. Korea has separated industrial capital and financial capital so many local banks have been merged into foreign financial capital and 79 percent of the preference shares of Samsung Electronics are now owned by foreign financial institutes.
Third, many Korean companies created and specialized in certain industrial fields. The Hyundai Group developed shipbuilding and auto manufacturing industries, SK Group led the telecommunication industry, LG Group led the chemical industry, and Samsung is the leading semiconductor maker. Hyundai Heavy Industries is the world’s largest shipbuilder. Hanjin Group has developed the world’s largest cargo carrier. In this era of global competition, we must lift regulations on investment, such as regulations on the total amount of investment, and on circular investment.
Instead, we must do our best to create new industries and develop companies that can represent Korea on the global stage.

*The writer is a professor emeritus at Seoul National University. Translation by the JoongAng Daily staff.

by Song Byung-nak
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