A delisting road map for all

After holding an emergency meeting, the Korea Exchange announced this week that it will not subject Hanwha, the holding company of Hanwha Group, to a delisting review in order to stave off shocks in the stock market. But the decision has stoked controversy over whether the authorities are showing favoritism to large companies. Hanwha, one of the country’s 10 largest conglomerates, clearly violated stock market regulations by failing to report a charge of embezzlement in a timely manner after prosecutors sought a nine-year prison term for Hanwha Group Chairman Kim Seung-youn on Friday for allegedly misappropriating billions of won of company funds. In order to maintain a level playing field in the future, stock authorities must set clear guidelines for delistings and suspensions of trade.

Investigators have been probing the embezzlement case since January of last year, but the stock exchange has not pressed the company to disclose information on the case in a bid to protect investors. Only after the company said on Friday that insiders had embezzled an estimated 89.9 billion won ($80.5 million) did the exchange say it would suspend trading from Monday to review whether the company deserves to be delisted. But the exchange review board, which usually spends weeks on such reviews, abruptly announced on Sunday that Hanwha shares would continue to be traded as normal.

The graft in this case amounts to 3.88 percent of Hanwha’s net capital. The company also handed a restructuring plan to the exchange, promising to enhance transparency and oversight in management. But investors were angered by Hanwha’s irresponsible explanation that it had neglected to disclose the details of the case due to a “misunderstanding in work procedures.” The company’s attitude and the authorities’ move simply underscore that, in Korea, large companies can get away with almost anything.

The public resentment against conglomerates owes to a lack of legal fairness. Last year, 13 companies were kicked out of the technology-laden Kosdaq market after being linked to cases of graft and misappropriated funds. They were all delisted because, in each case, the size of the embezzled funds was disproportionately large when compared to the companies’ net capital.

The exchange must map out fairer rules as society can no longer tolerate this lenient approach to the wrongdoing of chaebol, which should be subject to the same set of working standards as smaller businesses.