FKI takes on anti-chaebol proposalsPoliticians’ calls for banning circular shareholding among companies in an industrial group is wrong, said the country’s largest business lobbying organization, and could adversely impact the economy.
The Federation of Korean Industries expressed its concern about politicians’ moves to impose restrictions on conglomerates at a press conference yesterday.
The suggested changes would be too costly for the chaebols’ major shareholders, the FKI said.
“Owners of conglomerates need to hold more shares in a bid to maintain their voting rights,” said Bae Sang-moon, a senior vice president at the FKI. “If circular shareholding is banned, owners would divert money that they were going to invest in facilities or employment into buying shares.”
Bae said that would cut investments and slow the economy.
In circular shareholding, three to four subsidiaries of a conglomerate hold stakes in one another, ultimately helping the owner maintain control of the group without having to hold a large number of shares.
It is a way of circumventing mutual cross-shareholding, which was banned in 1986.
“For example, Hyundai Motor Group’s owner’s family would need to sell 6.16 trillion won [$5.5 billion] worth of shares held in subsidiaries like Hyundai Steel and Hyundai Mobis, and then buy 5.98 trillion won worth of shares in order to keep the family’s control over management of the group,” Bae said.
Meanwhile, a ruling Saenuri Party group working on the so-called “economic democratization” issue planned to submit a third piece of proposed legislation to restrict the chaebol yesterday, but faced opposition from some other conservative lawmakers. The proposed bill puts an immediate ban on conglomerates with more than 5 trillion won in assets from having circular shareholding.
By Song Su-hyun [firstname.lastname@example.org]
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