What the election will not mean

While in Thailand, I watched how Wednesday’s elections were reported. Once journalists quickly got past the first woman president, whose father was a dictator, sound byte, all reports noted how both candidates called for curtailing the chaebol’ influence on the Korean economy.

From my vantage point, I looked at the conservative party’s “light on the road to Damascas” epiphanies as not being substantially more than the old Korean form-over-substance behavior of “pomseng pomsa.” Madam Park badly needed to use the “minsaeng” or common people’s anchor in her campaign to align herself and her party closer to the alienated electorate than to the economic elite as epitomized by the chaebol oligarchy. Her chaebol reform promises were expected.

But, while both parties advocated some good ideas during the campaign, the fact remains that the chaebol have grown at least collectively, if not individually in some cases, to be more powerful in many areas than the ROK government. Consequently, no matter who took over the Blue House, it would be almost impossible to effectively implement campaign promises, unless the chaebol view substantial reforms to be in their own long-term best interests.

We should remember that both progressives and conservatives while in the Blue House have tried to curtail the chaebol’s grip on the economy - and all have effectively failed. Meanwhile, the chaebol’s power has only grown in the National Assembly. Their effective lobbying, as well as their latent threats in their being less geographically anchored than their regulators, cannot be discounted. All of which makes today’s politicians, regardless of ideology or intent, even less capable of bringing around real change in this critical area.

Stepping back for a moment, we may ask why would any form of dismantling the chaebol - at least to the levels common with major corporations in other major economies - be good for the economy? I can answer that in just three letters: P-S-Y.

What Psy with his “Gangnam Style” unintentionally illustrated is that when Koreans circumvent the massive corporate dictates, the entrepreneurial and artistic Korean genius percolates to the surface and unintentionally shames the big top-down bureaucratic approaches of large Korean organizations.

Today’s chaebol not only dominate but cynically, and inefficiently in the long term, suck out much of Korea’s vitality. Most Korean SMEs generally have few choices but to serve the chaebol as suppliers. While the chaebol have understandably attracted overseas accolades for their achievements, the larger story of how Korea inefficiently supports these corporate vampires remains largely unknown outside of Korea.

What is good for the chaebol ultimately has been primarily good for the chaebol. Korea has benefitted from the positive spillages of chaebol successes, but not without major costs. There has been a remarkable lack of fairness in dealing with the chaebol for Korea’s SME suppliers, since for each supplier driven to bankruptcy by chaebol work scope creep, pricing reneging and unethical practices, there are several competing vendors waiting desperately to replace them.

Yet for all of Korean politicians’ talk about reforming the chaebol, it’s very much like people talking about the weather. That is, everyone talks about it but no one is able or willing to do anything about it. Taking on the largest chaebol legally or legislatively within Korea is not dissimilar to a kamikaze attack. Even if one wins, ultimately one must be prepared to make a supreme sacrifice. Unsurprisingly, we have yet to see any politician willing and able to face down the chaebol.

So is the situation hopeless? In the long run, I remain optimistic due to the chaebol’s self interests rather than any feckless government regulation. For example, today some of the forward-thinking chaebol are placing progressive Korean and even foreign executives in charge of large business units as parts of their drives to become better internationalized. As you would expect, these CEOs are smart, extraordinarily skilled - but they are also inherently more ethical in business than their peers.

With the rise of Chinese and other nations’ multinational corporations, the chaebol will discover that ethical behavior can be a competitive advantage in this increasingly information-connected world. Korea already has a superior reputation for now being a nation of laws. The next natural step is for its chaebol to become the preferred option among other players who make similar offerings but who still retain sordid foundations.

This kind of chaebol evolution will take more time than most people may like, but global competition is certain to have a much greater effect than politicians’ unfulfilled campaign promises in meeting Korean voters’ frustrated expectations.

*The author is president of Soft Landing Korea, a business development firm, and an alliance partner of Odgers Berndtson Japan, a global Big Six executive recruitment consulting company.

by Tom Coyner