Ease off the chaebolOwners of large business groups are suddenly surrendering their chief executive titles, raising suspicion about their motives amid rising scrutiny of corporate chieftains. Park Yong-maan, chairmen of Doosan Group, and Cho Nam-ho, chairman of Hanjin Heavy Industries & Construction, have resigned CEO posts in key group affiliates. Before them, Chung Yong-jin, vice chairman of Shinsegae Group, and Lotte Group chairman Shin Dong-bin also quit boards of directors and chief executive posts. Their explanation was that they were making room for professional executives to enhance accountability in management. But few bought that line.
In recent years, owners and their heirs of family-run chaebol have been summoned to legislative hearings or investigations by prosecutors and the antitrust agency. Due to growing demands for economic justice and fairness, registered chief executives will come under more legal responsibility in corporate mismanagement.
The government has been encouraging large chaebol owners to take up chief executive or board of directors posts that come with distinct legal duties. Chaebol owners and their family members who are executives were criticized for running group affiliates with small stakes and without taking legal responsibilities. The sudden rush to leave the posts should not be viewed as mere whims.
Long gone are the days when chaebol chiefs could weasel out of corporate mismanagement and misconduct. SK Group’s Chey Tae-won and Hanwha Group’s Kim Seung-youn had to go to prison straight from court when a legal onus was laid on boards of directors for corruption in management. Corporate chiefs often have to open their offices and houses for warranted investigations by law enforcement authorities. Their accountability will grow once President Park Geun-hye enacts laws allowing collective law suits and punitive damages as promised in her election campaign.
Korean companies largely grew on management by their founders’ families. Korea Inc. could not have driven the economy and gained today’s global status if not for bold investments and proactive entrepreneurship from group owners during times of crisis. Their achievements and commitments must be appreciated despite criticism of their sometimes unfair business practices. But what would be worse is a corporate structure where owners maintain management control while kicking the legal responsibility and accountability to someone else holding the chief executive title. To prevent such an arrangement, the government should ease its hard stance on corporate management. It must seek a win-win solution where chaebol owners can continue aggressive management with greater accountability.