Let the chaebol do their jobThe legislature is in a rush to expedite various laws under the name of “economic democratization” that largely aim to regulate the excesses of large companies affiliated with chaebol. For instance, one bill aims to disclose salaries of registered corporate board members whose annual pay exceeds 500 million won ($448,370). Another could penalize business deals among chaebol affiliates by classifying them as illegal inside trading.
Large companies, even if they are operating under a deficit or restructuring, also won’t be able to pressure subcontractors to lower the price of supplies and services. If a family-run company outsources business deals to another where members of the owner’s family own a stake of more than 30 percent, the owner or chairman would be found accountable and face penalties including time in jail. The corporate owner would have to prove that he or she has not given orders to outsource work to the affiliate to avoid the penalties.
These measures would have severe repercussions on the economy and corporate activities. Unfair practices of large conglomerate-affiliated companies by sharing lucrative work among themselves and benefiting from unfairly low subcontractor costs must be fixed. They could be contained under existing antitrust regulations without borrowing the ambiguous term “economic democratization.” Small- and mid-sized enterprises have suffered because authorities’ supervision was lacking.
But the bills under review go too far. They violate the principles of a free market economy and could undermine the merits and strengths of the Korean chaebol structure. If all business deals among affiliates are regarded as illegal inside trade, the nuts and bolts that kept Korean chaebol competitive through balanced appropriation and sharing of work among subsidiary arms would break down. It also does not make economic sense to allow subcontractors to demand increases in contract prices, while large companies are prohibited for trying to reduce their costs no matter what. Penalizing someone without evidence and demanding that person prove his innocence is an abrogation of legislative responsibility.
President Park Geun-hye also has said some of the measures pushed under the banner of economic democratization are too extreme. Means are as important as the goal. The economy is under strain and times like these demand, before all else, urgent action to restore the economy. Corporate activities need to be encouraged, not discouraged. We hope lawmakers exercise their better judgment for the sake of the economy.