Korea Inc. struggles with out-of-action chairmen

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Korea Inc. struggles with out-of-action chairmen


At the end of the month, heads from Korea and Japan’s top companies are scheduled to hold a two-day meeting in Seoul, the first such meeting in seven years.

But the organizer, the Federation of Korean Industries (FKI), is having a tough time because it can’t find enough Korean business titans to attend its event.

“We have already received a list of 20 Japanese participants led by the chairman of Keidanren and Toray, Sakakibara Sadayuki,” said a FKI official. “But we haven’t even confirmed half of the participants from Korean business groups.”

In what has turned out to be a very difficult year for business, many Korean companies face a unique problem: no one calling the shots from the bosses’ offices.

Of the country’s top 30 conglomerates, 12 have empty chairman positions, including Samsung’s Chairman Lee Kun-hee, who has been gravely ill since May, and SK Group’s Chairman Chey Tae-won, who is currently behind bars.

Others are either faced with trials or busy restructuring their corporations.

SK Group is a good example of the struggles within Korea Inc. Last week, some 30 or so CEOs from its subsidiaries gathered for a top management seminar held at the conglomerates’ academy in Yongin, Gyeonggi.

The seminar was called to discuss next year’s business plans and direction.

“The discussions lasted a long time as there were debates over the crisis, including the sluggish global economy and the extended absence of Chairman Chey,” said an SK official.

Although the government is urging companies to invest more, the companies themselves are having trouble planning ahead because the challenges are so steep.

When the JoongAng Ilbo surveyed the nation’s top 10 conglomerates on their business plans next year, LG and Posco were the only two that said they were working on them. Since last year, Samsung stopped disclosing its investment plans.

“This is what Korea’s business community looks like today,” said a high-ranking executive at a conglomerate who requested anonymity.

The global market slowdown is clearly being felt by Korea’s companies.

In just six months, Samsung Electronics has seen its operating profit fall in half and has suffered from massive weakness in its smartphone business.

Among Korea’s six major industries - mobile phones, TVs, semiconductors, ships, petrochemicals and automobiles - the first five suffered from minus growth in the first half.

Even the nation’s leading automakers, Hyundai Motor and Kia Motors, are under pressure particularly due to the weaker Japanese yen against the Korean won.

In the third quarter, Hyundai Motor saw its operating profit shrink 18 percent compared to the same period last year to 1.65 trillion won ($1.5 billion).

Meanwhile, competitor Toyota has been enjoying its currency advantage. The company reported record sales of 7.6 million units in the first nine months, up nearly 3 percent compared to a year ago. The Japanese company will be announcing its third-quarter report later today.

Analysts worry that the lagging performance of the nation’s top companies isn’t simply part of the business cycle but could reflect structural problems resulting from a changing global business environment.

One example is the recent development of shale gas, which is affecting Korea’s petrochemical industry. The falling crude prices are impacting the shipbuilding industry.

“Major oil companies are delaying their orders on offshore plants, which has been one of the main growth engines for shipbuilding companies, as crude prices have been falling,” said a Hyundai Heavy Industries official. “The shipping market is also clouded.”

As businesses struggle, there are widespread concerns over the year-end personnel shifts.

Hyundai Heavy Industries has already announced changes, including cutting one-third of its 200 executive positions last month.

Samsung Electronics is said to be making changes in the executive suite of its information and mobile department.

Meanwhile, the companies are hesitating to make bold investments or expand overseas aggressively, especially those with absent chairmen.

This year CJ Group made 2.6 trillion won in investments, a 20 percent cut from an initial plan that was drawn up last year.

“This year we gave up on several projects, including constructing a golf course and a theme park,” said a CJ Group official.

“To compare our economy to baseball, it is like the Hanwha Eagles without Ryu Hyun-jin,” said Bae Sang-kun from the Korea Economic Research Institute. “At least the government’s bold regulation revision and expansionary fiscal spending could be a relief.”

BY LEE SANG-JAI, KIM HYUN-YE [ojlee82@joongang.co.kr ]
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