Justifying hereditary power

Doosan Group is bequeathing management control to a fourth generation for the first time among Korea’s family-run chaebol. Park Jeong-won, nephew of the current chairman, Park Yong-mann, will take the helm under Doosan’s unique tradition of sharing power within the family tree.

The oldest conglomerate was run in turns by five sons of the founder. The grandson will now ascend to the throne. Doosan is stable as the uncle-nephew succession has been expected since 2002. In fact, anticipation of a breath of fresh air blowing through the cash-strapped group boosted the share prices of Doosan companies.

But successions in Korean conglomerates raise many questions about corporate governance. The two largest chaebol, Samsung and Hyundai, have already laid the groundwork for third-generation rule.

GS and Kolon are preparing for fourth-generation management by placing the grandchildren of their founders in executive positions. Even with high inheritance taxes, hereditary rule among Korean chaebol continues.

Companies in a capitalist economy are free to bequeath management control in various ways. It can be debated whether it is better for a company to be run by an owner or a paid manager. But in discussing hereditary corporate control, we have to think about the social responsibility of companies.

Instead of chief executives running a company, there are only chief operating officers in the Korean corporate community. COOs chosen in a revolving door tradition run public enterprises, adding to inefficiency in the corporate sector.

Chaebol family troubles have also boosted public resentment and disgruntlement toward the chaebol. If hereditary rule is inevitable, the chaebol families must demonstrate social and ethical responsibility and contributions toward society to prove the justice of their legacy and their lucrative inheritances.

JoongAng Ilbo, March 4, Page 30