Chaebol wary of new era of Moon Jae-in

Korea’s chaebol are on the alert as Korea gets its first liberal president in nearly 10 years, Moon Jae-in, whose key campaign pledges included reform of the conglomerates and a crackdown on corporate corruption.

Major conglomerates are trying to assess the impact of the new president’s respective pledges, which included corporate governance reform, amendment of the Commercial Act, corporate tax hikes and separation of banking and commerce.

The disgraced former President Park Geun-hye also proclaimed that she would overhaul conglomerates’ governance structure under a commitment of “economic democratization” during her campaign.

But she didn’t get far while in office, and then was impeached and removed from office for allegedly strong-arming money out of conglomerates for business favors.

Large companies fear corporate tax increases the most - possibly from the current 22 percent to 25 percent - but also express concerns about changes to their complicated shareholding structures, including cross-shareholding. They claim that any big changes by Moon could lead to a drop in investment, dealing a blow to the national economy.

“Isn’t it true that large corporations have been practically leading the Korean economy?” asked an executive of a major conglomerate. “If the new administration attacks conglomerates as corrupt objects that needs to be reformed, it will weigh down any economic recovery.”

Reflecting such concerns, shares of Korea’s most valuable company, Samsung Electronics, tumbled 3.02 percent to close at 2,280,000 won ($2,006) on Wednesday.

But another executive who asked not to be identified welcomed the election of the new president, saying his company can now map out investment plans for the future. Much planning was suspended during Korea’s leadership vacuum, he said.

Some say a liberal president may eventually work out positively for Korea. Mark Mobius, a legendary emerging markets fund manager and executive chairman of Franklin Templeton Investments, is one of them.

He wrote in a blog post Tuesday - right after Moon’s victory - that chaebol reform in Korea should result in “better corporate governance and could lift the prices of many Korean companies.”

Moon could actually narrow the so-called “Korean discount,” Mobius said - a reference to the Korean market’s generally lower valuations compared with other comparable global markets.

Mobius came up with the theory that “a weakening of the chaebol system could give an opportunity for smaller companies to grow and prosper without being dependent on the chaebol.

“We look forward to exploring potential opportunities in Korea,” he said.

Given Moon’s anti-chaebol bias, it will be inevitable that the Federation of Korean Industries (FKI), the business lobbying group that played a key role in the corruption scandal that helped topple former President Park, will have its role diminished.

“Gone are days of the FKI,” Moon said on April 14 during a lecture delivered at the invitation of the Korea Chamber of Commerce and Industry (KCCI). “I felt that a business lobbying group declaring plans to give up vested rights was very fresh. KCCI must be the true business group for Korea.”

On April 6, Moon invited executives from four business groups - the KCCI, Korea Federation of SMEs, Korea Employer’s Federation and Korea International Trade Association - for a talk but cold-shouldered the FKI.

Two months prior, when he wasn’t yet a presidential candidate, Moon said the FKI has no “qualification and cause” to represent the business community” in a lecture.

The KCCI is expected to take over the role of representing Korean business, industry sources say. Part of that task is serving as a bridgehead between the government and large companies and proposing business-related policies.

The chamber said in a statement Tuesday it hopes the new president revives the economic and social mood, reactivating creativity and spirit.

With Park Yong-maan, chairman and CEO of Doosan Infracore, at the helm since 2014, the power and influence of the KCCI has grown. The KCCI has 170,000 members of varying size from around the country, which compares to FKI, which represents large companies.

The FKI said in a statement Tuesday it will try to fix the wrongdoings of the past.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]