[News in focus] Chaebol nonprofits strengthen family grip: FTCKorea’s corporate watchdog suggested this weekend that the country’s chaebol families may be using their nonprofit organizations to tighten their control over their business empires.
Some analysts, however, caution that any measures to rein them in may do more harm than good.
According to the Fair Trade Commission’s findings released on Sunday, out of the 165 nonprofit organizations operated by local conglomerates, 66 of them owned shares in affiliates of groups they were a part of. These nonprofit organizations owned shares in 119 different conglomerate affiliates, the FTC’s data showed.
About 22 percent of the assets owned by conglomerate-linked nonprofits were stocks, nearly four times more than other Korean nonprofit organizations. About 75 percent of the shares held by chaebol-owned nonprofit foundations were in affiliates of the same conglomerate.
The average assets of nonprofit foundations run by the nation’s top ten companies was 202.1 billion won ($180.7 million), the FTC said, nearly 10 times that of the average Korean nonprofit organization.
“Stocks owned by nonprofit organizations were mostly in the affiliates that had control over the groups [such as holding companies],” said an official from the FTC. He added that chaebol families may have used nonprofits in their schemes to hand over control from one generation to the next.
In addition to the questionable asset structure, the FTC also discovered that about 84 percent of conglomerate-run nonprofit organizations gave board seats to the members of chaebol families. Family members served as the foundation head at 41.2 percent of them. The FTC launched its investigation into chaebol nonprofits in December of last year.
The move is the latest effort by the antitrust body to pressure family-run conglomerates to overhaul their corporate governance structure. Some experts argue that burdening Korea’s conglomerates too much may backfire and harm the national economy.
“The government should implement restrictions when the activities of controlling shareholders do harm to minority shareholders,” said Sung Tae-yoon, a professor of economics at Yonsei University. “However, it’s unreasonable to raise issues with nonprofit foundations just because they own some shares in affiliates of the groups [they belong to].”
Yun Chang-hyun, an economist and a professor of business at the University of Seoul, said that putting pressure on companies to change their governance structure may do more harm than good at the moment, given Korea’s economic conditions.
“Economic conditions at the moment are not favorable, as the stock market is falling and exports are showing a decline,” Yun said. “Business owners and executives will have no choice but to channel their resources into resolving governance-related issues raised by the government rather than investing them elsewhere, which would deal a blow to the country’s real economy.”
“The government must consider the fair trade policy as a part of its economic policy and control the pace of implementation,” Yun added. “It must consider the timing of when to pressure the companies and when to give them some slack.”
BY CHOI HYUNG-JO [email@example.com]
with the Korea JoongAng Daily
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