Moon Jae-in, who is sure to be South Korea's next president, is expected to focus on the country's four biggest conglomerates as he pushes for a broad corporate reform drive, his economic aides said Wednesday.
The new Moon government has two major goals in reforming the business giants: one is to keep growth and wealth from being concentrated in large family-run companies known as chaebol, and the other is to improve their governance structure for transparency and fair competition, Moon's chaebol policy adviser Kim Sang-jo told Yonhap News Agency.
South Korea's four largest chaebol groups -- Samsung Group, Hyundai Motor Group, SK Group and LG Group -- currently account for half the assets held by the country's top 30 companies.
In his campaign pledges, Moon vowed to "gradually but fully" achieve his reform goals during his five-year term in office that began Wednesday, a day after the people voted him in.
|In this photo taken on May 8, 2017, Moon Jae-in of the Democratic Party calls for "overwhelming" support from voters ahead of the presidential election during a press conference held at the party's headquarters in Yeouido, Seoul. (Yonhap)|
In the past few decades, Korean conglomerates have grown rapidly and amassed wealth, but critics have accused them of engaging in unfair practices such as insider trading, awarding contracts to affiliates and forcing price markdowns by subcontractors.
To tackle such malpractices, the Moon government will form a pan-government "Euljiro Committee" with the prosecution, police, National Tax Service, Fair Trade Commission (FTC), Board of Audit and Inspection, and Small and Medium Business Administration to conduct comprehensive investigations and punish such oppressive conducts by the chaebol.
Market watchers have long argued that big businesses have maintained cozy ties with the government for unfair gains, which allowed their founding families to often use company funds for private purposes.
In February, Samsung Group's heir apparent Lee Jae-yong was arrested for bribery, embezzlement and perjury in a massive corruption scandal that led to President Park Geun-hye's impeachment the following month.
Moon has promised to break up the corruptive ties between big businesses and the government in the world's 11th-largest economy and respond sternly to other white collar crimes committed by chaebol heads.
"In other reform efforts, the new government plans to allow lawsuits by stockholders in parent companies against corporate mismanagement in their affiliates and introduce cumulative, electronic and send-in voting for minority shareholders," said Kim who also teaches economics at Hansung University.
Allowing small stakeholders to make their voices heard in a company's major policy decisions will be a core part of his chaebol reform plans, the president-elect has said.
The role of the FTC, the anti-trust regulator, will be strengthened to carry out those reform measures, he said.
|In this photo taken on April 19, 2017, Samsung Group's heir apparent Lee Jae-yong (C) moves to attend a court hearing in Seoul as part of an ongoing trial into a massive corruption scandal that led to the ouster of President Park Geun-hye in March. (Yonhap)|
Moreover, the government plans to restrict pardoning accused business leaders, while strengthening punishment against embezzlement, dereliction of duty and other economic crimes by corporate executives, the scholar said.
Moon's chaebol reform plans received positive responses from economists.
"Compared to chaebol reform programs in past governments, Moon's appear to be more realistic. It remains to be seen how deep the new government's reform drive will go this time," Lee Phil-sang, an economics professor at Seoul National University, said.
As for the spiderweb of cross-shareholdings among chaebol affiliates held by founding families, observers here said the matter is no longer a main issue to be tackled by the new administration.
Five years ago, 14 groups had a whopping 98,000 cross-shareholding ties for their affiliates, but last year the corresponding numbers fell to only 94 under eight groups, data showed. Of these the bulk were centered on retail giant Lotte Group.
As Lotte and Hyundai Heavy have recently announced plans to convert themselves into holding companies, Hyundai Motor Group is the only remaining chaebol that has yet to resolve its cross-shareholding structure among group affiliates, the advisor said.
Once a company adopts a holding company structure, it has to resolve all cross-shareholdings among affiliates within six months.
|This undated Yonhap News TV captured image shows the Chinese character for taxes and an image of a pile of bank notes against the background of the National Assembly in Seoul. (Yonhap)|
Meanwhile, the Moon government will consider raising taxes -- mainly income taxes, corporate taxes and value-added taxes -- if it fails to secure the funds needed to carry out pledges for reducing tax exemptions and benefits for individuals and corporations, Kim said.
"For now, the government does not have any plans to raise taxes to secure funds to push forward its welfare programs. But if necessary, there may be an upward revision in the three taxes," a political watcher said. (Yonhap)
Park Byung-uk firstname.lastname@example.org
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