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Korean Leader Poses Challenge To Conglomerates

By Hae Won Choi. Wall Street Journal. (Eastern edition). New York, N.Y.: Feb 24, 2003. pg. A.13
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Reforming the chaebol quickly without disrupting the economy will be one of Mr. [Roh]'s biggest challenges. Korean economic officials have been voicing deep concern about the disruptive effect of the U.S. standoff with Pyongyang over nuclear weapons. Echoing these concerns, Moody's Investors Service downgraded South Korea's rating outlook to negative from positive two weeks ago, shortly after the Bank of Korea lowered its economic-growth forecast for the nation to 5.5% for this year from 5.7%. Senior members of Mr. Roh's party have cited Samsung Electronics Co., South Korea's largest chaebol, as also in need of greater corporate transparency and accountability. Samsung Electronics appointed its chairman's only son, Lee Jay Yong, to a significant management position two years ago. The appointment was fiercely resisted by minority investors, who saw Chairman Lee Keun Hee's son as unqualified for the position because he hadn't worked for the company, despite being on its payroll for about 10 years. Last month, the chairman's son was promoted.

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Copyright Dow Jones & Company Inc Feb 24, 2003 SEOUL, South Korea -- President-elect Roh Moo Hyun will take office tomorrow pledging to finish the overhaul of the country's corporate and financial landscape that many foreign investors fear has stalled in recent years, stunting South Korea's growth. The inauguration is expected to lead to renewed battles between the government and the country's largest chaebol, or family-owned conglomerates. Despite efforts by the departing president, Kim Dae Jung, to improve corporate transparency after the 1997-98 Asian financial crisis, the chaebol are still considered to be more like family fiefs than publicly listed companies and are blamed for smothering Korea's anemic small and midsize businesses.

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The 56-year-old Mr. Roh, a former human-rights lawyer with little affection for Korea's industrial dynasties, has made it clear that he would like to decentralize the country's economic power and eliminate the opaque management style of the chaebol. He also would like to prohibit individuals from transferring wealth to their relatives and heirs through private foundations, a common way of evading South Korea's stiff inheritance taxes. Mr. Roh also is a strong advocate of strengthening the country's social-welfare system and has pledged to give labor unions more of a role in management. Political analysts say an early litmus test for change under Mr. Roh will be the investigation surrounding SK Group, South Korea's fourthlargest chaebol. On Saturday, state prosecutors arrested Chey Tae Won, the chairman of SK Group and a nephew of the group's late founder, and another executive at the company over their alleged involvement in illegal stock transactions. Foreign investors are watching how the prosecution proceeds with the probe for insight into Mr. Roh's policies on corporate reform and corporate governance. Reforming the chaebol quickly without disrupting the economy will be one of Mr. Roh's biggest challenges. Korean economic officials have been voicing deep concern about the disruptive effect of the U.S. standoff with Pyongyang over nuclear weapons. Echoing these concerns, Moody's Investors Service downgraded South Korea's rating outlook to negative from positive two weeks ago, shortly after the Bank of Korea lowered its economic-growth forecast for the nation to 5.5% for this year from 5.7%. Senior members of Mr. Roh's party have cited Samsung Electronics Co., South Korea's largest chaebol, as also in need of greater corporate transparency and accountability. Samsung Electronics appointed its chairman's only son, Lee Jay Yong, to a significant management position two years ago. The appointment was fiercely resisted by minority investors, who saw Chairman Lee Keun Hee's son as unqualified for the position because he hadn't worked for the company, despite being on its payroll for about 10 years. Last month, the chairman's son was promoted. Any action against Samsung Electronics, which accounts for 23% of South Korea's total exports, would likely unnerve South Korean markets and foreign investors who have viewed the company as the prime example of Korea's corporate-reform drive. Samsung said the board of directors approved the appointment and the promotion.
Indexing (document details) Subjects: Locations: People: Author(s): Document types: Section: Inaugurations, Economic policy South Korea Roh Moo Hyun By Hae Won Choi News International

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Wall Street Journal. (Eastern edition). New York, N.Y.: Feb 24, 2003. pg. A.13 Newspaper 00999660

ProQuest document ID: 293340901 Text Word Count Document URL: 485 http://proquest.umi.com/pqdweb? did=293340901&sid=7&Fmt=3&clientId=80745 &RQT=309&VName=PQD

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