South Korea set to crack down on chaebol with reforms

The family-run conglomerates have propelled South Korea’s economic rise, but critics say their dominance stifles competition and concentrates wealth in the hands of a few

President Moon’s administration is seeking to add transparency to top decision-making at chaebol with reforms dubbed ‘fair economy acts’ by supporters

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The headquarters of Hyundai Motor in Seoul. Photo: EPA

Published: 9:28am, 20 Nov 2020Updated: 9:27am, 20 Nov 2020

South Korea is pushing for its most significant reform of corporate governance since President Moon Jae-in took office, a move that could add transparency to top decision-making at large conglomerates that dominate the economy.

The conglomerates, known as chaebol, propelled South Korea’s rise as an export powerhouse. The semiconductors and cars made by the likes of Samsung Electronics and Hyundai Motor have also helped the country emerge from the pandemic slump quicker than many major economies.

Critics say the dominance of chaebol, where key decisions often rest on a handful of large shareholders, hampers fair business practices, stifles the competition crucial to economic growth and can facilitate the transfer of company power and wealth within families despite opposition from some shareholders.

A view of the Samsung Electronics head office in Seoul. Photo: EPA-EFE

Pushed by the ruling party for passage this year, the proposed revisions to commercial and fair trade acts would make it harder for the largest shareholders to appoint auditors who share their interests.

More companies will be scrutinised for any undue business favours to their affiliates. The proposals are dubbed “fair economy acts” by supporters, but denounced as overregulation by opponents.