I had the opportunity to go back over my 2003 article for Campden FB about South Korean family businesses – called chaebol, and with a similar meaning to Japan’s keiretsu – when I read today that the owning family of Samsung is mired in a multi-billion dollar tussle for inherited company shares. The BBC reports today that Samsung chairman Lee Kun-Hee is being sued by his brother Lee Maeing-Hee for shares in the group’s life insurance and electronics businesses totalling a value of £396m; Maeng-Hee accuses his brother of stealing his share of the…er…shares and alleges they were put in trust to be doled out between the brothers “according to law”. Family quarrels of that kind are usually about power – who’s the favourite kid, who really deserves to own the shop, etc – and I always ask myself why these arguments arise when there is an entire industry crafted around helping rich families fix legally-binding contracts to ensure when daddy dies, everyone knows who’s getting what.
Korean men with sunglasses, 1904. Flickr/Cornell University Library
The real story for me, though, is that inside South Korea, no one really has much to say about the corruption, fraud, in-fighting, poor management and blood-over-ability inheritance mores of chaebol companies. The guy that prompted me to write my story on chaebol is Chey Tae Won, in 2003 a rising star in his family’s company SK Global – the third-largest industrial group in the country. He had been serving time for ‘serious accounting fraud’ against the family business. Fast forward to January 2012 and he’s back in the news for all the wrong reasons: he is now indicted on charges of embezzling funds from affiliates of one of its companies to cover investment losses made by himself and his brother.
Rewind a bit to 2008 and there’s more evidence that South Korea doesn’t fight this family business corruption too hard: that was the year in which Tae Won was pardoned by president Lee Myung Bak of his conviction for fraud. A fund manager at a Seoul-based asset management business commenting on the latest accusation against Tae Won, now chairman of the group, told Bloomberg that while investigations into the allegation may have a ‘psychological’ impact on the group’s hideously tangled web of companies (as defines the chaebol concept – and gives rise to so much corruption), ‘it shouldn’t affect the day-to-day running of individual businesses’. South Koreans are so used to value-destroying wrangles inside the owning families of their chaebol, they barely make a ripple in the financial markets and are actually very expected. The holding company’s stock actually rose a little on the news.
Read my 2003 piece for a quick primer on chaebol and the “Korea Discount”
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