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Most large Korean companies are family-owned or family-controlled, and most are corrupt. An unusually high percentage of the heads of these companies have crimi

Most large Korean companies are family-owned or family-controlled, and most are corrupt. An unusually high percentage of the heads of these companies have criminal records for financial crimes, compared to other developed economies. For decades, presidents have frequently pardoned them -- and many other CEOs would be convicted of financial crimes if the government bothered to charge them. Presidents of South Korea have often justified their pardons of criminal CEOs by stressing the consequences for the economy. Fortunately, those excuses are less widely accepted than they used to be. Besides, it's not healthy for an economy to be heavily dependent on a small number of family-controlled firms, whether they are corrupt or not. It's true that enforcing the law against those companies may cause a short-term economic downturn, but in the long term, the economy will have a more sustainable foundation. Incidentally, the Korean term for these large conglomerates, chaebol, is cognate with the Japanese term zaibatsu, which dominated the pre-WWII Japanese economy and shared many characteristics, including family control and political and financial corruption. Japan was better off when they were broken up. Despite appearances, the current Japanese conglomerates are better than the zaibatsu in important ways: they are rarely family-controlled, and they are less corrupt, more accountable to shareholders, and have much better corporate governance as a result. Some reform of the economy, and less tolerance for corruption among the voters, are likely to be the best things that comes out of the impeachment of the current president.

mavelikara 10y ago
> Most large Korean companies are family-owned or family-controlled, and most are corrupt. An unusually high percentage of the heads of these companies have criminal records for financial crimes, compared to other developed economies. > Presidents of South Korea have often justified their pardons of criminal CEOs by stressing the consequences for the economy. Fortunately, those excuses are less widely accepted than they used to be. FWIW, similar justifications were brought out when HSBC was caught laundering drug-money, when LIBOR was found to be manipulated etc.
coliveira 10y ago
American companies are also extremely corrupt. The difference is that they operate through loopholes in the law, and pay armies of lawyers to find such loopholes. They also pay a fortune to lobbyists to maintain and expand these friendly laws.
- djsumdog 10y ago
  It's amazing once you start looking into it and realize industry lobbies are the ones who create a lot of the draft legislation that turns into law. Not directly, they'll have people from their industries be on "working groups." It's all legal too. A lot of effort is put in to pass laws to legalize corruption in the US. I'd suggest looking up the group behind the Anti-Corruption Act. They have some interesting ideas for solving corruption.
  - ue_ 10y ago
    What could be worse than unjustified authority and private capital? Only their combination.
- mifreewil 10y ago
  I agree with you, but I have to say it's probably better to have transparent corruption within the law, than opaqueness. In America, most of the corruption is open, people are just too busy with their own shit to worry about it.
  - kubelsmieci 10y ago
    > most of the corruption is open, people are just too busy with their own shit to worry about it And this is reason, why Basic Income won't come easily. They (government, corporations) don't want people to have too much free time, to worry about theirs wrong-doing.
    - simonh 10y ago
      Basic Income is intended to be a more efficient and fairer way to provide social support and to eliminate the poverty trap that makes some people worse off if they get a job. It's actually designed to encourage more people to work and thus reduce aggregate free time. After all, the money to provide the Basic Income has to come from somewhere.
    - AJ007 10y ago
      To the contrary, Basic Income means consumers will have to spend their money purchasing things from for-profit entities which were previously provided by the government. Except for the corporations which are government suppliers for existing social services and goods. They will oppose it.
geokon 10y ago
When you say the Japanese model is better, is this bearing out in the final financial picture? Samsung seems to have made a lot of the correct business decisions and is quite successful - even if they're corporate/ownership structure opaque and antiquated
- twblalock 10y ago
  The Japanese economy does not depend on a small handful of companies that are too big to fail. The Korean economy does.
  - ekianjo 10y ago
    Actually not. Even if Samsung fails it would not fail as a whole company. Samsung does everything from computers to cargo ships and manufacturing tools - there's a single umbrella name but there are tons of underlying separate entities inside the same group. Very much like Mitsubishi in Japan.
    - twblalock 10y ago
      Mitsubishi is not under the control of a single family. It was one of the original zaibatsu, but it is now quite different. Most of the large Japanese conglomerates do not have any kind of central control, and the top companies in the group are relative equals. They are not heavily dependent on each other. If one of the companies were to exercise poor judgment, most of the rest of the companies in the group would be fine. In contrast, Samsung may be incorporated as multiple companies, but one family and its loyalists call the shots at every company within the group. If that small group of people were to exercise poor judgment, the entire Samsung group would suffer. It therefore is entirely possible for Samsung to fail as an entire company, just as Daewoo did in the late 1990s due to poor decisions and criminal fraud committed by the family that controlled it. Just like Samsung, Daewoo was a group of companies that transacted in many industries, but that didn't matter because one family called the shots at every company within the group. Samsung could fail in the same way. Furthermore, about 20% of South Korea's GDP is produced by Samsung. There is no comparable situation in Japan or most other developed economies.
tbrownaw 10y ago
Besides, it's not healthy for an economy to be heavily dependent on a small number of family-controlled firms, whether they are corrupt or not. Is it the "small number" part or the "family-controlled" part that's the issue?
- Angostura 10y ago
  Potentially both? An economy dominated by a few massive companies, controlled by a few unaccountable people.
- ionised 10y ago
  both
ekianjo 10y ago
> and they are less corrupt Do you have any evidence for this? Most large companies are still very much in bed with the government in Japan.
hkmurakami 10y ago
I remember asking a college roommate (a Korean IMO gold medalist) about this. I asked if the chaebols influenced the government. His reply: "they do not influence the government. They are above the government."
foota 10y ago
I'm not sure shareholder accountability is in and of itself a better thing, a wise family held business may be able to better seek long term gains than one that is held responsible to the whims of shareholders.
tornadoboy55 10y ago
> Incidentally, the Korean term for these large conglomerates, chaebol, is cognate with the Japanese term zaibatsu Also, cabal.
- BorgHunter 10y ago
  Cabal would be a false cognate, as the two words are not linguistically related in any way. Chaebol (재벌) is "chae-" (wealth) and "-bol" (clan). Zaibatsu (財閥) is "zai-" (financial) and "-batsu" (clique). Cabal is ultimately from the Hebrew "kabbalah" (קַבָּלָה‎‎), which has to do with receiving, and has come to be its own word related to mystic tradition.[0] [0] https://en.wikipedia.org/wiki/Cabala https://en.wikipedia.org/wiki/Cabala
  - tornadoboy55 10y ago
    I stand corrected, thanks for the info!
- grzm 10y ago
  Cognate means they share some etymological origin, which chaebol and zaibatsu do. Cabal is from Hebrew, and does not share the same roots. A chaebol (/ˈtʃeɪbɒl/, Korean: 재벌, Korean: [tɕɛ̝bʌl]; from chae "wealth or property" + bol "faction or clan" – also written with the same Chinese characters 財閥 as Zaibatsu) is a South Korean form of business conglomerate. https://en.m.wikipedia.org/wiki/Chaebol https://en.m.wikipedia.org/wiki/Chaebol
  - tornadoboy55 10y ago
    Thanks for the info :)
ionised 10y ago
The parallels between US/UK banks is is astounding here. Family run, too big to fail, rife with fraud and corruption etc.
otakucode 10y ago
I don't know how particular this is to South Korea, or any nation. White collar crime has, at least since the 1980s (very possibly earlier, I simply have no knowledge of the topic whatsoever from before then), been normalized in the wealthy subcultures of industrialized nations. White collar crime kills more people, and does vastly more economic damage, than street crime does and has for a long time. But society looks the other way, and punishes it very little. As a result, it has become so commonplace amongst the wealthy that it would no longer be appropriate to refer to it as deviant behavior. It is normal. (The Teaching Company produced a course called 'Explaining Social Deviance' which had a couple lectures specifically about white collar crime. That's where I learned about such things.)

mavelikara 10y ago

> Most large Korean companies are family-owned or family-controlled, and most are corrupt. An unusually high percentage of the heads of these companies have criminal records for financial crimes, compared to other developed economies. > Presidents of South Korea have often justified their pardons of criminal CEOs by stressing the consequences for the economy. Fortunately, those excuses are less widely accepted than they used to be. FWIW, similar justifications were brought out when HSBC was caught laundering drug-money, when LIBOR was found to be manipulated etc.

coliveira 10y ago

American companies are also extremely corrupt. The difference is that they operate through loopholes in the law, and pay armies of lawyers to find such loopholes. They also pay a fortune to lobbyists to maintain and expand these friendly laws.

djsumdog 10y ago
It's amazing once you start looking into it and realize industry lobbies are the ones who create a lot of the draft legislation that turns into law. Not directly, they'll have people from their industries be on "working groups." It's all legal too. A lot of effort is put in to pass laws to legalize corruption in the US. I'd suggest looking up the group behind the Anti-Corruption Act. They have some interesting ideas for solving corruption.
- ue_ 10y ago
  What could be worse than unjustified authority and private capital? Only their combination.
mifreewil 10y ago
I agree with you, but I have to say it's probably better to have transparent corruption within the law, than opaqueness. In America, most of the corruption is open, people are just too busy with their own shit to worry about it.
- kubelsmieci 10y ago
  > most of the corruption is open, people are just too busy with their own shit to worry about it And this is reason, why Basic Income won't come easily. They (government, corporations) don't want people to have too much free time, to worry about theirs wrong-doing.
  - simonh 10y ago
    Basic Income is intended to be a more efficient and fairer way to provide social support and to eliminate the poverty trap that makes some people worse off if they get a job. It's actually designed to encourage more people to work and thus reduce aggregate free time. After all, the money to provide the Basic Income has to come from somewhere.
  - AJ007 10y ago
    To the contrary, Basic Income means consumers will have to spend their money purchasing things from for-profit entities which were previously provided by the government. Except for the corporations which are government suppliers for existing social services and goods. They will oppose it.

geokon 10y ago

When you say the Japanese model is better, is this bearing out in the final financial picture? Samsung seems to have made a lot of the correct business decisions and is quite successful - even if they're corporate/ownership structure opaque and antiquated

twblalock 10y ago
The Japanese economy does not depend on a small handful of companies that are too big to fail. The Korean economy does.
- ekianjo 10y ago
  Actually not. Even if Samsung fails it would not fail as a whole company. Samsung does everything from computers to cargo ships and manufacturing tools - there's a single umbrella name but there are tons of underlying separate entities inside the same group. Very much like Mitsubishi in Japan.
  - twblalock 10y ago
    Mitsubishi is not under the control of a single family. It was one of the original zaibatsu, but it is now quite different. Most of the large Japanese conglomerates do not have any kind of central control, and the top companies in the group are relative equals. They are not heavily dependent on each other. If one of the companies were to exercise poor judgment, most of the rest of the companies in the group would be fine. In contrast, Samsung may be incorporated as multiple companies, but one family and its loyalists call the shots at every company within the group. If that small group of people were to exercise poor judgment, the entire Samsung group would suffer. It therefore is entirely possible for Samsung to fail as an entire company, just as Daewoo did in the late 1990s due to poor decisions and criminal fraud committed by the family that controlled it. Just like Samsung, Daewoo was a group of companies that transacted in many industries, but that didn't matter because one family called the shots at every company within the group. Samsung could fail in the same way. Furthermore, about 20% of South Korea's GDP is produced by Samsung. There is no comparable situation in Japan or most other developed economies.

tbrownaw 10y ago

Besides, it's not healthy for an economy to be heavily dependent on a small number of family-controlled firms, whether they are corrupt or not. Is it the "small number" part or the "family-controlled" part that's the issue?

Angostura 10y ago
Potentially both? An economy dominated by a few massive companies, controlled by a few unaccountable people.
ionised 10y ago
both

ekianjo 10y ago

> and they are less corrupt Do you have any evidence for this? Most large companies are still very much in bed with the government in Japan.

hkmurakami 10y ago

I remember asking a college roommate (a Korean IMO gold medalist) about this. I asked if the chaebols influenced the government. His reply: "they do not influence the government. They are above the government."

foota 10y ago

I'm not sure shareholder accountability is in and of itself a better thing, a wise family held business may be able to better seek long term gains than one that is held responsible to the whims of shareholders.

tornadoboy55 10y ago

> Incidentally, the Korean term for these large conglomerates, chaebol, is cognate with the Japanese term zaibatsu Also, cabal.

BorgHunter 10y ago
Cabal would be a false cognate, as the two words are not linguistically related in any way. Chaebol (재벌) is "chae-" (wealth) and "-bol" (clan). Zaibatsu (財閥) is "zai-" (financial) and "-batsu" (clique). Cabal is ultimately from the Hebrew "kabbalah" (קַבָּלָה‎‎), which has to do with receiving, and has come to be its own word related to mystic tradition.[0] [0] https://en.wikipedia.org/wiki/Cabala https://en.wikipedia.org/wiki/Cabala
- tornadoboy55 10y ago
  I stand corrected, thanks for the info!
grzm 10y ago
Cognate means they share some etymological origin, which chaebol and zaibatsu do. Cabal is from Hebrew, and does not share the same roots. A chaebol (/ˈtʃeɪbɒl/, Korean: 재벌, Korean: [tɕɛ̝bʌl]; from chae "wealth or property" + bol "faction or clan" – also written with the same Chinese characters 財閥 as Zaibatsu) is a South Korean form of business conglomerate. https://en.m.wikipedia.org/wiki/Chaebol https://en.m.wikipedia.org/wiki/Chaebol
- tornadoboy55 10y ago
  Thanks for the info :)

ionised 10y ago

The parallels between US/UK banks is is astounding here. Family run, too big to fail, rife with fraud and corruption etc.

otakucode 10y ago

I don't know how particular this is to South Korea, or any nation. White collar crime has, at least since the 1980s (very possibly earlier, I simply have no knowledge of the topic whatsoever from before then), been normalized in the wealthy subcultures of industrialized nations. White collar crime kills more people, and does vastly more economic damage, than street crime does and has for a long time. But society looks the other way, and punishes it very little. As a result, it has become so commonplace amongst the wealthy that it would no longer be appropriate to refer to it as deviant behavior. It is normal. (The Teaching Company produced a course called 'Explaining Social Deviance' which had a couple lectures specifically about white collar crime. That's where I learned about such things.)