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[Newsmaker] Blind trust rule turns ‘thorny’ for Park

President Park Geun-hye has aptly compared regulatory and business hurdles plaguing smaller firms to a “thorn under the nail.” It turns out that she has her own obstacles right under her nose.

On Monday, Park’s nominee to head the Small and Medium Business Administration, Hwang Chul-joo, withdrew, citing a rule that compels high-level officials to dispose of any personal assets related to their duties.

Hwang, who is the CEO of a venture company called Jusung Engineering, was considered one of Park’s exemplary designations for the relevance of his background to the field.
Hwang Chul-joo
Hwang Chul-joo

Hwang was reportedly eager and devoted to his new position, spending much of his time at the SMBA to learn the ropes and outline a vision before his official confirmation.

What thwarted such a well-intentioned choice on both sides was the “blind trust system,” a regulation that requires a person taking a high public post to sell stocks or place them under the control of a financial institution if they are worth more than 30 million won and are considered relevant to one’s duties. The institution then takes the additional step of disposing of the stocks within 60 days.

Hwang, in a meeting with reporters, said he was not aware of how the institution would be required to sell all the stocks, and said his decision was for the sake of his company’s employees and minor shareholders that would otherwise inevitably sustain losses.

Hwang’s “noble” decision was seen to show a blind spot in the regulation ― which is aimed at avoiding conflicts of interest ― with critics pointing out the potential impact it would have on the company’s management rights and existing smaller investors. It, furthermore, exposed yet another poorly managed personnel procedure of Park’s presidential office, which failed to fully explain the consequences to Hwang.

Hwang said, “(Forcing the stocks to be sold) is unheard of in a free economic market. Unless the law is revised, it will be impossible for venture or small businessmen to assume a public post.”

Debate over the regulation, introduced in 2005, is expected to rise as proponents support further strengthening the criteria to fend off “honest graft,” while opponents underscore a violation of private property ownership rights.

By Lee Joo-hee (jhl@heraldcorp.com)
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