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[Editorial] Pain of restructuring

All concerned parties should share burden

The founding families of Korea’s chaebol have both positive and negative public images. In hard times, the negative image tends to overwhelm the positive one.

Chaebol families are often identified as the main culprit when their businesses go bad to the point of bankruptcy or government-aided bailouts.
To make matters worse, they often try to avoid responsibility – both legal and moral – and are caught trying to protect their own personal wealth. So they become the target of public criticism, which lends ammunition to politicians, government officials, law-enforcement authorities and the court to punish them.

This is exactly what is happening as Korea Inc. braces for a massive storm of restructuring in vulnerable sectors such as shipping and shipbuilding.

To see how serious the situation is, you need not look further than the fact that the two leading shippers and three shipbuilders recorded a combined net loss of 6.4 trillion won ($5.6 billion) last year, and the five firms’ combined debt stands at 78 trillion won.

What had long been the pride of Korea Inc. has become the bane of the economy. 

The crisis has forced one of the troubled firms – Hanjin Shipping – to seek creditor-controlled rehabilitation.

The bigger problem is that like many other chaebol owners have done before, members of its founding family took preemptive actions to protect their personal wealth – selling their shares three days before the decision to apply for the debt rescheduling program.

Choi Eun-yeong, Hanjin’s former chief, and her two daughters insist that the sale of 370,000 shares, worth 2.7 billion won, had long been planned.

This is exactly what we heard recently when members of the controlling families of conglomerates such as Woongjin Group and Tong Yang Group were charged with selling their own shares shortly before their affiliates filed for bankruptcies, court receiverships or debt rescheduling.

It is wrong to make chaebol owners into scapegoats whenever their firms go under, but these occurrences strengthen the public belief that many chaebol families simply walk away without taking responsibility.

Besides Hanjin, other chaebol companies – such as Hyundai Merchant Marine Co., Hyundai Heavy Industries and Samsung Heavy Industries – will bear the brunt of the harsh restructuring. The families who control the firms through stock ownership, control of the boardroom or executive positions should be the first to be held accountable for the ailing firms.

That will put the government and creditors in a stronger position to overhaul the underperforming companies, in which massive layoffs are inevitable.

In the shipbuilding sector alone, Hyundai Heavy plans to lay off an additional 3,000 workers and Daewoo Shipbuilding and Maritime Engineering Co. plans to reduce its workforce by 2,300 over four years.

What is lamentable is that for some executives and workers, the huge losses are not their concern. The CEO of DSME, which incurred a loss of 5.5 trillion won, took 2.1 billion won in compensation last year. The average annual salary of the three shipbuilders exceeds 70 million won despite the long slump in the industry. 

Like chaebol families, shareholders and executives, workers should take their share of the pain of restructuring in the form of layoffs and pay cuts. When a company fails, all are to blame and no party can be spared from suffering for its revival. 

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