The head of the nation’s antitrust watchdog told the leaders of the five top conglomerates on Thursday that the nature of their nonprofit foundations would be tested as part of the new government’s chaebol reform.
“We will check whether the foundations for public welfare under large businesses are operating the way they are supposed to, and seek ways to limit their voting rights,” said Kim Sang-jo, chairman of the Fair Trade Commission, while meeting CEOs from Samsung Electronics, Hyundai Motor and SK. The attendees also included the presidents of LG Corp. and Lotte, as well as Lee Dong-geun, vice chairman of the Korea Chamber of Commerce and Industry.
FTC Chairman Kim Sang-jo (Yonhap)
“The probe into public welfare foundations is likely to begin in December, with a plan to complete the matter in the first half of next year.”
The FTC head, nicknamed the “chaebol sniper” for his years of shareholder activism, also expressed concerns over the progress of voluntary chaebol reform efforts he had requested five months ago.
In June, Kim told leaders of the four groups to voluntarily change their decision-making process to become more transparent and democratic.
In Korea, the controlling families of chaebol often have total control over group management, despite low ownership rates, through complex cross-shareholding webs.
“It seems like (people) still have doubts on the businesses’ will to carry out voluntary reform,” he said. “Strategies (on reform) by the businesses should not keep distance from the market and society. Please do carry out more specific strategies speedier so that the people can get to know more about (the chaebol’s) change,” he added.
By law, foundations established for the public good refer to organizations that financially assist studies and academic works. But they have faced suspicions that they are actually fronts for tax evasion and ensuring family succession. Some family members of conglomerates have invested their shares in affiliates to the organization that are subject for tax deductions.
An FTC bureau on large businesses will be in charge of the probe, Kim said.
But the bureau‘s ultimate role is to seek ways to improve chaebol regulations, not to seek punishment for them, he added.
Kim also told reporters that businesses have made a “positive start” on their voluntary reform plans in the past four months, but have “a long way to go.”
The comment was seen as quelling businesses’ fears on the FTC’s radical chaebol movement, but at the same time, expressing his will to continue the reform initiative.
On speculations the FTC had given businesses a deadline for their reform measures of December, Kim explained the timeline is meant to keep up with the parliament’s legislation of a bill on chaebol reform, not to pressure them.