Major candidates in South Korea’s presidential election pledged to crack down on the power of the country’s family-controlled conglomerates, known as chaebol,
a
New York Times
report noted.
The chaebol “dominate the country’s economy and have amassed immense political power,” the
Times
article said. But after a political scandal that led to the arrest of Samsung’s vice chairman on bribery and other charges, the candidates promised to take steps to rein in the conglomerates, according to the report.
Moon Jae-in, leader of the Democratic Party, “has vowed to stop families from using nonprofit foundations, complicated shareholding plans and other methods to keep control of businesses,” the article said.
Despite the strong influence of a pro-business lobby, inheritance taxes in South Korea are high, and chaebol families have developed strategies to get around them. One method is to transfer stakes in chaebol companies to family-controlled charities; another is to create new companies that “strike lucrative and friendly business deals” with other companies controlled by the family; a third is to set up small companies under the control of an heir, and then merge them with other companies in the chaebol to consolidate power, the
Times
report noted.
Many chaebol companies are publicly traded, but outside shareholders haven’t had much influence. Some bills have been sponsored that would make chaebol corporate governance more transparent, the article said. But, the
Times
noted, “If the economy slows, politicians may fear that constraining the chaebol would hurt business activity.”
The election was held to replace Park Geun-hye, who was ousted in the wake of the scandal that resulted in the arrest of Samsung vice chairman Lee Jae-yong. Exit polls on May 9 indicated that Moon won the election. (Source:
New York Times
, May 8, 2017.)
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