A group of 24 South Korean members of the ruling New Frontier Party have submitted a bill to deny voting rights on cross shareholdings at the country’s family-owned conglomerates, known as
chaebols,
Bloomberg reported.
Family dynasties have used this mechanism to control the
chaebols
with only minority stakes.
The Bloomberg report said that because of the public’s discontent with the conglomerates’ power and lenient treatment of their leaders who have committed white-collar crimes, the legislation is expected to pass as early as this year. The article said the bill is “being spearheaded by members of a party that controls parliament and is traditionally pro-business.”
Under the proposal, “existing cross shareholdings in business groups would carry no voting rights, and any further purchase of stock between chaebol companies would be banned,” the Bloomberg article said. Lawmaker Nam King Pil told Bloomberg that the rules are meant to turn the conglomerates into holding companies.
The opposition Democratic United Party wants cross shareholdings to be banned altogether, the report noted.
Kim Sang Jo, a professor at Seoul’s Hansung University, told Bloomberg that if the bill passed, successors at Samsung, Hyundai Motor and Hyundai Industries Co. would face difficulties in inheriting control of their families’ business empire. Le Sang Hun of Seoul-based HI Investment & Securities Co. told Bloomberg that the conglomerates “will have to take action and shuffle their ownership structures in order to ensure that the owners retain their power.”
But Tom Conyer, a consultant to foreign investors in Korea, told Bloomberg, “Over the years politicians of various political parties have tried to reduce the near monopoly of the
chaebol
in the Korean economy but as we’ve seen they’ve always failed.” (Source: Bloomberg, Aug. 29, 2012.)
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