Thinking about chaebol

By Bernard Rowan

People like what chaebol do for Korea and the world. We benefit from the many consumer products and services produced by Samsung, Hyundai, and the other conglomerates. Korean Air and Hanjin Shipping are among the best in the world.

No one could say that Korea became an advanced nation without the chaebol. The Korean people and their successive governments created them after all and continue to operate them.

In its developmental phase, and continuing today in this era of advancement, Korea's conglomerates are the backbone of its economic power. But chaebol need further improvement to remain agents of growth in the 21st century. Korea needs democratic reforms to create a broader participation and equity for small- and medium-sized businesses and all citizens.

People dislike chaebol because of the economic and wealth excesses and incidents of corruption. Korean and global media increased audience shares with the "nut scandal". The courts come next. We should rise above theater. The public response is to rebuke and criticize, and want justice from the Cho family, but this does not begin to address the real challenges. Let's not forget the Korean people made chaebol great, not just their heads and families.

Yes, of course, if the court finds Cho Hyun-ah guilty, she'll face justice. Her actions already hurt the image of Korean Air and Hanjin in the court of public opinion.

What troubles me is that Koreans seem happy to seek individual justice, but to let the larger problems of chaebol remain. Not that your country is alone or unique in this respect. Obama and the U.S. Congress caved to Wall Street's preferences. Outrageous financial practices continue to endanger the world economy to this day. I doubt Obama meant to do anything more to stop that.

Korean people need to go beyond seeking judgments against Cho, the Daebo leader, the Hyundai head, this magnate or that. No number of personal humiliations and individual sentences, civil, criminal, or in the public mind change the underlying causes:

― Chaebol families account for most of Korean national income and GDP.

― Chaebol receive benefits that few if any other Korean businesses receive, including preferential interest and tax rates, trade licenses, and access to foreign exchange.

― Chaebol reduce the competitiveness of the Korean economy by monopolizing access to credit.

― Chaebol lack the incentives to address inequalities by age, gender, national region, or class.

― Chaebol preserve semi-dynasties of wealth, power and privilege through Korean laws.

If the public wants to see change, increase legal oversight of Korean conglomerates and change their managing conditions. Not since the days of former Presidents Kim Dae-jung and Roh Moo-hyun did anything like chaebol reform seem possible. But get way beyond "focusing on core industries" or "spinning off associated enterprises." Korea must decide if it's ready to "go big" with corporate reform.

Create limits on chaebol ownership of multiple subsidiaries. Make management boards public. Require public membership on chaebol boards, to a dominant minority share of voting power. Laws should end companies with exaggerated debt to equity ratios. Don't let conglomerates invest billions to trillions of won beyond their assets. The government should limit the credit they receive. Share increased levels of credit access to small and midsized businesses and individuals.

These are just a few of the ideas easily understood as reforms for chaebol. A national commission representing all Koreans should chart a 25-year reform plan. Make the conglomerates accountable to Korea's people. Tens of millions of Koreans built them.

Which mainstream party lacks an interest in chaebol reform? I think none. Which will develop this policy agenda? Chaebol reform marks Korea's greatest unmet challenge, threat, and opportunity for the century! Korea's not alone either.

Chaebol insularity is a cultural practice long past its prime. Read the last part of Plato's Republic, in which the author depicts the decline of a civilization that ties power to inheritance apart from merit, desert, and justice. It's a rare child who can overcome the corruption attending inheritance of great power without accomplishment of great virtue.

Yet chaebol families wish to keep their wealth and economic power, so they entrust to their children the future of the Korean economy ― and much of the world economy. Children of the wealthy who don't find a path to virtue become false versions of their elders, ridden with concern for money, privilege, and the service of what reeks popular, producing hatred from others.

And of course, Korea awaits a chief executive with the knowledge, vision, and fortitude to take on this cause. No one on the map has the guts that Park Chung-hee had to lead business magnates toward the national interest, the public interest. Chaebol chairman with an ounce of historical knowledge know that they owe Korea much more than Korea ever will owe them.

Chaebol leaders could do the inconceivable. Refuse to treat social success as "their own". Refuse to children and grandchildren the privileges they don't deserve by birth. Zero-ish inheritances and no succession to conglomerate leadership or the subsidiaries and foundations. Whither go the brave souls?

Bernard Rowan is assistant provost for curriculum and assessment, professor of political science and faculty athletics representative at Chicago State University, where he has served for 21 years. You can contact him at browan10@yahoo.com.