I’ve noticed that the Korean chaebols are more or less like the Mafia. One might ask Korean chaebols and the Mafia? For eight years now, I’ve been able to observe the inner workings of a chaebol companies and have met a lot of people who have shared some interesting stories. What I’ve noticed is that although there are differences much of the way that the two operate resemble each other.
For starters, both are family run operations. Most if not all aspects of the business is centered around the family and when the head of the family is ready to retire, the business is given to the son, and so on. Pretty much everything that is done in the chaebol is for the family by the family. On a side note, if a member of a chaebol ruling family, let’s say has to move to an another apartment, then it’s usually the general services team that scouts out the apartment, contacts the movers and the decorators. The IT dept. also follows by contacting the ISP for broadband Internet service and making sure it is installed and ready for the new apartment, among others. And we are not talking about a company funded official residence, such as the likes of the White and Blue Houses. Some chaebol families mobilize their employees for use as funeral workers before and during funeral services of their own and some even have the IT Dept. of their company buy them laptops and electronic toys for their own personal use. OK then, one might say well these corporations are traded publicly in the Korean Stock Exchange and some have outside directors in the board of directors, so doesn’t that mean that family can’t do any funny business with the outside directors looking over their shoulders? Well, yes most of the chaebols are publicly traded and most do have a board with outside directors, but the thing is, the outside directors probably don’t do much except warm up the board seats and meet at the most once per year. So, all in all, it’s a facade of a public corporation but, it is very much run like a private family run organization.
The second thing that the two have in common are their networks of politicians, bureaucrats, prosecutors, judges, and policemen which look out for them. I don’t exactly know what goes on among the network or how the network is created. However, one of the things that I have noticed via the Korean media is that chaebols when they are suspected of foul play either are not bought to justice or if bought to justice, they are let go with a slap on the wrist. Now the reasoning behind the light sentences for the chaebols are “national economic interests”. But seriously, does anyone think that the judges and the prosecutors have that in mind when they make their decisions/judgments? Or is there something else influencing their decision/judgment? The lack of evidence is also one of the factors that come up when the chaebols are suspected of something. Of course considering that it is common knowledge that the chaebols receive tips of potential raids and take preventive measures beforehand, don’t expect the FTC and the prosecutors to find anything useful. However, some evidence do make the light of day, but those are probably the results of luck on the part of the investigators and bad luck and/or sloppiness on the part of the chaebol.
Another thing that both have in common are the legions of loyal/frightened employees in dark suits that protect the families. In chaebols, there is an unwritten “Code of Silence” that is kept because of loyalty to the families or simply because the employees are afraid of losing their jobs. With a few exceptions, the employees keep their mouths shut and if there is a tip of a raid, they move to prepare for that raid, without the need for orders from above. This is also convenient because if the employees are caught red handed then it becomes the individual employee’s fault. There are also rumors of the affected employees secretly receiving generous severance packages, at a later time, not so much as compensation but so that they keep their mouths shut, forever. This environment also creates some interesting stories. One account I heard is of an internal investigation that affected a certain business unit of a chaebol. One of the employees being investigated, decided to increase his chances of survival and sent an e-mail to a chaebol family member. Attached in that e-mail was a document and the suggestion that the document might end up in the hands of the media or the prosecutors for that matter if the investigation was not stopped. The particular family member went ballistic and ordered the investigators to dig up as much dirt on that particular employee. The guy who told me the story didn’t say what happened after that. But it was assumed that dirt was dug up and used as a bargaining chip to oust the employee in question.
There is one difference between the two however and that there is no standing army of gun toting thugs. Of course guns are illegal here in Korea, and the reason that there is no standing army is probably because 1) there is no violent threat against the chaebol family members and 2) the chaebols feel they are new Korean yangban and it wouldn’t do to have thugs with Tasers following the yangbans. I mean we are gentlemen not the Colombian drug cartel. However, the fact there is no standing army does not mean that the chaebols don’t have access to one. Take the recent incident involving the Hanhwa chairman for instance. Also a while back, some Buddhist monks were protesting the tunneling of a sacred hill and staged a sit in at the site and bought construction to a halt. The work stop was costing the chaebol contractor and when negotiations with the monks broke down, several men in black uniforms were sent to break up the sit-in. The news reporters covering the incident described the men as “hired manpower.” In reality, they were probably gangsters, and considering that there are stories of angry gangsters storming into chaebol offices and demanding the resolution of overdue payment for their services, rumors of chaebols using gangsters for the dirty work don’t seem far from the truth.
In this era of the new economy, is this type of behavior is acceptable? The answer is no. But personally I don’t expect them to reform. They have been doing this for decades and old habits die hard. Same for the government. The government has don’t much to ensure that the chaebols stay in line in regards to the law and corporate governance. So, an individual can only hope that somehow sanity will be brought into Korea’s corporate culture, maybe.
43 Comments
you’re hoping for sanity?
First, you’re hoping beyond hope.^^
Second, why? The insanity is what makes it interesting.
And, three, Korea’s economic strength was largely built on the chaebol and they–and the Korean economy–seem to do quite well for themselves.
Perhaps you’re wondering just how much better Korea could be economically if the chaebol were running like, well, like Western conglomerates.(?) That’s debatable but I guess you’re main point is that it offends your sense of fairness that a small cadre of individuals reap so much benefit off the sweat of so many.
Hmm… sounds like an anti-capitalism rant. No no, it couldn’t be that because I know you’re not a Roh Moo-hyun fan….
Well yes and no. First off, you know way more about the inner workings of Korea than I do but there are areas in which is vastly open to a sharp eye. Big business has to come from family and rightly so because many of the informal deals of the early days of modern Korea made were informal and I would argue that the legal infrastructure of Korea was — to an extent is still — incapable of protecting the property of these new corporate superstructures. Despite what Seoulites believes, the majority of the domestic wealth and productivity of Korea rests outside of Seoul and thus the duality of an increasing separation of knowledge based cultures have lead to a different but necessary corporate group think. Simply, you do what is necessary to make money. I would suggest that you separate Seoul based conglomerates from the ones that are based in the Southern regions and find two different ways to do business. The Seoulites having been forced into the US markets have found that the sons who were reasonably educated in the US and utilized US laws and learned to cope with the up and downs of the US market have instilled many of the forward leaning ideas into their respective staid organizations. The Others have delved more deeply into Asia and have found their respective big family, big organizations, and big pockets useful in setting up factories and buying property in other countries. When IMF (Korean definition) came rolling around it was the Others would died or were mortally wounded. The Seoulites, though wounded via their legacy units, were able to survive specifically through their US experienced leaders. The families are not above simple market efficiency. Adapt to the market or die. The ones that adapt will increasingly break apart into smaller efficient units and the Others will diminish until their as quaint a brand as Kmart and Sears are in the US.
It is naïve to think that only the chaebols in Korea are evils. You should look at the overall society. You should think how you or other members of the society would do in their shoes. Of course, there is a lot to improve for the chaebols, but you can say that to many other people or groups in the country. How many times have you given or received ddukkaap in your life? Stop being naïve.
barbarian,
my first reaction while reading this was that he was making that comparison. but i think in the end he quite rightly avoided doing so, hence my paranthetical question mark above. so i’m not sure you can tag him with being naive. i just wonder what the real point is. the chaebol are bad because they are family centric and the families skim money and perks? ok, but they also employ a lot of people and (even still) invest a lot of money into the economy. if samsung was an anglo-american conglomerate, many of its business units would be gone, and with them a lot of good paying jobs.
Need to use a spell checker there mins0306
The chaebols that can adapt to globalization will do well, as Samsung, Hyundai Heavy and others are, but many others are scared of opening up the domestic market as they know they can’t or will be very hard-pressed to compete. In the long run, a company that can survive globalization will continue to grow and provide jobs, but those that are protected will eventually decline even if they remain protected. Therefore, it just makes sense for chaebols to try to improve their governance. For their own future security.
And the idea that foreign firms would buy them all out and then there would be no good jobs left is ridiculous. Foreign firms often pay better than local ones and they need high quality locals to run their Korean operations. Foreign firms may bring in some foreign staff, but the vast majority of the staff is Korean and conditions are generally better than at most chaebols, despite the resentment that many of the staff may feel at working for a non-Korean firm. If you want examples of relatively open economies that continue to prosper, despite being filled with foreign firms and foreign workers, look at Singapore and Hong Kong. Japan, too, has many foreign firms and foreign workers and yet the standard of living is far higher than that of Korea. Remaining in a closed shop will do nothing for Korea in the long run and in fact will hurt down the road, especially with the Chinese coming up fast and furiously. Koreans, please don’t believe the socialists and hermits who want to return to more closed markets and protectionism! Fear of the outside business world will do the country no good in the long run.
And many commenters too.
mjw, sometimes I get the feeling that you are the nicer alter ego of the banned YoungRocco2. You don’t have YR2’s sharp fangs but still your softer form of expression convey the same thoughts and ideals as YR2.
With that aside, my point is, as snow stated, that the chaebols need to stop acting like the neighborhood gang for the sake of the future. Now Western corporations aren’t saints either but I doubt they act like the chaebols. Also I’m sharing with the readers/commentators the inner workings of the chaebol. This is a blog of Korea, and chaebols are a big part of Korea. I wish I could write more but won’t since some would cross the so called invisible line.
mins, I thought this was a thoughtful post. It would be nice if you could comment on Sumo’s Seoul and Jibang dichotomy.
“the chaebols need to stop acting like the neighborhood gang for the sake of the future. Now Western corporations aren’t saints either but I doubt they act like the chaebols.”
Again you’re looking only at the corporate side of Korea. You should look at the whole picture of Korea. For example, how do the Korean political parties do, compared to their Western counterparts? You could say pretty much the same as you do for chaebols.
Anyway, if you believe the chaebols are evils, you shouldn’t be working for them, but perhaps work for an NGO or set up your own business or something as a responsible citizen.
I agree with Snow generally, but I wonder what he would say if the Chinese would want to take over Boeing or Intel with their huge foreign reserve?
This will never go away until they strike down that stupid assed law that punishes whistle-blowers if their evidence/testimony causes a corporation/person to lose money or property.
MJW, you say they do this and that and skim off the top, “BUT”, they supply Korea with alot of jobs. Do you think this off-sets their criminality? Do you think they offer alot of jobs out of some philanthropic sentiment?
I don’t believe you’ll see alot of the family members rolling up their sleeves, getting down on the assembly line and putting things together. They offer alot of jobs simply because they have no choice.
“I agree with Snow generally, but I wonder what he would say if the Chinese would want to take over Boeing or Intel with their huge foreign reserve?”
Babarian, I wouldn’t have a problem with that as long as the company didn’t hold some sensitive military technology. This may be the case with Boeing or Intel, but it is rarely the case with the vast majority of companies that are targets of a takeover, Korean or otherwise.
Now if you think these Chaebol folk are actually like you and me, give them a call. See how much they care about us little people. My guess is their sentiment toward their workers are akin to the seamstresses feelings toward the silkworm or the sheep. They may admire us, but we aren’t the same species.
Hey, start a company then shuffle your books. See what kind of a deal you get with the judicial system.
Adios, see you in hell. Not my sentiment, just reality.
There was a guy who supposedly is pretty smart. They did a write-up on him on him and he said the US will continue to dominate the world economy, not China, simply because if a company f’s up in the US, it is destroyed and is consumed. This forces efficiency and competition on the highest order which benefits the consumer.
Ask yourself whether this is true with the Chaebol system here in Korea. I’d say not yet. A few companies are getting there, but on average the aim is benefitting the Chaebol, not the consumer. Until Chaebols learn that benefitting the consumer, taking care of employees and efficiency will in the end also take care of “La Cosa Nostra”, the world market is going to be a dangerous place.
Wealth breeds/reinforces greed.There’s a whole world you have no access to without enough commas, and those with that access will protect it.
I work in an ex-chaebol corporation but every once in a while something funny goes on…
The day before we had a share-holder meeting, they announced ever-so-innocuously that everyone should go up to the big conference room for the rehearsal. Then we sat through a ten minute coaching of when we were to yell (I forgot the exact Korean phrases but I’ll approximate in English) “we have no objection” and “no that is not needed” and then the pursuant speech by the chairman and our appropriate responses to it.. It was only after that that the realization finally made it through my thick skull that something wasn’t quite right when the chairman said “all right guys, that was perfect, just remember, don’t wear your company pins tomorrow when we do this”.
It was then it all added up:
1. Why do we need to rehearse a shareholders meeting? The vast majority of us aren’t even shareholders (well in our competitors maybe)
2. In light of number one, what are we doing telling the chairmen if his policies are ok with us or not?
3.Why are we not supposed to look like employees and lastly: why do my co-workers keep making jokes about me representing the “foreign investors”?
…and I guess you guys can add that up too…
Good story, cap’n!
Nice article, Mr. Koehler. Also Captain bbq. I wonder how many other Korean companies are family run. Posco is up there now, I’m sure it’s adopted a similar business structure. In fact, most companies in Korea are probably family organizations. Don’t all businesses here start like the mom n pop convenience stores and dry cleaners?
Great post. I just want to add one more comparison between the mob and chaebols.
When Chaebol families spend corporate resources on personal perks, they’re not spending ‘their’ money. Many Chaebols are publicly traded companies: they raise their capital from individual and institutional investors. They are spending OUR money when they buy themselves a new house, car, or create a slush fund to further their political interests. This is theft.
Of course, it doesn’t LOOK like theft because Mr. Samsung and Mr. Doosan aren’t walking into our homes and robbing us at gunpoint. But then, the mafia doesn’t do this either. Mobsters call their business model “Wetting the beak” - skimming off a little bit from everybody, taking a cut from all crimes and legitimate businesses in their territory. Chaebols rarely commit blatant fraud. But tally up all the money they’ve skimmed and pocketed, and it adds up to hundreds of billions of dollars.
This used to be the case in the United States until the crash of 1929 led to serious financial regulations. Korea had its Great Crash already, but it seems nothing has changed.
Thoughtful post with a lot of reasoned comments. The only point I wish to add is that hiring goon squads isn’t a chaebol hallmark. It seems to be SOP for large and small businesses in Korea, Japan, and China. I witnessed workplace thuggery firsthand at the school where I taught in China, and our Japanese employee, who had seen similar uses of “hired manpower” back home, quit out of disgust.
I haven’t attended the dress rehearsal, but I do remember the first time I tumbled to the choreography of a Korean company’s shareholders’ meeting. The first few “shareholders” presented surprisingly intelligent, well-prepared questions and the Chairman’s answers were so thorough — I recall being impressed with everyone’s professionalism and thorough preparation. They all really knew the business! And here we were, holding a proxy for 70.8% of the shares on behalf of a foreign investor. Then a few of them started stumbling through their scripts, and the Chairman assisted them to recall their lines. Whoopsie daisy.
#19.
Actually, I wrote the post. Yes, the chaebols used to be mom and pop stores. Hyundai started off as the neighborhood garage fixing cars for the few who could afford them at the time. As for their transformation into what they are today, part of the credit does lie with the founders. But in reality they would not have been able to expand their businesses were it not for Park Chung Hee, who provided the funds, guidance, and in some ways protection so that the chaebols can grow. Of course back then, Korea didn’t have much of an economy, and to Park helping the chaebols grow was one of the ways of ensuring the growth of the Korean economy.
you should read Chung Joo Yung’s autobiography. Very Benjamin Franklin like.
Everything apparently was well deserved and earned, it seems to say.
A Self glorification, which leads out some seedy facts.
I believe the version I read was called “Si Ryun eun is uh do, Sil Pae neun up da.”
a self made man. The car repairing business is mentioned.
leads–> leave
#9.
In regards to Sumo’s comment, I will add that Sumo got it wrong. The fact of the matter is there are no Seoul or Jibang chaebol. There are just the chaebols, which are all based in Seoul. However the founding and ruling families of the major chaebols such as Hyundai, LG, and Samsung hail from the provinces. The only chaebol presence in the provinces are the factories and the sales and branch offices of the respective groups. Sumo also gives more credit to the chaebols than they deserve. Yes there have been changes, since the IMF, but the US market didn’t affect the chaebols decision to reform nor have the US educated chaebol family members exerted much influence. As a matter of fact, the US educated ones don’t exactly act like the enlighthened people that some people think and expect them to be. And despite the changes, which were at best cosmetic, the core factors that make the chaebols act like the mob are still there.
I also disagree that the wealth of Korea lies outside Seoul. Wealth is concentrated in Seoul and Kyonggi-do for that matter, that’s why you’ll hear complaints about regional imbalance from the provinces.
Actually, Posco is a bit different… Posco wasn’t a family business, but was rather the result of the Park administration using soft loans and grants from Japan (you know, the money that was supposedly to go at least in part to the slave laborers and comfort women…) in order to start a steel company. For a long time, Posco was basically a government-owned enterprise with one of Park’s cronies up top. Nowadays, it’s been privatized, and most of the shares are in the hands of foreign investors.
mins0306, you would be right pre 2000 but the break up of the chaebols have now really begun. Some of these breakups are still held together by the 1st or 2nd generation but by the the third they will go their separate ways and yes management styles and where you do your business will dictate why they part ways. A business based in Ilsan or the interior will have to play the domestic game of tactical executions. But like Toyota and Sony, the big game (USA) requires strategy and global perspective. Look at how Americanized the twin towers from Japan are in their American investments and you can see that the Koreans will have to follow suit or fall off the name recognition chart. There were many chaebols operating up to 1980 and when you examine the top 20 you then find the country chaebols. In fact, many still exist or some remnant of them still exists in Daegu or Busan. Remember how many textile companies Korea used to have?
Korea in general will change within 20 years, especially in finance and law. Do you really think that Samsung and LG will be the leaders in these fields? Service sectors need to be increasingly mid-tier, nimble, and responsive to the market–is this the bread and butter of Hyundai? Daewoo bet on Europe instead of the US and he never groomed a US educated son or daughter for sucession–was this the right move? Hyundai Construction, Hyundai Shipbuilding and Hyundai Automotive have different needs, clients and metrics–are they really one company?
Question: In the beginning, Park championed a group of companies to lead the way for the future. Of these companies, how many have survived? Of those who survived, do these ones have similarities that led to such survival?
Comment: As backward as the company you have seen with your own eyes, there were far more backward and centralized operations that formally were in Korea. They are simply no longer availble for anthropological comment and study.
That was interesting.
Just curious, in your opinion (for writer of the post) is the regular Korean (someone who doesn’t work in corporate or that kind of field) aware of the practices you talk about, like the ’shareholder’ meetings, etc… If people are aware of it, then does it mean that it continues because people feel helpless to do anything about it since the practices are so entrenched…? I guess the latter is more of a rhetorical question.
Most Koreans know nothing of the law. Nothing at all. It’s not relevant to their lives — the law is an alien construct overlaid on their 5000 year-old society, by force, only in this century. The law and government has been the tool of fascist oppression, in varying degrees, from 1910 to 1992 (some would say 1997).
The function of the law in Korea has generally been to establish means by which the ruling class (whether they are Japanese or Korean) exercises control over the general populace. As a result, everyone here is trying to make themselves as inconspicuous as possible, or to bribe the petty functionaries of the ruling class to look elsewhere and harass someone else.
Now, a “critical legal studies” theorist — or Korean misdirectionalist — would say the same is true of the United States, but at least in the United States we have a separation of powers and the limited-sovereign conception traceable back to the Magna Carta.
In the American system, in theory at least, all powers stem from the people and are granted to the government. Korea’s legal system reserves all powers to the government and the people are permitted to do what the government allows them to do. If not expressly permitted, an activity is forbidden — this is the nature of the so-called “positive list” system.
The system whereby judges are recruited directly from the Judicial Research and Training Institute (i.e., just as they are starting their careers) and appointed as civil servants without tenure ensures a pliant judiciary not eager to oppose the government.
This is also why Korean democracy is a winner-take-all system. Whosoever takes control of the government, controls all.
Now, as to the corporate-governance question, the answer is no — the general public, and the more ignorant members of the government too, for that matter — have no idea about corporate governance nor about shareholders rights. They think in terms of an individual “owner” of a corporation and that owner having utter and complete control and knowledge of all aspects of the corporation’s business.
Imagine a case where a multinational company — for the purpose of argument, Apple — suffers a loss in Korea due to fraud. Could you believe the police and prosecutors persistently requesting Steve Jobs to appear at the police station to swear out a complaint? I can, because I’ve experienced it. After all, he’s the “owner” of that company.
The owner of a company gets to do whatever he wants with the assets of that company, including its people. It’s very much a “family business”, sole-proprietorship conception that is applied in the popular imagination to Samsung, Hyundai, and Posco. In the case of state-owned companies, the owner is the President.
Brendon:
The problem you so succinctly describe has far deeper roots. Law for most of Korea’s history - not the 5000 year fantasy, but since Unified Silla - has been the instrument by means of which whoever controlled state power imposed “his” will on the people at large. “He” in this case refers not so much to a single sovereign, since Korean monarchs generally have been relatively weak vis-avis aristocratic competitors for power, but the incredibly small hereditary aristocratic/bureacucratic elite that dominated Korea until displaced by the Japanese and the equally small clique of military/industrial/bureaucratic kleptocrats who have been in the ascendency since the end of the colonial period. It’s also interesting to note that this persistent system of domination, which also was explicitly hereditary up to the end of Joseon - and the hereditary character of which the current incumbents do everything possible to replicate in an ostensibly meritocratic society — was imposed on a society in which more than 30% of the population was enslaved (Silla through Goryeo), and in which by the mid Joseon as much as 80% of the population may have been slaves. Slaves and their immediate descendants aren’t likely to have a lively appreciation of the law as the embodiment of a government of, by and for the people, as opposed to a bludgeon to use to exact revenge if they can get their hands on it..
Touché. You must be speaking of the Ministry of Punishment when Korea still had a Chinese-inspired legal system.
My point on the current German civil-code system is that the people are further alienated from the current system by the fact that it is perceived by many to be foreign in origin. Just one more reason to hate the law.
You said it, brother. But the slavery point — which is, as you know, hotly disputed by Korean nationalists — applies in general to any group which was oppressed by the law.
This is why the Kim Dae Jung camp in particular was so disappointing — instead of looking forward to a day when the oppressive government policies could be abolished, it seems DJ spent much of his time in stir plotting how much better it would be once he could be the oppressor.
The guy was no democrat, to be sure. Democracy idol, sure, but DJ didn’t have a democratic bone in his body. In this respect, the fecklessness of Roh Moo Hyun is a step in the right direction. Except for a few instances of backsliding to reliance on “I’m the President, dammit!” the Roh regime has had a better appreciation that this is a democracy.
And I expect the successor, even Lee Myung-Bak, will be a bit better too. Step by step.
Of course, the current German civil code is really the Meiji version of the German code, which makes it even worse.
But even the pre-existing system was, as you note, Chinese - and hence should be equally suspect.
As for the slavery point, yes, it’s controversial to the knuckleheads; but interestingly, it’s not just Western scholars with impeccable research like Palais who adhere to it; the 80% figure for the percentage of slaves in mid to late Joseon comes from a contemporary Korean Confucian literati scholar.
Excellent commentary in those last few posts, thanks.
Man, you guys are timid lately. Look, remember when Samsung did a huge old McKinsey impact study for millions upon millions of dollars? The report was not for the benefit of the whole outfit but a guide for a one man who was feeling lost and needed a vision of where to go. After all, Alex was gone, only butt kissing cronies were left, and the father figure was finally letting it all fall apart. How different from just ten years ago when the entire outfit had to fund a single mega project at the behest of one man. The market dictates survival–choose either your pride or your wallet. A lot of chaebols chose pride over their wallets–and one old man of the former is now waiting tables at a restaurant. Do you know his name?
Word has it you may be receiving a large amount of money in the near future to take this post down.
#36.
May I ask where did you hear that from?
Now if it was something that hot, I believe Robert would have told me to take it down.
mins0306,
Sorry for the late response. I value my weekends and generally stay away from computers during that time. I took an extended weekend and just got back in the saddle today.
Anyways, I think you make some good points, however, you argue from a primarily ethical perspective (are Chaebols good/bad) rather then an economic perspective (are Chaebols efficient/inefficient), which in my opinion, makes your analysis incomplete.
I’d say that we should look at Chaebols from the larger context of economic development. American corporations were also rather protectionistic and plutocratic in their formative decades too. The big American companies of the past used what we can euphamistically say as “contract labor” to quell unions. Witness Also, the Japanese Chaebols, the Zaibatsu, also used organized crime to do their “head bashing” bidding. The military/industrial complex of the Zaibatsu also played a huge role is starting WWII, which necessitated their dismantle after the war.
Anyways, most industrializing nations have conglomerates that need to mature for the economy to reach the next level. Hopefully Korea’s brand of conglomerates can mature also.
Besides, what’s the alternative. Korean chaebols have created a lot of benefits as well. Taiwan doesn’t have any chaebol style conglomerates, but it doesn’t have any global brands either…
“Besides, what’s the alternative. Korean chaebols have created a lot of benefits as well. Taiwan doesn’t have any chaebol style conglomerates, but it doesn’t have any global brands either…”
I agree with WangKon here. Despite the many problems of chaebols, I think things are getting better. The chaebols realize that they have to improve governance or be left behind. They may be fighting it all the way, but it will happen, I believe, perhaps not as quickly as I or many would want, but it things will change. As far as Taiwan is concerned, they may not have any global brands, but that’s not to say there isn’t a serious amount of money being made there. The Taiwanese are investing heavily in China and are making pots of money, despite the unstable political situation. Some of Taiwan’s company’s are also huge in their respective industries, but are not well-known (I read about a couple in the semiconductor and electronics biz, but forget their names already!). I’m not sure how nationalistic Taiwan is, but it seems that chaebols benefit from while being limited by the Korean trend towards myopic nationalism and protectionism.
#38.
No need to apologize.
Yeah you’re right I should have also looked at the efficiency side of the chaebol. But my original intention was to look at the ethical side and if I made my point then well, my job is done.
It’s also interesting that you mentioned Taiwan. The Taiwanese economy is mostly made up of SMEs that manufacture components and OEM products for the larger Western/Japanese companies. Yes, they have no global brand, but so far they have done very well.
Now the thing about the chaebols is that they feel they have to no. 1 in everything to succeed. Being no.1 and having a global brand isn’t bad, but the problem with the chaebols is they, in the process, forget the basics of a successful business, such as a healthy balance sheet, value to shareholders, etc. Some end up overextending themselves and in effect lose more than they have gained.
Acer comes to mind. And, in another field, Evergreen, which doesn’t come more global than that. After all, all this crap Taiwanese companies produce — in mainland China — has to be brought to the West… But true, there are not that many Taiwanese brands that get face recognition…
mins0306,
You raise a valid point when you say that sometimes Chaebols have an overarching ambition to be #1 in everything. However, I wouldn’t knock that too much because in order to be great, you need to have a belief in your own Manifest Destiny. #1 in ships, TVs, chips, etc. who would of thunk it in the 60’s huh?
However, if Chung Mong-koo ever has wet dreams that he’ll surpass Toyota, he better sober up and be happy with being the Asian Volkswagen, otherwise he may run Hyundai Motors into the ground trying to reach a unattainable goal.
Global brand = higher margin. The ability to command higher margins = better overall growth prospects for the future.
That’s why it’s important.
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