Special no more? Holding Korean chaebol to higher account
By Tony Munroe and Jack Kim
SEOUL (Reuters) - The uproar that forced a Korean Air Lines executive to resign after delaying a flight because she was unhappy with the way nuts were served points to growing intolerance of corporate bad behavior in a country dominated by family conglomerates.
Public frustration has long simmered over a culture of impunity that saw bosses of corporate groups known as chaebol often evading jail time for more serious offences. Due to poor governance and stingy dividend payouts, shares of South Korean companies trade at discounts to peers elsewhere.
That culture is slowly changing under the government of President Park Geun-hye, who took office last year after a convincing electoral win partly based on a tougher line on self-serving or abusive behavior by chaebol and their families.
"People have always felt this frustration, but the previous perspective was you can't discipline the chaebol because we can't survive and thrive without them," said Shaun Cochran, Korea head of investment bank CLSA.
In a sign that powerful companies are held to greater account, convicted executives are finding it harder to avoid jail time. Park's government has also passed a law taxing excess corporate cash in hopes of compelling big companies to, among other things, unlock their funds and pay more dividends.
Investors threw a fit in September when Hyundai Motor Co and two affiliates paid $10 billion for a plot of land - more than three times its appraised value. While Hyundai did not back down, it subsequently sought to appease investors by considering more dividends.
Last month, Samsung Heavy Industries scrapped a $2.5 billion takeover of Samsung Engineering due to shareholder opposition, a sign that investors will be more demanding as South Korea's biggest chaebol restructures to preserve family control when generational succession comes.