Chaebol
In 1988, a member of a chaebol family, Chung Mong-joon, president of Hyundai Heavy Industries, successfully ran for the National Assembly of South Korea.
[6] Many South Korean family-run chaebol have been criticised for low dividend payouts and other governance practices that favor controlling shareholders at the expense of ordinary investors.
However, the policies of President Park Chung Hee spurred rapid industrialisation by promoting large businesses, following his seizure of power in 1961.
The First Five Year Economic Plan[4] by the government set industrial policy towards new investment, and chaebols were to be guaranteed loans from the banking sector.
The chaebol played a key role in developing new industries, markets, and export production, helping make South Korea one of the Four Asian Tigers.
Although South Korea's major industrial programs did not begin until the early 1960s, the origins of the country's entrepreneurial elite were found in the political economy of the 1950s.
However, the chaebol-led industrialization accelerated the monopolistic and oligopolistic concentration of capital and economically profitable activities in the hands of a limited number of conglomerates.
Initially, the crisis was caused by a sharp drop in the value of the currency and led to immediate cash flow concerns needed to pay foreign debts; however, the lower costs ultimately helped the stronger chaebols expand their brands to Western markets.
[citation needed] In 2019, the revenue of the largest chaebol, Samsung, was worth about 17% of the South Korean GDP[12] with the company holding billions of dollars in cash.
South Korea's chaebols are often compared with Japan's keiretsu business groupings, the successors of the pre-war zaibatsu, but they have some major differences:[according to whom?]
Other practices that would be uncommon for Western workplaces to engage in include gift-giving to employees and arranging dates for workers in search of relationships or marriage.
For example, the Asiana flight 214 crash led critics to speculate that cultural factors prevented a pilot on board from aborting the low-speed landing and thus straying from his superior's commands.
Newly acquired employees undergo an intense initiation that includes activities such as training camps and singing company-unique songs that reiterate the production goals of the firm.
These included the government's choosing to select various family businesses to distribute the incentives (imported raw materials, commodities, bank loans).
Because of their major role in the Korean stock market, foreign investors play a massive part in whether or not chaebol conglomerates remain financially successful.
Foreign investors tend to avoid chaebols, especially those that displayed heavy political influence in South Korea, like Samsung and Hyundai.
Investors are reluctant to invest in large control-ownership disparity businesses because these companies tended to cheat shareholders to have higher personal financial gain.
However, a study published in the Journal of the Japanese and International Economies found that after the 1997 Asian financial crisis, foreign investment behavioural patterns changed drastically.
[23] As of January 2025, many Chaebol corporations have a high share of foreign investors, with Samsung Electronics 73%[24] and Hyundai Motors is 50%[24] SK Hynics is 55.8%.
During the 1997 Asian financial crisis, bankers feared that chaebols would go bankrupt so they allowed these businesses to roll over their loans each time they were unable to repay their debts.
Although no longer financially supported by the government, these firms have attained economies of scale on such a massive level that it is extremely difficult for a startup or small or medium enterprise (SME) to surmount the high barriers to entry.
[30] Conversely, chaebols have also been moving money abroad with the tacit endorsement of the South Korean government and investing in commercial enterprises, particularly in Koreatown Manhattan, New York City.
President Lee then proceeded to champion pro-chaebol deals, including a nuclear energy contract with the city of Abu Dhabi, and loosened laws preventing the conglomerates from owning financial services companies.
Choi Tae-Won of SK Group, Chung Mong-Koo of Hyundai, Kim Seung-Youn of Hanwha, and Shin Dong-bin of Lotte[35] are a few examples of chairmen who have been charged, convicted, or are currently serving a prison sentence for white-collar crime.
In the rare case that an executive is sentenced to prison, as the CEOs of SK and CJ group were, it is typically a relatively light punishment of up to 4 years depending on the charge.
In recent years, the leading political parties of South Korea have shifted their focus from supporting large corporations to promoting economic diversification.
[41] These were the enhancement of management transparency, strengthening owner-manager accountability, elimination of cross-debt guarantees among chaebol affiliates, improvement of capital structures, and consolidation of core business areas.
Rather than having the decision-makers be insiders, affiliates, or family members, chaebols were expected to hold representation that reflected the interests of investors, especially minority shareholders who gained a significant number of rights.
Some of these shows, including A Business Proposal, Coffee Prince, What's Wrong with Secretary Kim, King the Land, and The Heirs, portray the lifestyles of chaebol family members in a comedic manner.
In addition, many chaebol family members have taken to social media outlets like Instagram and Twitter, where they publish snippets of their personal lives.
