By Cameron Griffith
In the wake of South Korean President Park Geun-hye’s impeachment earlier this month, many wonder if the shifting political landscape will result in the substantive economic and political reforms needed to overhaul its corporate governance.
On March 10th, Korea’s Supreme Court unanimously upheld the parliament’s vote to remove President Park from office. The decision came amid a series of investigations into donations to two foundations operated by Choi Soon-sil, an unofficial confidante of Ms. Park. Ms. Choi has been convicted of bribery, fraud, and abuse of power for using her influence over the President to solicit $69 million worth of donations to her personal foundations.
The list of implicated parties is long and distinguished, with nearly all donations originating from chaebols, South Korean family operated conglomerates. Jay Y. Lee, chief of Samsung, is accused of donating $37 million to secure government approval for a merger between two of Samsung’s larger divisions. The remainder of the $69 million in donations, including a $1 million horse for Ms. Choi’s daughter, came from the heads of numerous other South Korean chaebols including Hyundai, Lotte, LG, and Hanjin.
The government’s relationship with these large conglomerates is inextricable. Following the Korean War, Park Chung-hee, then dictator and father of the recently impeached President, created the current system of chaebols. Park Chung-hee hoped to provide government funding and policy assistance to South Korean companies in an effort to rebuild the economy after the war. The system was hugely successful, and chaebols accounted for nearly two thirds of all Korean manufacturing by the turn of the century.
Despite this success, support for chaebols and the family dynasty’s which control them has faded in recent times. Many South Koreans now believe the conglomerates hold too much sway over government operations and have had a negative effect on labor conditions and prices within the country, as government policies have largely favored chaebols over the people. Government policies have largely favored chaebols over the people; the state cultivated these companies by providing startup capital, implementing high tariffs, and helping squash labor movements.
This Korean political paradigm is likely to change. The opposition party has already claimed a majority in the South Korean Parliament, and rising political figures appear less inclined to ally themselves with the Korean conglomerates. The hundreds of thousands of Koreans who gathered peacefully to protest the administration of President Park have shown that they will no longer tolerate the government corruption that places their interests behind those of a few corporate dynasties.