The Dark Side of South Korea’s Chaebol (Also Me)

South Korea receives accolades for its impressive economic turnaround, evolving from a war-ravaged nation to a global technological and innovative powerhouse. However, a less illuminated aspect of this narrative is the overbearing authority wielded by the chaebol—family-run conglomerates that sway South Korea's economy and political landscape.

Names like Samsung and Hyundai stand as pillars in propelling South Korea's growth since the 1960s, having received substantial government backing in the form of subsidies, loans, tax benefits, and protection from foreign competition. These conglomerates have branched into diverse sectors like electronics, automobiles, shipbuilding, finance, biotechnology, and more, securing their positions as global leaders. Their substantial investments in research and development have yielded cutting-edge products and services, elevating South Korea's standing on the worldwide stage.

Yet, the chaebol's influence also casts a shadow over the South Korean economy and society. Firstly, they breed market concentration and inequality, creating barriers for smaller enterprises and newcomers to compete and innovate. In 2019, according to the Korea Fair Trade Commission, the top four chaebol groups (Samsung, Hyundai Motor, SK, and LG) controlled a staggering 58.2 percent of the total assets of the leading 30 business groups. Moreover, these conglomerates hold sway over more than half of the nation's stock market value, with profits primarily accruing to the founding families, who often employ intricate cross-shareholding structures to evade taxes and transfer wealth.

Secondly, the chaebol exposes the economy to external vulnerabilities, such as trade disputes, geopolitical tensions, environmental regulations, and technological disruptions. Their heavy reliance on exports renders them susceptible to fluctuations in global demand and exchange rates. For instance, Samsung Electronics single-handedly accounted for 20.3 percent of South Korea's total exports in 2020, driven primarily by its semiconductor division. However, this dependence also means that any setback in Samsung's performance or market share could exert a substantial impact on the nation's economic stability.

Furthermore, the chaebol grapples with internal governance and succession challenges, as they remain predominantly controlled by their founding families, who have been embroiled in various scandals and controversies over the years. These owners often yield disproportionate influence over their affiliates, enabling them to make pivotal decisions without adequate oversight. Leadership positions are often passed down to heirs through nepotism or inheritance, irrespective of their qualifications or competence. For instance, Lee Jae-Yong, the de facto leader of Samsung Group, and the grandson of its founder, Lee Byung-Chul, faced bribery and embezzlement charges in 2017 for his involvement in a corruption scandal that led to the impeachment of former President Park Geun-hye. Although sentenced to two and a half years in prison in January 2021, he was granted parole in August 2021 after serving only 18 months.

Lastly, the chaebol faces allegations of worker exploitation and rights violations, especially in their overseas ventures. They often employ young workers as irregular or temporary laborers, subjecting them to low wages, extended work hours, substandard conditions, and job insecurity. Workers are often impeded from forming or joining trade unions or engaging in collective bargaining or peaceful assembly. These conglomerates have been accused of various labor transgressions and human rights breaches in countries like Vietnam, India, Indonesia, China, France, and Mexico. For instance, a report by Hankyoreh highlighted Samsung Electronics plants in Vietnam, India, and Indonesia engaging in activities that either skirted local laws and international standards or overtly violated them.

Hence, South Korea must overhaul its chaebol system and diminish its reliance on these colossal conglomerates. This entails cultivating a more equitable playing field for fair competition and innovation, bolstering the regulatory and legal framework for corporate governance and accountability, and advocating for a more inclusive and sustainable growth model that benefits all segments of society.

Peace Out