Jailing of Samsung heir sends reforms message to chaebol
South Korea’s new president Moon Jae-in made a bold pledge to pursue reform by taking on the powerful chaebol that dominate Asia’s fourth-largest economy through cosy and often corrupt ties with government. That was to be expected from a left-leaning president elected in a backlash against corruption following the impeachment of former president Park Geun-hye. South Korea remains, after all, a democracy with the rule of law and an independent judiciary. But the chaebol can still rely on business-friendly MPs to block reforms.
In a five-way presidential race, Moon may have won a respectable 40 per cent of the vote and 120 of 300 parliamentary seats, but that was well short of the three-fifths majority needed to legislate reform. The reign of the chaebol and their ruling families therefore seemed far from over, and their power and influence far from diminished.
But the relationship with government took a dramatic turn when a court convicted Samsung chief Lee Jae-yong, grandson of the company’s founder, and jailed him for five years for paying nearly US$8 million in bribes to an associate of former president Park.
It will take more than proof of corruption at the very top to loosen the grip on the economy of chaebol-founding families that typically exercise overall control through a web of small shareholdings. But, with the previous president and a top business leader in jail, the days of a chaebol era characterised by cronyism and bribery and immunity from accountability for abuse of power may be numbered.
The chaebol have been handsomely rewarded for the role of family-run conglomerates in South Korea’s post-war growth. Now, amid a clamour for equality before the law and fairer returns for shareholders, Moon must stand by his pledge not to pardon Lee and other chaebol leaders. His choice of shareholder rights activist Kim Sang-jo to head the Fair Trade Commission is a good sign.
The chaebol may survive and thrive in the foreseeable future – as evidenced by the record latest quarterly profit of Samsung Electronics. The jailing of the company’s chief, however, is a signal that Kim’s pledge to pursue reforms “through a positive campaign”should be taken seriously in the boardrooms that pull the strings of the economy.