Gov`t And Conglomerates at Odds Over CEO Meeting

The government and local conglomerates such as Samsung and LG have conflicting views over their recent meetings of chief executives of affiliated companies.

The government is against calling CEO meetings because investors at home and abroad may see them as attempts by local conglomerates to go back to ‘emperor-like management’ of the past. Meanwhile, those conglomerates reputed that what the government insists is equivalent to a request to diffuse their groups and that there are more to gain than lose by holding CEO meetings.

A high official at the Ministry of Finance and Economy warned June 7 that it is beyond the legal authority for a group owner to interfere with management of affiliates through CEO meeting, maintaining his sway over the group, despite he holds only 1~2% of total equities.

Samsung Group Chairman Lee Kun-hee is the registered executive of 9 out of 63 affiliates and the representative director of Samsung Electronics. Meanwhile, LG Group Chairman Koo Bon-moo is the registered executive of 3 out of 52 affiliates and the representative director of LGEI and LGCI, electronics and chemical affiliates respectively. In the case of SK Corp., the chairman Choi Tae-won currently is the registered executive of 5 out of 62 affiliates and the representative director of SK Corp. Hyundai Motor Group Chairman Chung Mong-koo is the registered executive of 6 out of 25 affiliates and the representative director of Hyundai Motors, Kia Motor Company and Hyundai Mobis.

In response to the warning, those conglomerates are saying that making an issue of CEO meetings is non other than denying the existence of conglomerates which have greatly contributed to the economic development in Korea.

A source at the restructuring headquarter of Samsung said that some conglomerates like GE in the U.S. and others in Japan also call CEO meetings and those meetings are designed to exchange information among affiliates and to set up strategies rather than to expand the owner’s hold over the whole group.

Sung So-mi from the Corporate Affairs Research Team at Korea Development Institute (KDI) said that it is hard to ignore the existence of conglomerates and CEO meetings may also be held if necessary. She stressed, however, chairmen of those groups should be registered as executives of major affiliates before exerting their rights so that they are held responsible in case their mismanagement causes loss to shareholders.

Byong-Ki Lee Joong-Hyun Park eye@donga.com sanjuck@donga.com