‘Capital Sovereignty’ Controversy

The controversy on ‘Capital Sovereignty’ has heated up by Sovereign Capital, a foreign capital which recently acquired substantial amount of SK Corporation`s stock.

Professor Jang Ha-sung has rebutted criticism against him which claims him as the ‘Agent of foreign capital’ through interview in the May edition of monthly publication, ‘Participation Society’ of People`s Solidarity for Participation Democracy (PSPD). Against Professor Jang`s comment on some positive aspects of Sovereign`s SK Corp. stock, several social organizations have criticized him on issues of ‘Capital Sovereignty’.

In his interview, Jang has fiercely rebutted the criticisms saying, “The (Korean) finance world has weakened their own corporate governance structure by ‘Circulation Debt-equity’ among interrelated corporations and blames the government. These critics turn a blind eye on the domestic issues and merely blame the foreign capital.”

Jang claims that the current situation was brought by vested interest party conservatives (domestic finance world) and extreme left-wing groups (probably ‘Position21’) which support the ‘Chaebols’.

The SK Group is the third largest Chaebol in Korea. Their management rights are threatened by 1700 billion won investment by Sovereign Capital. Professor Jang states that this problem was brought upon by circulated debt-equity among interrelated corporations, which weakened the corporate governance structure and relatively low corporate value of holding company (SK Corp.) compared to their subsidiaries (SK Telecom). “Our Chaebol reform is part of straightening this mess,” says Jang.

“Management rights are important however we have to consider this if the holders of these rights keep on harming the company and the society. If M&A by the foreign capital is a problem, then we have to discuss the issue of whether opening or closing out our capital market first,” says Jang

A professor of Incheon University, Lee Chan-geon of Position21 says, “Large corporations are important to national economy because they are credited for creation of new businesses jobs, and increasing of national competitiveness by technological development. The problem is that the foreign capitals which are targeting for abnormal stock price jumps ignore these social values.” Therefore, Lee argues, “The Chaebol reform must be corrected to focus on these national benefits rather than economical aspects.”

Readers can view this debate on People`s Solidarity for Participation Democracy websites (http://peoplepower21.org ) and Position21 websites (http://position21.jinbo.net)

Yong-Ki Kim ykim@donga.com