[Editorial] Yoon Jeung-hyun Versus Kang Chul-kyu

Kang Chul-kyu, the chairman of the Fair Trade Commission (FTC), keeps expressing his intention of overhauling the corporate governance structure. Yoon Jeung-hyun, chairman of the Financial Supervisory Commission, warned that government interference with corporate governance structure can cause problems. Who, between the two decision making authorities, serves the national interest better?

The day before yesterday, the FTC made public the ownership share and the share of voting rights of families of the heads of conglomerates. It seems that the FTC tried to emphasize that the owners of conglomerates exercise voting rights seven times bigger than their share of ownership to build consensus that government interference with corporate governance structure is just. Chairman Kang said many times that the “wrong” corporate governance structure leads to misuse of economic power, a decline in corporate competitiveness and underestimations of corporate value.

The major company of Samsung, Samsung Electronics, that Kang views as the main target of corporate governance overhaul, ranked 39th on the list of the world’s largest companies published the day before yesterday by Fortune, a U.S. magazine. The rank of Samsung at 39 is a remarkable jump from 59th place in 2003 and 54th place in 2004. Samsung became the first corporation in Korea to be ranked among the world’s top 50 corporations. Sony ranked 47th, eight ranks lower that Samsung, which it didn’t consider as a rival only a few years ago. Hyundai Motor Company came in 92nd, ranking among the world’s top 100 corporations.

There is no doubt that behind the success of Samsung lies the management visions and practical abilities of Chairman Lee Kun-hee, Vice-chairman Yoon Jong-yong, President Hwang Chang-kyu and President Lee Ki-tae. Today’s Samsung owes its achievements to its constant efforts to pool talent and to innovate through the role division corporate governance structure that owners and expert managers view as the optimal corporate governance structure. They are leading Korea’s corporations and the Korean economy in this era of unlimited competition, while proving new possibilities. Top corporations in not only Taiwan but also Japan even, are benchmarking the corporate governance structure of Samsung.

Unlike Kang, Yoon said “It is not the government that decides which corporate governance structure is the most efficient and idealistic. What companies need to do is make contributions to society by making profits, paying a lot of taxes, paying employees good wages and increasing the dividends of shareholders.” What he means is that good and strong corporate governance serves the national interest through those aforementioned efforts.

By Kang’s standard, there are many corporations that have “more exemplary” corporate governance structures than Samsung, LG and Hyundai. However, a lot of those corporations contribute to creating national wealth by only a tenth or one hundredth of the amount that Samsung does because of their sluggish growth. Does Kang want Samsung, LG and Hyundai to resemble corporations that can hardly keep up with the times?

It is an established fact worldwide that it is wrong to think there is only one corporate governance structure. Corporate governance structure differs depending on countries, including advanced countries such as the U.S., Germany, and Japan. Within a country, different companies adapt different corporate governance structures. Take a look at Toyota in Japan. Its corporate governance structure changed from owner-centered governance to an expert-manager centered one, and to the one which strengthens the influence of owner. Toyota’s governance structure keeps changing toward “survival and development.”

The government now should worry more about political power governance structure than about corporate governance structure. High ranking officials are busy adjusting policies to the code of the president. The ruling party is swayed by a letter from the president. The president keeps appointing people close to him to important positions in government and public companies. This human governance structure destroys systems, hurts the validity of policies, and compromises the competitiveness of the public sector.

Korea’s economic growth rate in the first quarter of this year is the lowest among Asian countries. China posted a growth rate at 9.5 percent, while Indonesia, Hong Kong and Malaysia posted growth rates of around five to six percent. The Philippines, Thailand, and Taiwan posted about four percent growth, and Korea, two percent. Which should take more blame for this result: the wrong corporate governance structure or the government in which people like Kang are influential?