The leaders of Hyundai Motor and Amorepacific

Suh Kyung-bae, chairman of the Amorepacific Group, has become Korea’s second richest man by stock value, surpassing Hyundai Motor Group Chairman Chung Mong-koo. Amorepacific’s stock price, which was one million won (940.2 US dollars) at the end of last year, has recently jumped to around 2.5 million won (2,350 dollars). As of the end of last month, Suh’s stock value was 6.7 trillion won (6.3 billion dollars) and Chung’s 6.5 trillion won (6.1 billion dollars). Samsung Group Chairman Lee Kun-hee ranked top with 10.48 trillion won (9.85 billion dollars).

Amorepacific cosmetics such as Sulwhasoo and Laneige are on the top of the gift list that Chinese women want most. Despite the economic downturn, the cosmetics company has achieved an earnings surprise every quarter. It is not just because of the strong demand in China. As the second generation CEO, Suh was recognized for his excellent management ability during the crisis in the 1990s. Back then, he sold non-core businesses such as brokerage, electronics and construction and focused on cosmetics. He has always said, “I want to create luxury cosmetics in Korea where there is none.” And he finally hit the jack pot in 20 years.

Chairman Chung was pushed behind Suh largely because Hyundai Motor Group purchased the land of Korea Electric Power Corp. (KEPCO) at 10.55 trillion won (9.9 billion dollars). Though it is Korea’s second largest group, Hyundai Motor did not have a headquarter building that can accommodate tens of thousands of its employees. As such, the country`s largest automaker has long kept an eye on the land. When the bidding result was released, many people were astonished at the price that was over three times the appraisal price. Chairman Chung said, “This is an investment for the next 100 years,” and the group said it was not expensive given office rent it has been paying and the future value of the land.

The stock market was cold, however. The market capitalization of Hyundai Motor Group fell from 99 trillion won (93.9 billion dollars) to 87 trillion won (81.8 billion dollars) for 10 days from the announcement of the bidding outcome. Many criticized by saying, “It is doubtful whether the board of directors worked properly to protect shareholders’ rights” and “It’s a classic example of a Korea discount.” Global business scholars have mixed views. One side says that it showed many problems due to the majority shareholder’s abuse of his authority, while the other side says that his decisive long-term investment overcame the limitation of U.S. shareholder capitalism. How Chung’s big bet will turn out later remains to be seen.