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The Federation of Korean Industries building in Seoul’s Yeouido neighborhood

Calls for the dismantling of the Federation of Korean Industries (FKI) are growing louder after key member company Samsung announced its departure. FKI has moved to gather opinions from member companies in response.

At a meeting on Dec. 7 presided over by full-time vice chairperson Lee Seung-chul, FKI discussed plans for reorganization and measures in response to Samsung’s departure.

“We’re working on different development ideas, including some member companies’ suggestion that we become a think tank instead,” said an FKI source. For now, the FKI plans to gather member company opinions on the idea.

The sense of urgency was heightened by Samsung Electronics Vice Chairman Lee Jae-yong’s announcement at a National Assembly hearing on the Choi Sun-sil government interference scandal the day before that Samsung planned to stop paying dues and leave the group. SK chairman Chey Tae-won and CJ chairman Sohn Kyung-shik both declined to raise their hands when asked at the hearing to show their opposition to FKI’s dismantlement - suggesting the FKI is now threatened with losing some its major member companies in one fell swoop.

FKI does not appear likely to proceed toward dismantlement of its own accord. Even if it loses Samsung - which pays the largest share of dues at over 40 billion won (US$34.4 million) a year - it still has a 50-story building built in Seoul’s Yeouido neighborhood in 2013. At a construction cost of around 400 billion won (US$344 million), it has generated a lot of debt, but also substantial rental revenue. Disbanding FKI would also require the consent of 75% of more of all employees. The presiding government ministry could revoke its establishment permit for engaging in activities outside its corporation objectives or harming the public interest, but that possibility appears realistically unlikely.

The prevailing view for now is that FKI could attempt to survive as a think tank along the lines of the US-based Heritage Foundation, an idea suggested at the hearing by LG Group chairman Koo Bon-moo. Founded in 1973, the Heritage Foundation is a conservative research institution working for “free enterprise” and “small government” in areas ranging from politics to economy and security. Under this scenario, FKI would shed its identity as a link in government-business collusion and become a center for exploring development directions for the South Korean economy.

But pressure to disband FKI is mounting. In a Dec. 7 commentary, Solidarity for Economic Reform called on it to “begin disbanding procedures voluntarily now that major member companies are repudiating its role.”

“Chairman Huh Chang-soo needs to take action and accept a [disbanding] resolution from member companies,” the group advised.

Hongik University professor Jun Sung-in stressed the importance of defanging FKI. His idea is to add provisions to the Fair Trade Act banning illicit joint action by chaebol, thus preventing them from doing anything to prevent decentralization of economic power. He also suggested it may be possible to weed out a number of FKI’s more political actions by extending bans to offering contributions or any other money or items to politicians or the government, regardless of the nomenclature used.

“I don’t think [FKI] is going to go away on its own even if its major chaebol members leave. We need legal restrictions in place to prevent it from engaging in the kind of behavior [it is currently accused of],” Jun said.

Minjoo Party lawmaker Min Byung-doo has proposed an amendment to the law including the terms suggested by Jun.

By Lee Wan, staff reporter

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