Return to crony capitalism? Korea’s big 4 chaebol eye rejoining FKI

Posted on : 2023-08-10 16:58 KST Modified on : 2023-08-10 16:58 KST
Samsung, SK, Hyundai Motor, and LG all withdrew from the lobbying group seven years ago in the wake of the influence-peddling scandal under Park Geun-hye
SK Group Chairperson Chey Tae-won, FKI acting chairperson Kim Byong-jun, Samsung Electronics Executive Chairperson Lee Jae-yong, Korea Federation of SMEs Chairperson Kim Ki-mun, LG Group Chairperson Koo Kwang-mo and other heads of Korean conglomerates and business federations applaud following President Yoon Suk-yeol’s address at a banquet for business leaders held in Hanoi on June 22. (Yonhap)
SK Group Chairperson Chey Tae-won, FKI acting chairperson Kim Byong-jun, Samsung Electronics Executive Chairperson Lee Jae-yong, Korea Federation of SMEs Chairperson Kim Ki-mun, LG Group Chairperson Koo Kwang-mo and other heads of Korean conglomerates and business federations applaud following President Yoon Suk-yeol’s address at a banquet for business leaders held in Hanoi on June 22. (Yonhap)

Samsung and three other Korean chaebol are speeding up efforts to rejoin the Federation of Korean Industries (FKI), which they withdrew from in the wake of the influence-peddling scandal under President Park Geun-hye. The conglomerates are seriously considering returning to the FKI just six months after a ruling party politician was named its chairperson. The moves are arousing criticism and concerns that the unholy alliance between the conservative government and these megacorporations is being revived.

According to accounts Wednesday from the FKI and business world insiders, South Korea’s four major groups — Samsung, SK, Hyundai Motor, and LG — are currently holding board meetings and internal discussions on rejoining the federation.

On July 19, the FKI sent official messages to the four groups asking them to rejoin, with responses to be given before an ad hoc general meeting scheduled for Aug. 22.

The federation has been waging an all-out campaign to get the four groups to rejoin, alongside its plan for its integration with the Korea Economic Research Institute (KERI) and relaunch under a new Korean name.

The Samsung Group has been swiftest to respond to the FKI’s request to rejoin. Five of its affiliates, including Samsung Electronics, officially announced plans to seek a judgment from the group’s legal compliance oversight committee following discussions on the matter shortly after the FKI’s announcement was sent out.

Samsung said the current plan was to “make a final decision at a board meeting based on the determination of the legal compliance oversight committee.”

An ad hoc meeting of that committee is scheduled to take place before the scheduled FKI general meeting on Aug. 22. Lee Chan-hee, the committee’s chairperson and a former president of the Korean Bar Association, explained, “The date hasn’t been chosen yet, but we are planning to move up the ad hoc meeting [on whether to rejoin the FKI].”

Legal compliance oversight committee recommendations are not mandatory — but if individual affiliates choose to pursue management activities that go against the recommendations, they are obligated to hold a board meeting and make an official announcement. In effect, it is the committee that holds the key to Samsung’s return to the FKI.

Samsung’s reaction is being seen as unusually swift. In addition to the potential for creating public relations issues, the other groups are very likely to adjust their own actions depending on what Samsung decides to do.

“If Samsung had no intention of rejoining the FKI, it would have indicated its unwillingness without asking the legal compliance oversight committee for a determination,” said a senior executive at one company, speaking on the condition of anonymity.

“The legal compliance oversight committee is probably going to lean toward rejoining too,” they predicted, suggesting that Samsung is using the committee’s procedures as a way of establishing a rationale for returning to the federation.

But Lee Chan-hee recently hinted at some opposition to Samsung rejoining the FKI, insisting that the matter would require “careful consideration.”

The other groups besides Samsung said that no decision had yet been made, although they suggested that they recognized a need to return.

“Given the global protectionist trade environment and the competition between the US and China, this is a time when cooperation between the government and corporations is extremely important,” said a senior official at one of the four big groups.

“I think we need a ‘think tank-style’ business group to represent the companies’ interests on trade issues,” they added.

In a March 2022 press conference, SK Group Chairperson Chey Tae-won bluntly said he had “no plan to join” the FKI, explaining that “none of the conditions for rejoining have currently been met.”

But when asked about the matter at a forum in Jeju last month, his reply was a complete 180.

“I hope to see the FKI succeed, and if there is a way to help, we will help,” he said at the time.

Chung Eui-sun, the chairperson of Hyundai Motor Group, has been taking part actively as a speaker in public talk events organized by the FKI to show off its reforms. This stands in stark contrast with his previously dismissive remarks on the issue of rejoining the federation, which he said would be “neither justified nor beneficial.”

For these reasons, many business world insiders are predicting that the four groups’ return to the FKI is only a matter of time, even if the decision isn’t made at the upcoming general meeting.

“We haven’t set the schedule for rejoining in stone,” an FKI official insisted.

“Since the general meeting is when the federation gets a new name and chairperson, we’d prefer it if the four groups were there for that,” they explained, adding that it would be “no big issue if they rejoin later on.”

The procedure for rejoining the FKI is also expected to be a source of controversy. Unlike Samsung, the other three groups have not announced any definite plans on whether the question of rejoining will be addressed at a board meeting.

Typically, board discussions are seen as necessary in cases where donations or support are provided above a certain amount. If an official board meeting vote is held, the matter could run into some unexpected problems, including objections from outside directors.

“It seems like there ought to be some process of expressing views officially, even if it’s not a board meeting,” an official with one of the four big groups said.

“Even if the decision on whether to rejoin isn’t made right away, I expect there to be some discussions in terms of the four groups acting in concert,” they suggested.

The shift in the four groups’ approach became noticeable in the wake of Kim Byong-joon’s arrival as the federation’s acting chairperson this February. Kim previously led Yoon Suk-yeol’s campaign for president.

Since Kim’s arrival, the FKI has played a leading role in deciding the makeup of business delegations during presidential visits to Japan and the US — the result of the federation being given back the role of voicing the requests of the business world, which had been performed by the Korea Chamber of Commerce and Industry (KCCI) during the Moon Jae-in administration. Many business world observers began questioning whether the FKI’s comeback was a reflection of the presidential office’s wishes.

“The very fact that Kim Byong-joon was appointed as FKI chair reads as a message from the presidential office,” said Jun Sung-in, a professor of economics at Hongik University.

Since taking office, Yoon has advocated pro-business policies, declaring that “the government is business.” The business world has been arguing along similar lines, stressing that the government and business represent “one team” and that an organization like the FKI is essential for organic cooperation.

“The changes in the global economy may necessitate close cooperation with the government,” said Kim Woo-chan, who serves as director of Solidarity for Economic Reform and is a professor at Korea University.

“Those responsibilities and roles are something that need to be adequately processed and handled by economic groups based on roles and areas, such as the KCCI or Korea Enterprises Federation, rather than chaebol interest groups,” he added.

Jun said, “This pattern where an administration with weak governing capabilities gets a boost from a chaebol-style national strategy, while the chaebol get to secure concessions and solve their succession problems in exchange, is the typical form of government-business collusion that has kept happening over the years.”

“They’re reviving a platform for the Yoon Suk-yeol administration and the chaebol to make tradeoffs in terms of unfair interests,” he concluded.

Many within the political world are also expressing concerns.

On Wednesday, a statement on the matter was issued by six Democratic Party lawmakers on the National Assembly’s National Policy Committee: Hwang Un-ha, Kang Hoon-sik, Kim Han-kyu, Kim Jong-min, Lee Yong-woo, and Oh Gi-hyoung.

“If [the FKI] aspires to become a ‘think tank’ model of business group, there is no need for it to fixate on having the four major groups rejoin,” the statement insisted.

“Lee Jae-yong [of Samsung] and the others should honor the promises they made in National Assembly hearings to ‘no longer participate in FKI activities,’” the lawmakers said.

Signs of logrolling with the administration are already in evidence.

In March, the FKI spearheaded the creation of a “Korea-Japan future partnership fund” with the Japan Business Federation (Keidanren).

This was a proactive response to the measures presented by the administration as part of its “solution” to the matter of compensating victims of forced labor mobilization during the Japanese occupation. In effect, the FKI was dragging businesses into a conflict over matters of foreign affairs and national security.

“The top four conglomerates rejoining the FKI will be the finishing stroke of the blatantly pro-chaebol policies pursued by the Yoon administration,” commented Park Sang-in, a professor at Seoul National University’s Graduate School of Public Administration. “It’s no different from a declaration that they plan to carry out influence-peddling once more by reviving the FKI with crony capitalism.”

Park added that this amounted to “Yoon forgetting where he came from as the man who prosecuted the [Park Geun-hye] influence-peddling case.”

By Kim Hoe-seung, senior staff writer; Ock Kee-won, staff reporter

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