Recent
Korean media has highlighted accounts of Succession moves within the Korean
chaebol such as the Hyundai Motor Group and Samsung. This has included a round of restructuring
with smaller sister companies merging to strengthen key companies within the
Group.
As
I have shared in chats, this comes as no surprise and is part of a long term
strategy built around two words—Work Funneling.
In
this process, most Korean chaebol families
have considerable ownership stakes in many of the privately-held sister
companies.
Next,
the other subsidiaries give these smaller companies a huge amount of business
to increase their revenue. Finally, these smaller companies grow considerably
over time and can move to an IPO or sell some of their holdings to outside
investors.
The
families can then use the revenue stream to buy stock in other key publically
traded subsidiaries and their chaebol’s defacto holding company. This ownership
stake along with circular, cross and pyramid (radiant) shareholdings give them
direct and indirect control over the entire Group.
That
said, despite the chaebols' dominance and influence, they are increasingly
coming under pressure from new laws and regulations designed to increase
financial transparency and accountability of family members.
 |
| Chaebol |
For
instance, the government recently enacted a “deemed inheritance tax,” so that
family members can’t get around South Korea’s inheritance tax laws, and has
revised commercial laws to tighten requirements for reporting internal transactions.
Questions,
comments, concerns? Feel free to ask.
More
to come as I prepare an update on my take on a strengthening Korean Won to US
Dollar, as well as what I perceive as a timeline on this year’s Union strikes.
DS
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