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South Korea’s economy and its stock market are dominated by dozens of financially complex, family-run multinational conglomerates that have been central to South Korea’s rise on the global stage, incubating such global brands as Samsung Electronics , Hyundai Motor, and LG Electronics .
But some view “chaebols,” as they are known in Korea, as squelching competition, currying government favor and engaging in secretive “interior” transactions that tend to benefit family members over shareholders.
The Korean government has gone back-and-forth between tightening and loosening regulations on chaebols over the years, and the trend now is toward tightening. The conglomerates are increasingly being reined in with new laws and taxes that seek to hold family members accountable, and to increase the transparency of these behemoth corporations.
How far these laws will go — with a presidential election coming up in December — remains to be seen, says Shaun Cochran, head of research for Korea at CLSA Asia Pacific Markets.
“Things will probably get better, but the chaebol will fight tooth and nail to maintain their position,” Cochran says. “It pays to be skeptical.”
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