Finding the "right" lawyer has never been difficult for the nation’s largest conglomerates. Hwang Jae-seong, an outside director of Samsung Electronics, built his career at the National Tax Service and is now an advisor for Kim & Chang, the nation’s largest law firm. Kim & Chang is a legal representative for Samsung Group in [pending criminal lawsuits in connection with illicit campaign financing,] along with class-action lawsuits and issues arising from shareholder meetings. Another outside director at Samsung Electronics also works for Kim & Chang. When creditors of Samsung Motors sought damages against Samsung Group, lawyers from Bae, Kim & Lee handled the case for the automobile giant; one of the lawyers is an outside director of S1 [what is S1?] and another is an outside director of Cheil Communications, Samsung’s [Motors? Group?] advertising division. The legal representative for Samsung Group in the lawsuit is an outside director of Samsung Electro-Mechanics.
The twisted web of connections at the nation’s largest conglomerates does not only involve "advisors" and "outside directors," but can go back to those halcyon school days, as well. Three of the outside directors at Hankook Tire went to Gyeonggi High School and graduated from the economics department of Seoul National University, the same high school and college as Cho Yang-rae, major shareholder of Hankook Tire. Two outside directors of Dongyang Major, a unit of Dongyang Group, were seniors of Hyun Jae-hyun, the group’s chairman, at Gyeonggi High School, Seoul National University, and the prosecutor’s office. Five out of six outside directors at Hyosung Group attended the same high school as Cho Seok-rae, chairman of the group.
In fact, four out of 10 outside directors of the nation’s large industrial conglomerates lack independence from management due to their personal connections. A survey of 616 outside directors at 59 industrial conglomerates, conducted by the Center for Good Corporate Governance (CGCG), showed that 37.5 percent, or 231 directors, have certain ties of interests with management or major shareholders.
School ties were the most common type of conflicts of interests in the survey. Of the 231 outside directors, 46.8 percent, or 108, were seniors, juniors or classmates with major shareholders or the management.
Another 30.75 percent, or 71 outside directors, are former executives of their companies or incumbent executives of affiliates. This case is rampant at Lotte, Hanwha, LS, Hite Brewery, Hanjin Heavy Machinery, and Youngpoong Group. Lawyers and advisors at law firms representing Samsung, Doosan, and Hyundai Motor Group hold outside directorships in affiliates of the groups.
In one case, Daesung Group chair Kim Young-hoon appointed Sohn In-woong, the pastor of his church, as an outside director of the group’s Daegu City Gas.
Attorney Kim Seon-woong, head of CGCG, said, “The biggest problem is a lack of willingness among publicly listed companies to improve their corporate governance.” In addition, Mr. Kim said loopholes in legal and institutional regulations for the naming of outside directors are one of the major reasons such corporate favoritism has been allowed to flourish.
[News Analysis] Web of connections surrounds large S.K. firms |
