South Korea's conglomerates continue to employ circular intra-group shareholding practices to permit "owners" to run large numbers of affiliates with little or no actual stakeholdings, the country's corporate watchdog said Sunday.
The Fair Trade Commission (FTC) said among the 41 family-owned chaebol groups nationwide with assets in excess of 2 trillion won (US$2.1 billion), owners and their immediate family members held an average of 5.04 percent of all issued shares. Companies in this category are subject to restrictions on mutual investment and loan guarantees.
It also said that not counting the non-voting shares, like preferred stocks, owners control an average 9.17 percent of all voting shares. The report added that with these limited holdings, chaebol owners exercise 6.71 times more voting rights than they would normally be entitled to. "Despite the relatively weak direct hold on their businesses, chaebol owners use cross-shareholding schemes between affiliates to raise the level of votes they actually can manipulate," said Lee Dong-kyu. head of the FTC's competition policy office.
He said of the 14 largest chaebol groups with assets in excess of 6 trillion won, the amount of shares actually in the possession of owners stood at 3.67 percent of the total. The official said if non-voting shares are excluded, owners of these top conglomerates controlled an average of 6.36 percent of all voting stocks. The shares they control by getting affiliates to invest in each other is 7.47 times what would normally be granted if cross shareholding did not take place.
The official said the figures did not change significantly from 2005, when the so-called ownership matrix for South Korean conglomerates was first released.
The FTC started disclosing details on stock ownership of large companies in a bid to enhance market monitoring that could help raise corporate accountability and transparency.
Lee said that of the top 14 chaebol groups, 60.9 percent of owners and their families held no shares in their affiliates other than in a few leading companies. Despite this, the owners exercised complete control over the entire group, he said.
He said the numbers were slightly lower for the 41 top companies, with an average figure of 59.6 percent.
The corporate regulator said while these large companies have been criticized for the disparity between actual stock ownership and exercise of control, the gap for non-listed companies is even greater.
Seoul, July 30 (Yonhap News)
Watchdog says reform of conglomerate ownership structure still sluggish |
