Hyundai-Kia says it is about to create an advertising company. Why that is worth taking note of is because it appears to be related to the succession process there. The industry is predicting that the president of the advertising company will be either Chung Mong Koo's son Chung Ui Seon (currently president of Kia Motors) or his daughter. Once given the group's advertising work the new business will immediately be a massive advertising company. The money invested will suddenly multiply several times or dozens of times over. The group People's Solidarity for Participatory Democracy (PSPD) is watching closely, saying it looks like the move is a roundabout way to pass on the group's wealth and managerial rights.
The process of inflating Chung Ui Seon's assets in fact began earlier this decade. The automobile, shipping, and construction subsidiaries he is major shareholder of have grown fast. Some do more than W1 trillion in business a year. Thusly increased financial power becomes the capital used in acquiring the stakes needed to inherit the group's managerial rights. It would not be that off to say part of the group's profits are being transferred to him so that with those profits he can then buy part of it.
Management at the country's conglomerates has become much more transparent. The process of passing on managerial rights to the next generation continues to be the same old "emperor-like" management. In other words, cases where the tycoon uses the company for his family's profit are not going away. That, gradually, eats away at a company's competitiveness. It would be hard to criticize someone for passing on his company to his offspring. But that is legitimate when the offspring's management capabilities are proven and they pay inheritance or gift tax.
We do not want to insist that members of owners' families should be completely excluded from management like Soichiro Honda, founder of Japan's Honda Motors, chose to do. But when it comes to passing on managerial rights you wish it would be done in a manner more becoming of a world-class company that represents Korea's image. Should there not be no need to use unreasonable methods to pass on stakes in the group if the children possess proven abilities? The Toyota family of Toyota Motors owns only 1 percent stake in their company but they lead one of the greatest automakers in the world through the right kind of leadership.
The Hankyoreh, 23 April 2005.
[Translations by Seoul Selection (PMS)]
