In South Korea, a Protester’s Lone Fight Against Samsung

Yes. But don't take my word for it. The lecture I attended was given by Woojin Kim, a professor of finance at Seoul National University's Business School. http://cba.snu.ac.kr/en/faculty?memberidx=60582&major=6&mode...

He advises Korea's National Pension Service (NPS) how to become active in improving corporate transparency for share ownership. In his lecture, he explained that currently, what happens is that a variety of holding companies can by and sell companies, but the nature of who owns the holding companies can be obscured.

So imagine a Donkey Kong level four levels high. Various companies can own companies at any level below it. For a simplified explanation, you may have companies A, B, and C each holding 17% of companies D, E, and F. Then together, they hold 51% of each of D, E, and F, and thereby control all voting rights for those companies. Then companies A, D, and E also hold 13% each of companies G, H, I, and J. Likewise, companies C, F, I, and J each hold 9% of companies K, L, M, N, O, and P. And so on. Easy for all these companies to acquire these shares on the stock market.

But the chaebol at the top of the pyramid holds 51% of each of companies A, B, and C. So the chaebol effectively exercises control over companies K, L, M, N, O, and P without even owning shares in those companies, or owning only a minority percentage of shares. However, this control isn't visible to shareholders of companies K, L, M, N, O, and P, so they don't know that there are major fiduciary duty problems with companies K, L, M, N, O, and P. Multiple the 51% chain from the top to the bottom, you have outsized control of the bottom companies without the controllers actually owning 51% of those companies. Shareholders play a rigged game they are destined to lose, and it's rigged way more than other respectable stock markets (let's limit the discussion to respectable stock markets).

These fiduciary duty conflicts lead to problems where, for example, a company with a really good technology is forced to sell their technology to the chaebol for pennies on the dollar and leave the technology company with nothing of value. Classic corporate raiding, except even more dastardly. Now the professor said that although this happens in Korea, in other countries with more transparent stock markets, that would never happen because the minority shareholders could sue the company and stop the transaction from happening. But even if investigations happen and people get put in jail, the professor noted that there's a solution for that too! It is easy to hire a no-name off the street, make him CEO (remember, they have 51% voting rights, they can do whatever they want), and have him take the fall when the shit hits the fan. The no-name agrees to the deal because he'll be well-compensated for some years in jail, whereas his employment prospects weren't great otherwise anyway. It's hilarious.

The professor advises Korea's National Pension Service and advises them on how they can force companies to be more transparent with their ownership structures to ensure that if these 51% chains allow companies to have outsized control of companies, other shareholders are at least aware of what's going on, and there can possibly be the start of a legal framework to prevent this kind of corporate raiding from happening.

When a chaebol pulls this kind of stuff, yes, not only the average shareholder can lose something from it, the National Pension Service can also lose something from it. And the National Pension Service is supposed to be for the people. Corporations serving themselves at the expense of normal people, what else is new? But Korea's chaebols take it to another level.

South Korea is working to fix problems with its stock market, they know that it's an issue: https://www.pionline.com/governance/s-koreas-600-billion-pen...

There's nothing incorrect about the very last quote in the article: "But it is true that South Korea has been lagging far behind the global standard for corporate governance."

> You know that startups in the United States also don't compete with the sectors where big companies' grip are strong, right?

No, they disrupt them or force them to up their game. If the incumbents don't up their game, they become like the record companies. And if all goes well, they become major players that can compete with the big boys like Google and Slack competing with Microsoft, Microsoft and Apple competing with IBM, and so on. When was the last time you heard of a Korean startup growing up to compete with the big boys? It happens in the US, it happens in China, heck, it even happens in Canada sometimes. Korea?

> There are loads of reinvestment options like real estate, foreign stocks and others if you think ((they)) are controlling the national stock market.

> Then perhaps don't get a stock option?

I think you're missing the point. My point is that I don't think there are many great options in Korea when the chaebol tentacles are everywhere, and foreign stock markets are easier to invest in, especially tax-wise, if you are a resident of those countries.

Also, if you think it's more important to prop up an unprofitable company because it employs people, I don't think you understand how much of a drain that would be on the Korean economy. Countries need strong companies led by competent management that can sustain themselves, not corrupt companies led by incompetent management that will cost the taxpayer money. I suppose you think that the US government bailing out the airlines is a great thing when it wouldn't have been necessary if those companies were run well? https://www.businessinsider.com/taxpayers-bailout-us-airline... Or that the US government bails out banks every 10 years, despite bank executives receiving compensation that only top geniuses should deserve? https://www.newyorker.com/magazine/2020/04/20/the-price-of-t... Why is it the taxpayer that should pay the burden for corporate executives that do a bad job? Taking care of the people, that's what unemployment insurance should be for. The taxpayer shouldn't have to take care of the corporations too. Or should the government fund Kodak to continue to be the size it once was at the expense of taxpayers because it employed so many people, even though it can't figure out how to self-sustain itself as the world changes? Should the Canadian government have used taxpayer money to fund Nortel, even though nobody was buying their network switches?

You seem extremely emotional coming to the conclusion that because I think the chaebols having control is a bad thing, it in turn implies that I think Korea sucks as a country. I never said that Korea's worse than other countries regarding various services and attributes. I said that this chaebol thing was the #1 reason why I wouldn't consider Korea. There are many reasons why I would consider Korea, and maybe in the end, they would outweigh this #1 reason why I wouldn't. Do you not weigh pros and cons when you make your decisions?

Korea does many things well. Streets are super clean. Health care is great. It has the best COVID-19 response out of any country in the world. I am saying that the great progress that Korea has made to date is at risk if Korea lets the chaebols compete unfairly. It puts at risk Korea's ability to finance its current way of life in the future.

This thought of mine derives from Joseph Schumpeter's idea of creative destruction and Clayton M. Christensen's idea of the innovator's dilemma. Companies birthing and dying are a natural cycle of life. If chaebols compete fairly, they should be ripe for disruption. But they don't compete fairly. That is a artifact of Korea's economic history of how it was able to raise itself from poverty. Chaebol companies got special treatment and special rights in order to get them to be the economic engines that brought Korea into the modern age. We can be thankful for what they did in the past. But why let them abuse those privileges in the present? Are they more important than the nation? I hope you would not think that they are.

Never mind that OP is about how it treats workers. The chaebols are unfair about that too. The Korean elite are too afraid of losing their place in society, or too greedy, to give other members of society and competing corporations a fair shake.