Economic democratization is becoming a hot-button issue ahead of the presidential election scheduled for December this year. The debate, which began as discussions regarding wealth divide and jobless growth, is expanding to chaebol reform and chaebol bashing.
In this context, Kyungpook National University professor Lee Jung-woo, who is heading the Economic Democratization Committee of the Democratic United Party (DUP), proposed a meeting on October 11 with chairperson Kim Jong-in of the Committee on Public Happiness of the ruling Grand National Party (GNP) and professor Jang Ha-sung, who is in charge of economic policy for independent presidential candidate Ahn Chul-soo.
The chairperson, however, expressed a negative stance regarding the trilateral talks, saying that an agreement reached by the GNP and DUP would suffice. In response, the DUP answered that it would go for a bilateral meeting with the ruling party for legislation for economic democratization during the regular session of the National Assembly.
Under such circumstances, it is expected that related law-making activities will gain momentum once the two parties come to an agreement.
Park Puts Law-abiding Practices before Ownership Structure Reform
GNP presidential candidate Park Geun-hye is laying focus on the prevention of abuse or misuse of economic power. “What matters is the guarantee of equal opportunities, a transparent market and constitutionalism,” she said, adding that she would toughen the punishment of related-party transactions at major corporations, embezzlement and professional negligence of their heads, etc.
She also clarified that she is against new circular equity investment. Although some in the party are mentioning voting rights restrictions with regards to circular equity investments already made, the majority opinion is that it is inappropriate because it can cause confusion. She and her followers are also against a total equity investment ceiling and a stricter separation of financial and industrial capital.
Moon Is Dead Set against Current Chaebol Ownership Structure and Circular Equity Investment
DUP presidential candidate Moon Jae-in is perhaps the most enthusiastic about chaebol reform. “I’ll strive for reforming conglomerates at any cost,” he said on October 11, lamenting, “Their distorted ownership structure, reckless business expansion and unlawful activities are crumbling our market economy.”
His plan is to immediately ban new cross-unit equity investments while removing all previous ones within three years. The equity investment ceiling system would be reinstated so that the 10 leading corporate groups in Korea cannot make investments exceeding 30% of their net assets. He would also lower the upper limit of the debt-to-equity ratio of holding companies from 200% to 100% in order to put a brake on subsidiary establishment, as well as cut bank ownership limit of non-banking subsidiaries from 9% to 4% for the separation of banking and commerce.
Ahn Targets Power-wielding Conglomerate Heads but Opposes Compulsory Prohibition of Circular Investment
“I think we should deal with chaebol-related problems before anything else,” said independent candidate Ahn Chul-soo on October 14, “Economic democratization can only begin when the cocoon of the most powerful and richest, yet the most unjust, is broken.” He continued, “I’ll do my utmost to uproot illicit wealth transfer and inheritance committed by owners of conglomerates, as well as their internal transactions and unfair competition with small-scale businesses, and showing zero tolerance regarding their criminal acts.”
He also announced that he would put restrictions on the ownership shares of financial institutions engaged in the illegal support of subsidiaries, adding that the regulations for the separation of banking and commerce and the debt-to-equity ratio of holding companies would be tightened. However, he was against an equity investment ceiling and the forced removal of already made circular equity investment, although he agreed with Moon in regards to new cross-unit equity investment.
Most entrepreneurs are refraining from commenting on the pledges of the three candidates out of concerns that their argument could backfire with economic democratization emerging as one of the hottest issues. However, a consensus is being reached below the surface that all three are turning to populist measures without adequate knowledge in business management.