'Anti-conglomerate Sentiment Makes Korean Companies Vulnerable to Activist Funds'

Professor Shin Jang-seup of the National University of Singapore pointed out that the conflict between Samsung C&T and Elliott Management is because of the Korean government’s anti-conglomerate policy, characterized by the most restrictive fair trade act in the world and complex procedures regarding the succession of management rights.

“Even the Samsung Group, the largest business group in Korea, has become vulnerable to activist funds due to the government’s inflexible enterprise policy,” the professor remarked at the June 25 seminar in Seoul hosted by the Citizens United for a Better Society, adding, “Korea is one of the few countries where a single voting right per share is forced by commercial law, too.”

The professor mentioned that, in advanced economies, fair trade regulations come into play only when collusion, abuse of status, or the like causes specific side effects such as monopoly or restriction of competition, whereas enterprises in Korea can be subject to regulations just because of the number of subsidiaries or the size of assets, as the fair trade act of the country includes restrictions on business consolidation and economic power concentration.

“Besides, the succession of control over a company via its foundation is not easy in Korea, due to the government regulations with regard to the foundation’s stockholding, and this has caused companies to become unable to protect their management rights and short-term speculative funds to have their own way,” he continued, adding, “Under the circumstances, the policy should be overhauled so that protective measures such as the poison pill and dual-class voting rights can be adopted.”