4 Major Korean Business Groups on Their Way Back to FKI after 7 Years

The four major Korean business groups -- Samsung, S.K., Hyundai, and LG -- have begun to return to the Federation of Korean Industries (FKI).

Ahead of the FKI’s extraordinary general assembly on Aug. 22, Samsung will hold a compliance committee meeting to discuss rejoining the organization. Other groups are also weighing their options. It is unclear whether the big four will return to the FKI at the same time. While there is a consensus on the need to return to the FKI, which will be headed by new chairman Ryu Jin, there are different opinions among the business groups about when to return. Moreover, they have different decision-making structures.

“Samsung Group’s compliance committee has decided to hold an extraordinary meeting before Aug. 22,” some insiders of the Korean business world said on Aug. 8. “We understand that Samsung’s compliance committee will hold a meeting to discuss whether to rejoin the FKI before the FKI’s extraordinary general meeting.”

Samsung Group left the FKI in 2016 over the Mir Foundation scandal. But Samsung Electronics, Samsung SDI, Samsung Life Insurance, Samsung Fire, and Samsung Securities have remained members of the FKI’s Korea Economic Research Institute (KERI). If the KFI resolves to absorb KERI at the extraordinary meeting, they will naturally become members of the unified Korean Businesspeople Association (KBA).

During this process, Samsung Group’s compliance officers will discuss and review the procedural legitimacy of its return to the KFI. Under consideration is the scenario that after the compliance committee’s review is complete, Samsung Electronics and the other Samsung affiliates will hold board of directors meetings to vote on their comebacks to the FKI.

Samsung’s move will have a direct and indirect impact on the other business groups. Hyundai Motor Group is positive about its return to the FKI. Five of its affiliates -- Hyundai Motor, Kia Corp., Hyundai Mobis, Hyundai Engineering and Construction, and Hyundai Steel -- are registered as members of KERI. They are reportedly considering returning naturally with no intention of withdrawing from the organization while KERI is absorbed by the FKI and the FKI is reborn as the KBA.

SK Group and LG Group are in no hurry to return to the FKI and are waiting to see how the situation develops. SK Group is reportedly planning to proceed with its return to the FKI regardless of Samsung’s decision. Its affiliates -- SK telecom, SK innovation, and SK networks –- are members of KERI. LG Group plans to take steps after brooding over the matter. This means that the four business groups may return to the FKI separately after some interval.

While the four business groups have begun to mull over when to return to the FKI, they still remain prudent. They need clear rationales for their returns, as their chairmen themselves announced their intention to leave the FKI in 2016. They believe that the FKI needs to do more than just rename itself and elect a new president to make a strong case for their returns, according to insiders of the four business groups.

Some analysts say the scheduled September session at the National Assembly could be a factor. If the four business groups return before the session with the parliamentary inspection of the administration, opposition parties such as the Democratic Party of Korea may call in the heads of the four business groups to the National Assembly as witnesses. This is a big concern for them. “It will be a huge burden on the four business groups if they are embroiled in an unnecessary political controversy regarding their returns to the FKI ahead of the parliamentary inspection,” said an executive at one of the four business groups.

At the extraordinary general meeting, the FKI will discuss changes to its articles of association related to a reform proposal put forward in May and announce its ethics charter. It will also establish an ethics management committee against connections between politicians and businesspeople.