Foreseen Concern
Investment by major business groups, which is very urgent for job creation and domestic consumption increases, is showing no signs of recovery amid the absence of the owners. They are in no position to make important decisions for the same reason, too. In short, owner absences are emerging as another obstacle to the national economy of Korea.
For example, Chairman Jo Suk-rae of the Hyosung Group has stood trial since June this year on allegations of fraudulent accounting. His first son, President Jo Hyun-joon; third son, Vice President Jo Hyun-sang; and many others in the top management have joined the court hearings held on each Monday. Under the circumstances, the group is failing to make investments. The annual investment of Hyosung, one of the main subsidiaries, stood at 411.9 billion won (US$400.3 million) last year, which is 46.8 billion won (US$45.5 million) less than what was previously planned. The company had made an investment of 458 billion won (US$445 million) in 2012.
The CJ Group has put all of its new businesses on hold due to the absence of Chairman Lee Jae-hyun. The group stopped or postponed investment plans worth a total of 480 billion won (US$466.5 million) in the first half of this year, which is equivalent to 35 percent of the investment planned for this year. CJ Korea Express has recently shelved a 20 billion won (US$19 million) investment plan for the establishment of a logistics terminal in Chungcheong Province, and CJ Cheil Jedang failed to take over a foreign biological resource company.
The situation is not much different in the Taekwang Group, either. Former Chairman Lee Ho-jin, arrested and charged with embezzlement, has been in the hospital for three years for liver cancer. Taekwang Industrial’s retention ratio reached 47,197.09 percent last year, 2,466.98 percentage points higher compared to the preceding year.
SK Group Chairman Choi Tae-won, who used to fly to emerging markets such as Latin America and Turkey for joint investment and natural resources development, has been imprisoned as well. The chairman, who is very close to Chinese President Xi Jinping, could also not meet with him during his recent state visit to Korea.
“It is inevitable for major business groups to proceed with large-scale and high-risk investments in today’s business world characterized by a fast-changing environment,” said international business professor Kim Yong-yul at Hongik University, adding, “However, it is very difficult for CEOs to make rapid and important decisions by acquiring the consent of board members.”