On August 5th, 2012, Korea’s ruling party submitted a revised fair trade bill prohibiting cross-shareholdings in major Korean conglomerates (aka Chaebol groups) with assets over KRW 5 trillion and restricting voting rights of existing cross-shareholdings. Both the ruling and opposing parties have been voicing the need for “economic democratization” beginning with the reform of Chaebol groups for quite some time.
An example of such a structure is the Samsung Group. As of July 30, 2012, Samsung Everland holds a 19.3% stake in Samsung Life Insurance, which owns a 6.2% stake in Samsung Electronics, which has a 35.3% stake in Samsung Card, which, in turn, holds a 5.0% stake in Samsung Everland. This allows Lee Jay Yong, son of Lee Gun Hee, the 25% shareholder of Samsung Everland, to wield control over other group companies. Furthermore, Hyundai Motor Group has an even more complex governing structure consisting of three main rings of cross shareholding. The core of the cross-ownership structure is found in Hyundai Motor, Kia Motors and Hyundai Mobis. The group chairman, Chung Mong Goo, holds a 5.2% and 7.0% stake in Hyundai Motors and Hyundai Mobis, respectively. Hyundai Motor holds a 33.9% stake in Kia Motors, which holds a 16.9% stake in Hyundai Mobis, which, in turn, holds a 20.8% stake in Hyundai Motor.
While the changes are viewed as an undesirable threat by most common controlling structures and an ineffective way of punishing Chaebol owners for their rapid expansion driven by Korean government from a corporation standpoint, the general public seems to believe that any kind of radical fairness measures imposed on Chaebol group owners are positive.