Korea’s Stubborn Leviathan
Sentencing the billionaire leader of South Korea’s largest and most powerful company, Samsung Electronics Co., to five years in prison for bribery and embezzlement sent a strong signal the country might finally push through long-promised corporate reform.
But if Korea really wants to clean up the overly cozy and sometimes corrupt relationship between the government and large family-owned business groups, known as chaebol, it will have to look inward to its own national pension fund. Since most workers must contribute to the fund, Korea’s retirement war chest has surged to 22 million contributors and 558.3 trillion won ($495 billion) under management last year, from 189.6 trillion won in 2006, making it the world’s third-largest after those of Japan and Norway.
With big money comes big influence. The NPS holds shares in 888 of Korea’s roughly 2,000 listed companies, including 10 percent of Samsung and 8 percent of Hyundai Motor Co. But instead of using its might to push through corporate governance reforms and help close the valuation gap between Korean companies and those in other countries, it’s been used as a tool in an array of political maneuvers.
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