Reforming the large business groups to promote productivity and inclusion in Korea

Randall S. Jones

No 1509, OECD Economics Department Working Papers from OECD Publishing

Abstract: Large business groups, which played a key role in Korea's economic development, are still dominant today, especially in exporting. The concentration of economic power creates a number of problems and risks. Ensuring a level-playing field between the business groups, also called chaebols, and SMEs and start-ups is essential to promote innovation and inclusive growth. While the business groups have long been subject to a number of special regulations, a comprehensive strategy is needed. The top priority is to improve corporate governance by strengthening the role of outside directors and protecting minority shareholders. A greater say for institutional investors and more active use of private remedies, such as class action suits, would also be beneficial. In addition, strengthening competition by reducing barriers to trade and FDI and activating a market for corporate control would lead to better performance by the groups. The ownership structure of the groups needs to be improved, notably by phasing out circular shareholding among their affiliates. This Working Paper relates to the 2018 OECD Economic Survey of Korea (www.oecd.org/eco/surveys/economic-survey-korea.htm)

Keywords: chaebols; class action suits; corporate governance; cross shareholding; diversification; inside ownership; Korea Fair Trade Commission (KFTC); large business groups; minority shareholders; outside directors; ownership structure; subcontractors (search for similar items in EconPapers)
JEL-codes: G34 L1 L2 L4 L5 (search for similar items in EconPapers)
Date: 2018-10-10
New Economics Papers: this item is included in nep-ind
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