Word: chaebols
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...drive sales, softening both profit margins and its brand image. For example, LG sees 5% profit margins on its mobile phones; Samsung earns in excess of 20%. Nor does it help that LG Electronics is a member of one of South Korea's mammoth, family-controlled conglomerates, called chaebols, which are infamous for mysterious and convoluted business practices. In February the company broke a promise to investors by pledging $130 million to buy bonds of a nearly bankrupt affiliate, credit-card issuer LG Card. Kim says his company joined in because a failure at LG Card would have damaged...
...payoff for decades of commercial consanguinity has varied from nation to nation. For more than 30 years the impoverished Indonesian archipelago was run as a mom-and-pop operation by the ruling Suharto family. In contrast, South Korea's economic miracle was engineered by some 30 ambitious conglomerates called chaebol, almost all family controlled, while the commercial drive of industrious Hong Kong and Taiwan emanated from anthills of small, adroit family shops that promiscuously abandoned products and premises whenever better opportunities came along...
...proof, look to South Korea, where conglomerates have long been "run like ancient tribes to maximize political power for the leading families," says Morgan Stanley economist Andy Xie. That changed with the '97 crisis, which caused the breakup of Hyundai Group and others and fostered an anti-chaebol backlash. Business life today in South Korea is marked by a steady stream of special investigations into chaebol-related bribery, stock manipulation, illegal campaign contributions, tax evasion and fraud. Chey Tae Won, nephew of the founder of SK Group, was jailed last year for accounting and stock fraud. Chung Mong...
...Even the most bullish Korea watchers say the country still has much to do to streamline its corporations. For decades, Korea's economy was driven largely by government policy. Today, there's a laissez-faire shift and the adoption of free-market principles. But big family-run chaebol are still uncomfortable with the notion that shareholders should have a say in the company; transparency and disclosure still fall short of world standards. Corporate debt is still too high and better bankruptcy laws?now in the planning stage?are needed to speed the disposal of unprofitable companies. Unfortunately there are still...
...Electronics whose nifty DVD players are already a must-have item for U.S. consumers. As the world's biggest semiconductor maker, the company would also get a boost from a pickup in the U.S. high-tech sector. Other beneficiaries: the myriad suppliers to Korea's shipbuilders, carmakers and other chaebol exporters. Korea's dependence on the U.S. market has lessened, but it is still a big part of the picture...