Monday, February 4, 2013

Did I Rip You Off? Oh Pardon.

SK Chairman Chey Tae Won heading to jail

Election time in Korea, as elsewhere, is a time when some – usually the incoming parties - talk tough and others – the outgoing – settle scores while they still can. In this regard, two major news items have converged in the past few days to ignite a firestorm of public animosity against Korea’s rich and powerful. First, the outgoing President, Lee Myung-bak, has just granted presidential pardons to 55 people, many of whom were senior political allies who had been jailed for corruption and bribery. The incoming President Park Geun-hye, who was elected to office in December partially on the promise to deal with the continually growing wealth disparity between the chaebol-related Haves and the Have-nots, has duly expressed her outrage at this outsized display of magnanimity.

Secondly, Chey Tae Won, the charismatic Chairman of SK Corporation, has been ordered to jail by a judge for a US$45 million embezzlement charge that he has been on trial for during the past year. He is appealing the case and his four-year jail term; therefore, his guilt is not yet finally established. However, it is clear that Mr. Chey seems to have been untidy with the governance of Korea’s 3rd largest chaebol, relying on his political clout to clean up any mess. In 2003, he was convicted of a bookkeeping fraud, but had his sentence suspended. The magnanimous President Lee then pardoned him in 2008.

This situation hands the incoming President Park an early test case to prove her resolve to be Ms. Clean-up and a champion of “economic democracy.” It is unusual for someone of Mr. Chey’s stature to be tossed behind bars while the case is on appeal. However, these are unsettled, angry times in Korea politically. The income gap has noticeably widened over the past five years – the top 20% of society now make 7.8x more than the bottom fifth. Furthermore, the large chaebol have a habit of squeezing the life out of small-medium sized businesses, while not providing employment and security to the masses. Studies show that, in 2010, the top 30 chaebol accounted for roughly 42% of the economy’s output, but only employed 6% of the country’s workforce.

With the touchy public sentiment against Korea’s power elite, President Park will think twice about using her influence to go easy on Mr. Chey. The masses may not be so pardoning towards her.

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