Seeing Chey Tae Won led off to prison was perhaps the last thing South Koreans expected to see this week. The arrest of the former chairman of SK Group, South Korea’s third-largest industrial conglomerate, is a hopeful sign for the nation’s economy.
Koreans aren’t used to the masters of their corporate universe being brought to justice. The family-owned giants, known as chaebol, that tower over their economy have long enjoyed carte blanche for their clubby, non-transparent ways. Chey’s conviction on embezzlement charges suggests things may be changing for the better.
Leaders of other household name companies, including those from Samsung Electronics Co. and Hyundai Motor Co., have received suspended prison terms. Last August, Hanwha Group Chairman Kim Seung Youn was sentenced to a four-year jail term for embezzlement. Earlier this month, Kim was released conditionally on medical grounds to rolled eyes around the nation.
Chey’s arrest could be a fluke, but there’s reason to think it’s a sign of progress. President-elect Park Geun Hye has pledged to tighten sentences for corporate crimes. Reining in the chaebol is vital to making Korea a more vibrant and innovative place. There’s no doubt that corporate names such as Samsung, Daewoo, Hyundai, LG and Lotte helped Korea rise from the ashes of war in the 1950s. But now they are doing more harm than good.
Every economy has a certain amount of innovative oxygen to sustain its dynamism and prosperity. Too much of Korea’s is absorbed by the chaebol. Their dominance not only starves young would-be entrepreneurs of air, but also impedes the creation of a vibrant stable of small and mid-size companies. Breaking this cycle will allow Korea to be more about job creation from the ground up and less about job protection from the top down. Chey’s four-year sentence, should it hold, may be a sign that Korea Inc. really is changing.