1. Korea’s Chaebol: Problems of Governance John Ohnesorge University of Wisconsin Law School February 16, 2004

2. “Korea, Inc.” Authoritarian politics High-speed, export-oriented growth Blurred line between State and private sector Questionable role for law Constitutional law, individual rights Administrative law Judicial independence

3. 1987 Democratization New Constitution Constitutional Court created (Kukje case) Democratic Presidential Election (Roh) Legal reforms (especially under President Kim, Yong-Sam) –Administrative Law –Anti-corruption

4. 1997: Asian Financial Crisis “IMF Crisis” to Koreans Korean Won collapses Stock market collapses Debt crisis IMF Loans required, come with demands for change –Higher interest rates (bankruptcies; unemployment) –Deregulation; liberalization –Reform/rejuvenate dormant bankruptcy law –Allow foreign investment in financial sector Foreign Interests Reflected in IMF demands?

5. Korea’s Response (5 years) IFIs: “Don’t try to export your way out!” Korean response: Export, export, export Growth returns Repay IMF loans Rationalize Chaebol (“Big Deal” program) Adjust to new structural realities –More liberal financial system –Greater foreign presence –More rights-oriented society

6. Chaebol in “Korea, Inc.” Readings: Woo and Lee (West “Megafirms”) Developmental Function? Political Function? Who Governed the Chaebol? –Shareholders? (which shareholders?) –Product Markets? (local v. export) –Financial markets? –Banks? –Government?

7. Chaebol and 1987 Reading: West How has democratization affected Chaebol? What is Jim West’s assessment of the Kukje case? What are implications of Kukje for Korean governance?

8. Chaebol and the IMF Crisis Can they be blamed? –Non-transparent bookkeeping? –Too much debt? –Debt cross-guaranteed w/in Chaebol? –Too much political influence, block reform? –Management too personalistic, not “Market rational”?

9. Chaebol and Corporate Governance Reading: Kim & Kim What’s wrong with corporate governance of the Chaebol? What is PSPD, and what are its goals? What is overall change sought in corporate governance? Pros and/or Cons of PSPD agenda? Challenges to Korean political system?