NPS set to wield influence on business management

National Pension Service, the country’s largest institutional investor, is not going to cast a favorable vote for Chung Mong-koo, Hyundai Motor Chairman, and Park Yong-sung, Doosan Infracore Chairman, in its board meetings when the next sets of board members are chosen.

The agency, holding a 4.56 per cent share in Hyundai Motor and 2.92 per cent in Doosan Infracore, cites the two business moguls’ crime records of embezzlement as the main reason for the decision. The regulatory book of the agency stipulates that it can oppose to the appointment of anyone as a board member who damages corporate values or infringes upon shareholder’s rights.

Many believe that its shares are not enough actually to cast the two chairmen off the board but the decision is believed to ring an alarm bell in many Korean chaebols for better management and exert influence onto other shareholders in their decision making.

Samsung heir-apparent cleared of breach of trust

The Samsung special inquiry counsel yesterday acquitted 28 defendants including Lee Jay-yong, the heir apparent to Samsung Group, of charges of breach of trust, citing lack of evidence.

The defendants, comprised of employees of 9 Samsung affiliates, were accused by a civic group of buying back Lee’s shares for three days from Mar 27 to 29 back in 2001 of four loss-making internet start-ups run by the junior Lee , thereby incurring financial losses to their companies.

The investigation team concludes the share-buying was proceeded with a ‘normal decision making process’ within those companies, which does not seem subject to breach of trust, and the claim that Samsung affiliates were forced to buy the shares in order to financially save Lee Jay-yong is not convincing, given those internet companies have been in the black since 2004.

Samsung Group made a short statement saying it was a relief that any misunderstanding related to this case could be cleared.

BAI launchs a sweeping audit into state agencies and firms

The Board of Audit and Inspection has started a vigorous audit into 31 major public companies and agencies including KEPCO, Korea Gas Corporation, and Korea Racing Authority, a move that has been widely expected since the inauguration of Lee Myung-bak who stressed the importance of government overhaul.

The state agency allocated 240 personnel on the mission of tracking down on lax management and unnecessary spending, and excessive in-house welfare system in order to enhance work efficiency in the public sector.

A senior official from the agency, criticizing a widespread delinquent management in the state-run sector, said “the BAI has been inspecting public firms since 2004 but lax management of some companies remains unchanged…In order to spur competitiveness, it is necessary to reform, which has been however blocked due to organizational self-interests.”

- The government is set to gradually reduce corporate taxes by as much as 5 per cent by 2013 to enhance business investment, a measure that Seoul expects sees a W8.6 trillion worth of tax cut.

- The Ministry of Strategy and Finance says it expects this year’s economic growth to be around 6 per cent and to create 350,000 new jobs, the projection that is downsized from the previous goal of an annual growth rate of 7 per cent and 600,000 new jobs. But it admits the goal is not easily achievable, by saying it ‘tries to accomplish the goal,’ not definitely saying that it will.

- A group of 15 chicken-meat producers have recently filed an appeal at the Fair Trade Commission to ask the agency to allow price-fixing amid slowing business environments. There is an exception to the law that lets companies temporarily collude to fix prices, but in the last ten years there has been no such case that is permitted by the state agency.

- Kim Sung-ho, NIS appointee, is reported to have established a foundation called ‘Happy World’ and collected a 1.5 bn worth of donation from 20 businesses right after he retired from Justice minister in last December. The donation came while rumors swirled that he would be appointed as new NIS head.

- This year’s government policy on the property market is to stabilize the market and assure a sound supply of housing, which does not see a dramatic change from the goals of the previous government. It is also hard to expect any deregulation for the time being for the sake of market stability.

- A total of household debts surpassed W630 trillion last year, which translates into a debt of W38.42 m per household, says a report released by Bank of Korea. Households’ bank loans decreased a lot to W17.4 trillion last year from W40.7 trillion in 2006 due to loan restraints, but credit cards debt jumped by W3.7 trillion from a year earlier.

Business leaders' hotline with president

President Lee, elected on the promise to reinvigorate the economy by boosting a business-friendly environment to encourage investment, is said to soon establish a hot-line with which he can communicate with business leaders at any time of the day.

An official of the presidential house told “we will soon set up a mobile phone for the president to directly talk to business people whenever it is and wherever he is.” They decided to go with a mobile phone, not a fixed line in the presidential office, because of president’s order that he should be able to get a call even at home.

This latest move was one of his campaign pledges during the electioneering.

Firms negative on economy

Korea Employers Federation revealed in its survey that about half of 418 domestic companies paint a bleaker picture for this year’s economic conditions than when they drew up the 2008 management plan later last year, mainly due to economically negative factors such as rising raw materials and oil prices and worries on world economic recession. 29.6 per cent of companies surveyed say they plan to scale down this year’s employment while only 16.7 per cent will expand the plan. Meanwhile 52.6 per cent consider pump-priming measures to be necessary for reviving the economy.

New cabinet make-up reveals more pragmatism

The LMB cabinet is comprised of mainly former bureaucrats (57 per cent), followed by scholars with 18 per cent. The so-called ’386-generation’ who made up an important part of the early Roh government is conspicuously absent in this new one, with only one cabinet member being considered one, the fact that demonstrates the new government will pursue more ‘pragmatism,’ rather than ‘idealism.’ ‘The 386-generation was in the vanguard of student movements for democracy in previous military governments in the 1970 and 1980s.

FTC established international cartel team

The Fair Trade Commission established an ‘international cartel team’ aimed at heightening global cooperation to combat with international cartel of price and supplying collusion. An official from the cartel watchdog said “an international cartel case has been further down in the priority list compared to a domestic one due to lack of personnel, and it usually takes years to conduct and study one case, but now that the exclusive team is formed, we expect market supervision and analysis will be much strengthened, and consequently we can spot more illegal cases.”

FSS to make early announcemnet for accounting changes

The Financial Supervisory Service will make early public announcement for impending changes to the accounting standards in drawing up a balance sheet. It said “all listed companies should adopt the international standard in their balance sheet from 2011… so we are considering earlier public announcement of revised accounting standards to prevent any confusion or damage arising possibly from the changes.”

Samsung formed up a countermeasure team

Samsung Group is said to have formed up a special task force for damage control, if any, from the decision by Sony to construct the 10th generation LCD factory, not with Samsung but with Sharp. The special team is expected to thoroughly study possible ripple effects of the ‘break-up’ with Sony, a future business partner replacing it, and relations normalization with its former Japanese partner.

- The government decided in today’s cabinet meeting presided over by President Lee that it scrapes the existing investment cap on chaebol within the first half of this year and reduces oil tax by 10 per cent by this May.

- The court dealing with the KEB case said it would wrap up the case within this year. The judge said “it was the case of 2006 and is a very topical one, so we plan to wrap this case up within this year by finishing questioning witnesses by this fall.”