Korea's major airlines in trouble over 'owner risks'
Arirang News
2019-04-19
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국내 양대 항공사 오너리스크에 휘청…한국경제 영향 및 필요한 견제장치는?
Korea's two biggest air carriers are facing public backlash for a slew of bad decisions and illicit activities by the heads of the firms.
Our Ko Roon-hee explains on what this reflects about the Korean economy.
Major airlines in South Korea are facing headwinds mainly from the growth of owner risks.
Asiana Airlines has been put up for sale... to try and solve its parent company's liquidity crisis.
Former Kumho Asiana Group Chairman Park Sam-koo was criticized for decisions including the acquisition of Daewoo Engineering and Construction in 2006 and Korea Express in 2008,... which required massive borrowing.
Korean Air has been going through hard times as well.
The late Cho Yang-ho's family, who were executives in the company, have been criticized for behaving like feudal lords and abusing their subordinates, a practice known locally as "gapjil."
These problems can negatively affect a company's reputation, its share price and its profits.
Experts say "owner risk" is especially serious in Korea.
"There is no separation of ownership and management in Korea. Therefore, members of the board are highly affected by the owners. For instance, if owners make decisions related to management, it's difficult for the board of directors to play a 'check or monitor' role."
Because Korea's economy depends heavily on large conglomerates, experts say changes are needed as soon as possible.
One suggestion is to scout professional managers... and entrust company management to them, like in the U.S.
If this is not immediately feasible, experts say there are other measures as well.
"If stewardship codes work well, then institutional investors like the National Pension Service can play a role in preventing problems related to owner risk. More importantly, we need measures to protect non-controlling shareholders."
Although experts agree that the concentration of economic power helped South Korea develop at such a fast pace in the past, they emphasize that changes are needed for a strong economy in the long run. Ko Roon-hee, Arirang News.
Korea's two biggest air carriers are facing public backlash for a slew of bad decisions and illicit activities by the heads of the firms.
Our Ko Roon-hee explains on what this reflects about the Korean economy.
Major airlines in South Korea are facing headwinds mainly from the growth of owner risks.
Asiana Airlines has been put up for sale... to try and solve its parent company's liquidity crisis.
Former Kumho Asiana Group Chairman Park Sam-koo was criticized for decisions including the acquisition of Daewoo Engineering and Construction in 2006 and Korea Express in 2008,... which required massive borrowing.
Korean Air has been going through hard times as well.
The late Cho Yang-ho's family, who were executives in the company, have been criticized for behaving like feudal lords and abusing their subordinates, a practice known locally as "gapjil."
These problems can negatively affect a company's reputation, its share price and its profits.
Experts say "owner risk" is especially serious in Korea.
"There is no separation of ownership and management in Korea. Therefore, members of the board are highly affected by the owners. For instance, if owners make decisions related to management, it's difficult for the board of directors to play a 'check or monitor' role."
Because Korea's economy depends heavily on large conglomerates, experts say changes are needed as soon as possible.
One suggestion is to scout professional managers... and entrust company management to them, like in the U.S.
If this is not immediately feasible, experts say there are other measures as well.
"If stewardship codes work well, then institutional investors like the National Pension Service can play a role in preventing problems related to owner risk. More importantly, we need measures to protect non-controlling shareholders."
Although experts agree that the concentration of economic power helped South Korea develop at such a fast pace in the past, they emphasize that changes are needed for a strong economy in the long run. Ko Roon-hee, Arirang News.
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