Seoul Gyopo Guide

Do Not Pass Go.  Do Not Collect $200.
SK Group now-ex-chairman Chey Tay-Won was convicted of embezzlement and ordered directly to jail for 4 yours.  Just wow.  This blog has reported and comment on this issue, many times, in the past.  This isn’t the first time that this has happened in Korea, nor is it the first time that Mr. Chey and SK has become familiar with the Korean penal system.  In fact, the amount of money embezzled is small in scale compared to the past infraction of huge accounting abnormalities at SK Energy, for which  Mr Chey has served a 1 year jail sentence.  It is a little-known fact that the Korean government chose to not prosecute Mr Chey to the fullest extent possible at that time; the most -likely reason is that the government believed that the Korean economy was too weak to take such a massive blow.

One Small Step
This blog has taken risks by pointing out these irregularities.  This money has been taken, in effect, by Mr Chey (alone, without anyone else’s knowledge whatsoever? Uh, no, is a very good guess), from the owners of SK: shareholders of the equity.  Who is that?  Foreign investors, who largely live in jurisdictions where 4 years is small compared to the penalty in their home countries.  Who is that?  Koreans, who own mutual funds or have rights to pensions, that have invested in SK. While it is true that in other nations, this would mean the end of Mr Chey’s professional life, he has survived in the past.

Board of Directors and Influential Shareholders
The only way for those that have taken from everyday Koreans, in such a blatant fashion, is for the Board of Directors and influential shareholders, such as the National Pension Fund and the Korea Investment Fund, to take a stand and prevent this from occurring in the future. Board of Directors should not merely be hand-picked by the founding family of a corporation, and the influential investors must block any such proposal, as is their right. The Korean justice system has stepped forward, and given Boards of Directors and influential shareholders the ammunition required to wage such a war against this type of activity. In this small way, the financial benefits from Korea’s rise in the global economy can be distributed as capitalism intends, and not solely to the few, who don’t share in the financial risk.

Not That Simple
Mr Chey cannot be stupid, of course. Strictly speaking, he is highly educated. The argument can be that the CEO of such a large, successful corporation should be highly compensated, and it is factually correct that a CEO of a corporation in the U.S. or Europe would earn far more than Mr Chey has. That, however, is the for the board of directors and ultimately the shareholders to approve. How Korean companies reach that objective cannot be reasonably foreseen at this time. Mr Chey will have four years to consider how that path can be traveled.