Daewoo
Asian Corporate Governance Case Studies Series [Korea]
Anatomy of an Asian Conglomerate: The Rise and Fall of Daewoo and the Formation of Modern Corporate Governance
Joongi Kim Graduate School of International Studies Yonsei University, Seoul, Korea
Hills Governance Center at Yonsei University
50
Asian Corporate Governance Case Studies Series [Korea]
CONTENTS
I. INTRODUCTION II. ASIAN CONGLOMERATES & KOREAN
CONGLOMERATES 1. Business and Government Relations 2. Ownership Structure 3. Related-Party Transactions and Self-Dealing 4. Accounting Fraud and Loan Fraud 5. Financial Structure
III. CONCENTRATED DECISION-MAKING AND THE
FAILURE OF OVERSIGHT 1. Concentrated Decision-Making 2. Inadequate Oversight by Representative Directors, Boards of Directors and Statutory Auditors 3. Shareholders and Stakeholders IV. CONCLUSIONS REFERENCES
Hills Governance Center at Yonsei University
51
Asian Corporate Governance Case Studies Series [Korea]
LIST OF TABLES <Table 1> <Table 2> <Table 3> <Table 4> <Table 5> <Table 6> Daewoo Group Intraconglomerate Ownership Improper Internal trading and Subsequent FTC Subcharge by Group Accounting Fraud Debt/Equity Ratio of Top Four Chaebols Daewoo Group’s Domestic Borrowings Director and Officers Liability Insurance Policies in Korea
LIST OF CHARTS <Diagram 1> Daewoo Group’s Ownership Structure in 1997
Hills Governance Center at Yonsei University
52
Asian Corporate Governance Case Studies Series [Korea]
I. INTRODUCTION 1
Many Asian companies collapsed during the financial crisis in 1997 and 1998, but none compared to the demise of the Daewoo Group, imploding under the weight of 22.9 trillion won in accounting fraud. The Daewoo saga provides an understanding of the state of corporate governance in a major Asian conglomerate. As later discovered, weak corporate governance of conglomerates and their vast network of companies had a devastating effect when the 1997 financial crisis hit. Corporate governance reforms since then
Anatomy of an Asian Conglomerate: The Rise and Fall of Daewoo and the Formation of Modern Corporate Governance
Joongi Kim Graduate School of International Studies Yonsei University, Seoul, Korea
Hills Governance Center at Yonsei University
50
Asian Corporate Governance Case Studies Series [Korea]
CONTENTS
I. INTRODUCTION II. ASIAN CONGLOMERATES & KOREAN
CONGLOMERATES 1. Business and Government Relations 2. Ownership Structure 3. Related-Party Transactions and Self-Dealing 4. Accounting Fraud and Loan Fraud 5. Financial Structure
III. CONCENTRATED DECISION-MAKING AND THE
FAILURE OF OVERSIGHT 1. Concentrated Decision-Making 2. Inadequate Oversight by Representative Directors, Boards of Directors and Statutory Auditors 3. Shareholders and Stakeholders IV. CONCLUSIONS REFERENCES
Hills Governance Center at Yonsei University
51
Asian Corporate Governance Case Studies Series [Korea]
LIST OF TABLES <Table 1> <Table 2> <Table 3> <Table 4> <Table 5> <Table 6> Daewoo Group Intraconglomerate Ownership Improper Internal trading and Subsequent FTC Subcharge by Group Accounting Fraud Debt/Equity Ratio of Top Four Chaebols Daewoo Group’s Domestic Borrowings Director and Officers Liability Insurance Policies in Korea
LIST OF CHARTS <Diagram 1> Daewoo Group’s Ownership Structure in 1997
Hills Governance Center at Yonsei University
52
Asian Corporate Governance Case Studies Series [Korea]
I. INTRODUCTION 1
Many Asian companies collapsed during the financial crisis in 1997 and 1998, but none compared to the demise of the Daewoo Group, imploding under the weight of 22.9 trillion won in accounting fraud. The Daewoo saga provides an understanding of the state of corporate governance in a major Asian conglomerate. As later discovered, weak corporate governance of conglomerates and their vast network of companies had a devastating effect when the 1997 financial crisis hit. Corporate governance reforms since then
References: Judgment of Dec. 18, 2003, Constitutional Court, en banc, 2002 Heonga 23 Panryejip [Court Decisions] 15-2, 393-405. Judgment of May 28, 2004, Seoul District Court, Civil Affairs 22nd Division, 2000 Gahap 78865.