Od Paper on Daewoo Debacle
Organization Development Paper on
Daewoo Debacle a Tale of Riches to Rags
(A Classic example of Chaebol, and its failure)
Submitted to: Prof. Jatin Christie By Sumita Banerjee Roll No. B-04
The Rationale of the choice of topic and the company
In 1999, the Daewoo Group, one of the biggest transnational conglomerates, collapsed, committing a staggering $15.3 billion in accounting fraud in the process, the largest in world history. In 2006, its chairman was sentenced to eight years in prison and a disgorgement penalty of $22.7 billion. Daewoo’s problems, however, did not remain a case isolated to Korea and their mighty, family-controlled conglomerates called “chaebol.” Daewoo’s demise foreshadowed corporate scandals that more recently ravaged confidence in financial markets around the world. Leading financial institutions, investment banks, securities analysts, accounting firms and credit agencies from around the world failed to address its problems. Despite its warnings, policy discussion focusing on the importance of reputational intermediaries and gatekeepers in particular has only recently emerged. The OD Paper deals with the history of Daewoo, a major chaebol, focusing on the implications of its vast corporate governance meltdown, internal corporate governance, particularly its controlling shareholder, boards of directors, officers, employees and banks. Furthermore, the external corporate governance landscape and the failure of reputational intermediaries, gatekeepers and public institutions are explored. It also traces how Korean companies have converged toward a more shareholder-oriented corporate governance model from a state-oriented model. Finally, the ineffective corporate governance system in place at the time of the Asian financial crisis provides a backdrop for the reforms that followed.
2
I. Introduction (Where was the Problem)
The Organization Development Paper provide an insight about the Internal corporate governance of Daewoo,
Daewoo Debacle a Tale of Riches to Rags
(A Classic example of Chaebol, and its failure)
Submitted to: Prof. Jatin Christie By Sumita Banerjee Roll No. B-04
The Rationale of the choice of topic and the company
In 1999, the Daewoo Group, one of the biggest transnational conglomerates, collapsed, committing a staggering $15.3 billion in accounting fraud in the process, the largest in world history. In 2006, its chairman was sentenced to eight years in prison and a disgorgement penalty of $22.7 billion. Daewoo’s problems, however, did not remain a case isolated to Korea and their mighty, family-controlled conglomerates called “chaebol.” Daewoo’s demise foreshadowed corporate scandals that more recently ravaged confidence in financial markets around the world. Leading financial institutions, investment banks, securities analysts, accounting firms and credit agencies from around the world failed to address its problems. Despite its warnings, policy discussion focusing on the importance of reputational intermediaries and gatekeepers in particular has only recently emerged. The OD Paper deals with the history of Daewoo, a major chaebol, focusing on the implications of its vast corporate governance meltdown, internal corporate governance, particularly its controlling shareholder, boards of directors, officers, employees and banks. Furthermore, the external corporate governance landscape and the failure of reputational intermediaries, gatekeepers and public institutions are explored. It also traces how Korean companies have converged toward a more shareholder-oriented corporate governance model from a state-oriented model. Finally, the ineffective corporate governance system in place at the time of the Asian financial crisis provides a backdrop for the reforms that followed.
2
I. Introduction (Where was the Problem)
The Organization Development Paper provide an insight about the Internal corporate governance of Daewoo,