Samsung Electronic Corporation: Governance of Chaebols
CASE:
SAMSUNG ELECTRONIC CORPORATION: GOVERNANCE OF CHAEBOLS
Copyright: Prof. Florencio Lopez-de-Silanes
Professor Florencio Lopez-de-Silanes and Rakhi Kumar, Yale MBA02 prepared this case as the basis for class discussion rather than to illustrate the effective or ineffective governance of an organization.
Prof. Florencio Lopez-de-Silanes INTRODUCTION
Case: Samsung Electronics
Prior to the Asian currency crises, South Korea was an investment destination for several institutional investors and emerging market funds. Throughout the early nineties the country experienced an economic boom. South Korean conglomerates, locally know as chaebols, had diversified into various industries from cars to microchips. Samsung Electronics Corporation (Samsung Electronics), a rising star in the Samsung Chaebol was considered to be a high growth company. However, in 1997, the Asian currency crises magnified the problem of the Chaebol structure and highlighted the need for governance reforms. By 1999, a shareholder rights activist in South Korea - Prof. Hasung Jang had taken up the cause of minority shareholders of Samsung Electronics. With the help of foreign institutional investors, he planned to fight for governance reforms in South Korea. As a corporate governance specialist, Samuel Smith, had been contracted by a large foreign institutional investor to help reform Samsung Electronics.
KOREAN CHAEBOLS: Establishment, growth and structure.
In order to accelerate economic growth in the 1970’s, the Korean government formulated industrial policies that encouraged investment in heavy and chemical industry (HCI). Funded largely by government-controlled banks, affluent families took advantage of the liberal policies and set up companies in these industries. By the end of the 1970’s approximately 80 percent of fixed investment in the manufacturing sector was in HCI businesses. Between 1962 and 1982, annual growth averaged 8.4%, although by the end of the 1970’s
SAMSUNG ELECTRONIC CORPORATION: GOVERNANCE OF CHAEBOLS
Copyright: Prof. Florencio Lopez-de-Silanes
Professor Florencio Lopez-de-Silanes and Rakhi Kumar, Yale MBA02 prepared this case as the basis for class discussion rather than to illustrate the effective or ineffective governance of an organization.
Prof. Florencio Lopez-de-Silanes INTRODUCTION
Case: Samsung Electronics
Prior to the Asian currency crises, South Korea was an investment destination for several institutional investors and emerging market funds. Throughout the early nineties the country experienced an economic boom. South Korean conglomerates, locally know as chaebols, had diversified into various industries from cars to microchips. Samsung Electronics Corporation (Samsung Electronics), a rising star in the Samsung Chaebol was considered to be a high growth company. However, in 1997, the Asian currency crises magnified the problem of the Chaebol structure and highlighted the need for governance reforms. By 1999, a shareholder rights activist in South Korea - Prof. Hasung Jang had taken up the cause of minority shareholders of Samsung Electronics. With the help of foreign institutional investors, he planned to fight for governance reforms in South Korea. As a corporate governance specialist, Samuel Smith, had been contracted by a large foreign institutional investor to help reform Samsung Electronics.
KOREAN CHAEBOLS: Establishment, growth and structure.
In order to accelerate economic growth in the 1970’s, the Korean government formulated industrial policies that encouraged investment in heavy and chemical industry (HCI). Funded largely by government-controlled banks, affluent families took advantage of the liberal policies and set up companies in these industries. By the end of the 1970’s approximately 80 percent of fixed investment in the manufacturing sector was in HCI businesses. Between 1962 and 1982, annual growth averaged 8.4%, although by the end of the 1970’s