The Fair Trade Commission noted that although large corporate groups have switched to a holding company structure, many of their affiliates are still controlled by owner families.
There are currently 23 large companies that have adopted the structure following government regulations. These include SK, LG, GS, CJ, LS, Hyundai Heavy Industries and Amorepacific. Lotte, Hyosung and Hyundai Development Company recently switched to a holding company system. Meritz Financial Group, Hanjin Heavy Industries and Hansol were excluded from the conglomerates that are mandated to adopt this system due to a decline in assets.
The 23 companies have a total of 962 affiliates. Among them, 170 affiliates are controlled by owner families outside the holding company system.
The FTC said that the 170 affiliates can be used by owner families to keep their dominant power over the entire group or to increase their personal interests.
The watchdog is also concerned that the share of intra-affiliate trade deals in large companies with a holding company system is higher than in other groups. The share of internal transactions of the companies with holding company system is 18.82 percent, which is higher than the average of 9.87 percent.
“We believe that the owner family’s motivation for private profits through internal transactions will be high,” said Park Ki-heung, head of the FTC’s holding company division.
“Considering the intention of making the governance structure transparent through holding companies, it is desirable to incorporate affiliates into the system,” he said.
By Shin Ji-hye (email@example.com)