Understanding the rise and decline of shareholder activism in South Korea: the explanatory advantages of the theory of Modes of Exchange

Abstract

The extent to which Korea has become a full-fledged neoliberal state has been subject to debate. We argue that the recent rise and fall of shareholder activism in Korea is related to the coexistence of neoliberal and developmental state characteristics. Uncertainty as to ‘the rules of the game’ during this uneven transition has provided the chaebol with an opportunity to defuse the radical potential of shareholder activism. Through an analysis of media reports, this article argues there is a relationship between the rise of fall shareholder activism in Korea and a retreat from neoliberalism. It then discusses advantages of the theory of Modes of Exchange to make sense of these developments.

Keywords:

• East Asian crisis
• chaebol
• corporate governance
• minority shareholder movement
• modes of exchange

Acknowledgements

The authors would like to acknowledge the kind guidance of the special issue editor, Professor Ingyu Oh at Korea University, the APBR editors, Professor Chris Rowley and Professor Malcolm Warner, and the anonymous reviewers.

Notes

1. In a study carried out by the Korean Fair Trade Commission (FTC) of 238 listed companies that are part of 46 chaebol, only 0.6% of 5692 motions raised in board meetings between May 2011 and April 2012 weren’t approved as proposed because of opposition from an external director. (Hangyoreh Simun ‘Park government stepping back from proposed restrictions on chaebol’ 8 August 2013).

2. A 1994 survey of CCEJ members found that the majority were employed in the tertiary sector, with politicians, academics and medical, arts and culture, legal, small business, office and government workers accounting for 59.7% of the membership. Ministers of religion, members of social organizations, students and housewives accounted for a further 26.4% of the membership. Educational levels for members are also relatively high and in 1994, 63% were university graduates (CCEJ 1994, 327). In the case of the PSPD’s shareholder activist arm the Participatory Economy Committee (PEC), by the end of 2000, its 22 executives were either lawyers, accountants, academics or financial specialists (Rho 2007, 86).