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Naver joins ‘quasi-chaebol’ list

Despite best efforts, Lee Hae-jin will face chairman regulations
Sept 04,2017

Naver’s co-founder Lee Hae-jin will fall under harsher restrictions imposed on family-run companies as the Korean government labeled the nation’s top Web portal company a “quasi-chaebol.”

Under this label, Lee and his relatives have to publicly release any equity transactions made in regards to Naver, as well as being held legally accountable for any mismanagement of the business.

According to the Fair Trade Commission on Sunday, Naver, as well as Korea’s largest game developer Nexon, were among four companies that were newly added to the list of large companies or corporate groups whose assets exceed 5 trillion won ($4.45 billion).

Companies whose total assets exceed 10 trillion won are labeled as chaebol.

The report showed that there are 57 companies or corporate groups like Samsung and SK whose assets exceed 5 trillion won and among those companies 31, or 54 percent, are chaebol.

The 26 companies including Naver with total assets of less than 10 trillion won are faced with lesser scrutiny than chaebol like Samsung. However, these companies still face several transparency regulations including being prohibited from giving unfair profits to anyone with a close relationship to their management, or publicly disclosing important decisions related to unlisted companies.

The co-founder of Naver has tried to dodge these regulations, even making a rare appearance at the FTC’s headquarters in Sejong last month. Despite being one of the key founders and the de facto chairman of Korea’s largest search engine and Web portal company, Lee never took the title of chairman. Last year he handed the reins to Han Seong-sook, Naver’s first female CEO, and stepped down as chairman of the board in March.

Last month Lee sold 110,000 Naver shares, equivalent to 0.33 percent of the company at 743,990 won per share, lowering his stake from 4.64 percent to 4.31 percent. This was considered to be a move to avoid being labeled as the chairman of the company in order to avoid the harsher responsibilities and oversight this entails.

“We make our decisions on whether that person actually governs a company or not, based on the person’s influence in the company including share ratio, business activities and appointing executives,” said Park Jae-gyue, head of the FTC’s economic policy bureau. “Among [Naver’s] stakeholders, Lee was the only one who was exercising his governance.”

Park said even though Lee’s shares in the company could be relatively small, when excluding several major institutional investors like the National Pension Service, Lee is actually the largest stakeholder.

“Fifty percent of the investors are those who own less than 1 percent of the company’s shares and he is the only one that has the means to exercise governance,” Park said.

Among the large companies, eight are considered to not be run by a specific family - Posco, Nonghyup, KT, Daewoo Shipbuilding and Marine Engineering, S-Oil, KT&G, Daewoo E&C and GM Korea.

There are a total of 1,980 affiliates under the 57 companies or corporate groups with total assets exceeding 5 trillion won. The total assets of the 57 business groups amount to 1,842 trillion won and the revenue of these companies amounts to 1,233.4 trillion won. The top five companies whose assets exceeds 100 trillion won, including Samsung and Hyundai Motor Group, saw their total assets amount to 975.7 trillion won, which is 53 percent of the total assets of the 57 companies or business groups, while net profits generated from the top five amounted to 37.9 trillion won, which is 70.5 percent.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]