Hyundai Motor Group Chairman Chung Mong-Koo Was Suspended

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The article on Kompas daily, Friday, September 7th, 2007 interested me to write this essay of analysis on how the local authorities, in this case South Korean high court has pushed to make decision that driven by national economy interest. “Hyundai chief given suspended sentence. Hyundai Motor Group chairman Chung Mong-koo was on Thursday, Sept 6, 2007 handed a 3-year suspended sentence by a South Korean appeals court, freeing him to continue running the world's sixth largest auto maker. 1) “The decision to suspend the sentence for 5 years eliminates concerns over a management vacuum at the company, which is facing a slowdown in overseas sales and increasing competition. Although it suspended the 3-year jail term given in February by the Seoul Central District Court, the high court upheld the lower court's conviction of the chairman for breach of trust, embezzlement of company money and setting up slush funds 2). Investors had been concerned that uncertainties over Chung's legal battle could hamper Hyundai's expansion plans at home and abroad, even though brisk domestic sales and a smooth conclusion to this year's wage talks are brightening the outlook somewhat. Hyundai Motor Group alone accounts for about 7 percent of South Korea's total exports, which help the economy remain on a growth track, and Chung is heavily involved in most decisions at the group. "Hyundai Motor is the top enterprise because of its ripple effect on the whole economy. The accused, Chung Mong-koo, is a symbol of Hyundai Motor and our country's automobile industry," Lee Jae-hong, the presiding judge at the Seoul High Court, said while handing down the sentence. "I did ask many people, including restaurant waiters, taxi drivers and reporters. The ordinary people leaned toward a suspended sentence," he said. "That means the accused should work hard." 3)

“Hyundai's charismatic chairman was arrested in April 2006 on allegations that Hyundai and its affiliates set up slush funds to pay for political favors. “The lower court sentenced Chung in February but granted him $1 million bail to continue running Hyundai after he spent two months in jail. 4)

Hyundai runs by family-owned conglomerate which called “chaebol”. These family-run conglomerates have played an important role in helping to rebuild Korean’s economy after the 1950-1953 Korean war, but partly blamed for the financial crisis of the late 1990s. 5) With the release of Chung mentioned above, it is indicating two major issue which number one is the Hyundai chaebol has issue on management shortcomings, or could be the other chaebols facing the same issue. Issue number two is that the government dare not put a gamble in national economy by asking the management of the chaebol to appoint new leader. The government seems too afraid to this family business that it does not have control, and more on afraid of having economy problem given the fact that Hyundai accounts for 5.4 percent of gross domestic product, on which it also controls of 70% of country auto markets. Though, looking at issue number one which more on giving a chance to slowly working on this management changing issue, actually the government may gamble with less risk by asking Chung Mong-koo's son, Chung Eui-sun, which is president of Kia Motors Corp, Hyundai's affiliate, 6) to handle his father role while his father in jail. This action actually if taken will put the authorities in a better position especially in the eyes of the public, the opponents, and international. In parallel will contribute to the long term economy strategy especially helping this local conglomerate surviving its management issue. While by appointing somebody that close to the family that own and run the business, the government may also reducing the risk in having significant decrease on the economy. Also there are many options that could be taken in order to foster such decisions. Given the situation that Chung is willing to...
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