A South Korean court Friday ordered Hyundai Motor's chairman Chung Mong-Koo to pay compensation of 82.6 billion won (US $73.1 million) to his own company for damaging it by supporting Hyundai affiliates. A group of 14 minority shareholders and activists sued Chung and a vice chairman of Hyundai Mobis, an auto parts manufacturing affiliate, for causing 1.9 trillion won in losses to the country's top automaker.
The group argued that Hyundai Motor had exclusively placed orders with affiliates at higher than normal prices. They also accused the 73-year-old tycoon and his only son of unfairly taking sizeable shares in Hyundai Glovis to strengthen their direct control over the logistics affiliate established in 2001.
The Fair Trade Commission in 2008 slapped Hyundai Motor with a 50.7 billion won fine after accepting some of the group's allegations. "Chairman Chung must shoulder the responsibility of compensating for damage to Hyundai Motor," the court said in its ruling.
But it said he and his son do not have to return their Hyundai Glovis shares and profits to Hyundai Motor. Activist Kim Yong-Hee said the court's decision was not strong enough to stop unfair business practices. South Korea's post-war growth was based on state-backed conglomerates known as chaebols. Critics say their dominance stifles small and medium-sized industries, due to unfair distribution of resources and entry barriers.
The chaebols' reckless expansion through borrowing contributed to the 1997-98 financial crisis, although they have since undertaken limited reforms. However the dominant role of founding families often remains unchanged, as they control their empires through cross-shareholdings despite holding relatively small stakes.
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