[THE INVESTOR] Park Hyeon-joo, the founder and chairman of Mirae Asset Financial Group, tells his fund managers and executives to think global, have a long term vision and always be the first mover in the market. 

Those principles, however, don’t seem to apply to his own ownership of the group.     

Mirae Asset is under increasing pressure to reform its corporate governance structure, the cost of which Park seems to think of as a potential drag on global expansion. 

Experts say Mirae Asset will likely take maneuvers in the coming months or years on group ownership, which will likely help keep Park’s control in the future, they said. 

“At the peak of the group’s corporate governance structure stands Mirae Asset Capital. But the firm is also the Achilles heel of the group,” said Daniel Yoon, a U.S. attorney at law and researcher at Korea Corporate Governance Service in Seoul.

Mirae Asset Capital, unlisted and 48.7 percent owned by Park, was the very start of the group, founded by the former star stockbroker in 1997 with 10 billion won ($8.5 million) and 10 staff members. 

On paper, it is a venture capital firm. But its business portfolio suggests otherwise.

New technology financing takes up just 1.8 percent of its total assets, according to the company’s audit report at the end of 2015, while 93.8 percent is in equity investments in other companies. 

Mirae Asset Capital’s raison d’etre is obvious -- controlling the group’s core units through ownership of stocks,” said Kim Sang-jo, head of Solidarity for Economic Reform and a professor at Hansung University. “But it has been evading regulations imposed on financial holding companies.”

In a vertical governance structure, Mirae Asset Capital owns a 38 percent stake in Mirae Asset Securities, which in turn controls 16.6 percent of Mirae Asset Life Insurance. Capital also owns 15.29 percent of the insurer.  

Other companies, such as Mirae Asset Global Investments, are weaved into this lineal chain. 

Mirae Asset Securities and Life Insurance are the only two within the group that are publicly traded, apart from Mirae Asset Daewoo Securities -- formerly KDB Daewoo and which the group recently acquired for 2.4 trillion won with plans to merge it with Mirae Asset Securities in November. 

Despite being a de facto holding firm for the group, Mirae Asset Capital has continuously failed to meet the requirements of a financial holding company, as defined by the Financial Holding Company Act, in what watchers see as a deliberate effort to shun regulations.

Under the law, when the aggregate book value of a financial company’s equity investments in other financial firms exceeds 50 percent of its total assets, and meets other criteria, the firm is recognized as a financial holding company and subject to a set of additional and tight regulations. Mirae Asset Capital’s ratio has showed a recurring pattern of dipping below the 50 percent bar near the end of the year and returning again after a certain time.

“To avoid the law, Mirae Asset used tactics like increasing its volume of short-term debt (to boost its total assets) or lowering its stake in affiliates through intra-group transactions,” Kim said.

To rein in the elusive Mirae Asset, Korean lawmakers earlier this year had revised a law that governs capital companies and introduced a cap on their equity investments with a two-year grace period. 

To comply, Mirae Asset Capital will have to by early 2018 cut the ratio of the aggregate book value of shareholdings in affiliate companies to 150 percent of its equity capital from the current 200 percent. It can either sell off some shares in other Mirae Asset companies or boost capital by issuing debt.

The message from regulators seems clear: Stop using Mirae Asset Capital as a de facto holding company or make it an official holding firm of the group.

Then, why the objection to the holding company in the first place?

“Mirae Asset wants to keep its wildness. Holding-company regulations would curb it,” Park said in a press conference late last year. 

By “wildness,” Park means being able to make quick, bold moves and challenge the existing order, undeterred by fear of failure or anything else, explained Mirae Asset Global Investments spokesperson Lee Jong-guil.

One size doesn’t fit all. A holding company structure is not the ideal answer for every multiaffiliate group, he argues.

Further complicating the situation surrounding Mirae Asset’s governance, the planned merger between Mirae Asset Daewoo and Mirae Asset Securities will dilute Park’s ownership.

“If the merger is completed in November with a ratio of 1-to-2.9, as announced, Mirae Asset Capital’s stake in the new brokerage entity will be reduced to 18.94 percent,” said Kim Tae-hyun, analyst at Kiwoom Securities.

The brokerage company will hold 21.1 percent of its own shares, as the controlling 43 percent stake in Mirae Asset Daewoo that Mirae Asset Securities bought will turn into treasury stocks upon the merger.

“Uncertainties remain as to the group’s ownership structure. The group is pursuing an investment banking-focused business model that requires a lot of cash and may want to use the treasury stocks, while it may draw up a new picture for governance structure,” the analyst said. 

Mirae Asset group is not very concerned about the postmerger ownership dilution or the new investment cap to be imposed on the de facto holding firm, spokesperson Lee said.

If needed, the group may hand over treasury stocks of Mirae Asset Daewoo to affiliates or seek buyers overseas. Mirae Asset Global Investments, which sits on ample cash and is not deeply entrenched in cross-shareholdings with affiliates, could play a bigger role in the new governance structure, he said.

“We have options and plenty of time and money. Right now, the priority is growth,” he said. 

By Lee Sun-young (milaya@heraldcorp.com)