Surrounded by growing public antagonism and state pressure, Korean Inc. have been speeding up efforts to improve transparency in their corporate governance, long blamed for allowing the owner families to stay in power despite their small shares in companies.

Not only Hyundai Motor, top conglomerates like Hanhwa and Hyosung came up with grand plans last week that they believe would improve shareholders’ rights. And believe it or not, they want to complete such complicated and costly restructuring processes within this year.

According to the Fair Trade Commission, top five conglomerates, except for Samsung, have announced a set of plans to restructure their respective corporate governance in the first half. Six others, including Hyundai Heavy, CJ, Daelim and LS also have been pushing ahead with restructuring efforts.

Hanhwa Group said last week it will disband its control tower for the first time in 20 years and will have each affiliate operated strictly under decisions made by each boardroom. The group also vowed to lower the proportion of shares held by the chairman’s sons in companies criticized for inter-affiliate trading.

Hyosung, a local textile giant, also adopted a holding company structure and put its seven major businesses into four independent entities, claiming that it is a step to improve transparency in management and corporate governance.

In the first major change in decades, the textile company will have four operations under a control tower, Hyosung Corp. The CEO post of the holding company will be shared by Hyosung Chairman Cho Hyun-joon and President Kim Kyu-young. President Cho Hyun-sang, the chairman’s younger brother, was named a boardroom member. More than 30 experts, including former judges, scholars and high-ranking government officials, were named members of the boardrooms of the four affiliates to make the decision-making process clear and responsible, officials said.

Chaebol taking voluntary efforts in their corporate governance came less than a year after Kim Sang-jo, an activist-turned-Fair Trade Commission chairman, declared war against conglomerates.

Since his inauguration, Kim appears to have taken a carrot and stick approach by encouraging conglomerates to conduct voluntary steps while setting a strict deadline.

In what appeared to be an ostensible gesture, Kim, nicknamed “chaebol sniper,” even praised them in the middle of a roundtable session with CEOs of top 10 conglomerates late last year that they have lived up to the government’s expectations.

But public antagonism against cases of chaebol abusing their power and seeking personal gains have apparently grown heavier than the yardsticks used by the authorities.

Fueled by a series of power abuse and irregularities allegations by family members of Hanjin Group last month, calls have been mounting to bring chaebol scions and their alleged criminal acts into light, questioning their qualification as leaders of the conglomerates.

From summoning the chairman’s wife and children for questioning, conducting a series of raids into their residences and offices, combing through their tax reports, the simultaneous probes taken up by the authorities ranging from the prosecution to the tax service is a way of “disciplining” not only Hanjin but also other conglomerates, said Park Ju-gun, CEO of CEO Score, a local corporate tracker.

“As soon as the pending North Korea issue is resolved, the Moon Jae-in government is highly likely to shift its focus on chaebol. Conglomerates are fully aware of the possibility of the government imposing tough rules, and that is why they are moving fast beforehand,” he said.

According to government officials, Cabinet members have agreed to establish a control tower within the FTC to push ahead with chaebol reform 2.0. The envisioned task force team will be consisted of authorities from related public offices from the Ministry of Justice and the Financial Service Commission to strengthen monitoring on chaebol and assess their “voluntary reform moves.”

Not only FTC, but also the tax office vowed to look into allegations that chaebol families have been transferring wealth to their children without paying due tax, through inter-affiliate trading and building assets under borrowed names.

The National Pension Service gradually shifting from its role as the protector of Korean companies from the so-called threats of foreign investors, will continue to be a major problem to chaebol, industry watchers said. Despite the NPS’ efforts to improve its political neutrality, its top decision-making committee is chaired by the minister of welfare and health, thus putting its operation under the government’s boundary.

But even with such determination taken up by the government, the voluntary nature of the restructuring of chaebol and their protection of interest will yield limited results, according to experts.

The government, backed by the strong public sentiment, could make Hanjin Chairman Cho Yang-ho resign from management, but it could never take away his shares, albeit small, that comes with an impregnable control over the group.

“Giving them a chance to make voluntary reform means nothing because it changes nothing,” said Park Sang-in, professor at the graduate school of Seoul National University. “What they are doing is structurally changing their ownership. But in essence, it doesn’t change the way chaebol operate and pursue. They won‘t give up on their imperialistic power and hereditary succession of power on their own if not without stricter law enforcement of bigger rights of the shareholders to hold them legally and financially responsible,” he said.

By Cho Chung-un (christory@heraldcorp.com)