SEOUL, South Korea — South Korea's presidential election campaign has highlighted discontent with the family-controlled industrial conglomerates that dominate the country's economic life. The two main candidates promise a tougher line but neither is likely to tinker too much with a model that transformed South Korea into a global business power.
South Koreans head to the polls on Wednesday to elect a successor to President Lee Myung-bak, who has already served the maximum five-year term. The economic outlook is far less rosy than it was five years ago when Lee was elected on promises of business-friendly policies and annual growth of 7 percent.
Owners of mom-and-pop stores fret that big discount retail chains, owned by chaebol as the conglomerates are known, will wipe out their businesses. Companies that supply components and other goods complain they must accept whatever the conglomerates want to pay. Income inequality has widened while growth has sputtered due to a slowdown in China and the slumps in Europe and the United States. But the chaebol have continued to thrive. That has added fuel to the complaints that they are dangerously big, above the law and crush small entrepreneurs.
Debate about the conglomerates has also been energized by an historical irony. Park Geun-hye, presidential candidate for the ruling Saenuri Party, is the daughter of former dictator Park Chung-hee, an architect of South Korea's rapid industrialization in the 1960s and 1970s that allowed politically connected families to assume command of swathes of industry and the economy.
"In the current South Korean economy, no matter how huge the chaebol profits become, those profits do not trickle down to small- and medium-sized enterprises or the public," said Chung Woon-chan, a former prime minister. "The economic concentration of chaebol results in a serious polarization."
The decline of Finland's Nokia and big Japanese corporations such as Sony has underscored how quickly the fortunes of successful corporations can change as well as the risks of becoming overly reliant on a handful of super large companies. Combined, Samsung and Hyundai Motor Group contribute more than half of the combined profit of all listed companies except financial firms in South Korea's stock market. Samsung Electronics Co. alone accounts for 17 percent of South Korean exports. A recent survey showed 77 percent of South Koreans believe a fairer distribution of wealth will boost economic growth.
Reflecting such concerns, Park Geun-hye and her rival for president, former human rights lawyer Moon Jae-in, have pledged to divide the economic pie more evenly, curb chaebol excesses and create a leveled playing field for small businesses. They also promised to punish crimes by chaebol family members more stringently.
The policies of strongman Park Chung-hee "achieved industrialization but in the process, many problems and contradictions have accumulated," said Yoon Yeo-joon, a long-time bureaucrat who is a key member of Moon's camp. "This election will be an important chance to seek ways to change."
There have already been signs that South Korean institutions are losing some of their deference to chaebol bosses. In August, the chairman of Hanwha Corp., South Korea's 10th largest conglomerate, was sentenced to four years prison and fined 5.1 billion won ($4.5 million) for embezzlement in a ruling that showed a tougher stance against wrongdoing by leaders of the country's mightiest companies. Courts gave suspended prison sentences to the seven executives from the top 10 chaebol who were convicted of crimes since 1990.
According to documents that authorities confiscated from Hanwha headquarters, employees were instructed to regard Kim as a god-like figure and "an object of absolute obedience." The company's authoritarian culture allowed Kim to steal corporate funds, the court said.
Moon's policies, which analysts say take a stricter position on big firms than Park's, focus on reforming the ownership structure of chaebol, so that founding family members would not wield greater power than shareholders with a bigger stake or the company's top executives. A system of cross-shareholdings between companies often allows founding families to exert emperor-like power over the group.
Park Geun-hye has said she would prevent the individual companies that make up each conglomerate from adding to their shareholdings in each other. But she would not force changes to existing ownership, which would allow founding families to retain control even with a minority stake.
While candidates agree that the next president should implement measures to stop chaebol from becoming even more powerful than they already are, they say that does not mean breaking the companies up.
"What I think as the goal of the chaebol reform is that chaebol should be loved by citizens," Moon of the opposition Democratic United Party said in a recent televised debate.
And Park warns that "policies to kill chaebol will discourage investments, lower growth rates and reduce jobs."