Download Chaebol Relent on Class Action Suits

Korea Securities Dealers Association
Daily News
Chaebol Relent on Class Action Suits
(Korea Herald)(2003-03-20)
Yielding to President Roh Moo-hyun's get-tough reform policy, top conglomerates
yesterday agreed to accept the centerpiece of his corporate overhauls - class action
suit in the securities field.
A joint statement released by the nation's five largest business organizations said
that local companies will consent to the government's bid to legislate securitiesrelated class action suit system this year on condition countermeasures are devised
to deter abuses.
"Businesses decided to conditionally embrace the class action suit system to help
improve transparency and accountability in corporate governance and
management," said the statement signed by the five, including the Federation of
Korean Industries and the Korea Chamber of Commerce and Industry.
A class action suit against a company permits all investors equal compensation
whenever one of them wins a legal battle against a concern or manager for irregular
actions that caused them to suffer financial losses. The system has long been seen
as vital to fix the chaebol's irregularities.
"A grace period of one year will be needed to help firms make relevant preparations.
In addition, investors should be allowed to initiate a class action suit only after
related charges are filed by the prosecution," it said, calling for thorough measures to
deter abuses.
Recently, a separate statement from the five organs pledged a willingness to accept
the five-day workweek system and other government-imposed reform tasks.
President-elect Roh has reiterated his determination for strong chaebol reforms,
expressing deep concerns over the increasing concentration of economic powers in
the top conglomerates and their lack of managerial transparency. Earlier this week,
Kim Jin-pyo, deputy prime minister and minister of finance and economy,
reconfirmed a plan to introduce the securities-related class action suit system within
several months.
Regarding the chaebol's latest move, a KCCI executive said that the five business
organs would ensure that the proposed class-action suit system be applied to listed
companies indicted for fraudulent accounting, stock price manipulation and false
stock-market disclosures.
Korea’s Consolidated Fiscal Balance 2002 (Preliminary)
(Ministry of Finance and Economy)(2003-03-20)
Korea’s consolidated fiscal balance in 2002, including social security funds,
increased by KRW15.4 trillion to record a KRW22.7 trillion surplus, which accounts
for 3.9 percent of GDP. In 2001, the fiscal surplus was KRW7.3 trillion won, or 1.3
percent of GDP. This is the first time since 1989 that Korea has recorded a surplus in
the consolidated fiscal balance excluding the social security funds.
For your information, consolidated fiscal balance is comprised of budget balance
(general and special accounts) and extra-budgetary funds. The surplus in budget
balance rose to KRW6.7 trillion, a KRW 8.0 trillion increase from the previous year.
This was due to the sale of the government’s stakes in KT Corp. (’01: KRW3.1
trillion→’02:KRW6.7 trillion) and surplus budget transferred from the Bank of Korea
(KRW 2.8 trillion). Extra-budgetary funds, when including the five social security
funds, recorded a surplus of KRW16.0 trillion, a KRW7.4 trillion increase from 2001.
When social security funds are excluded, the surplus stands at KRW 5.1 trillion, or
0.9 percent of GDP, compared to a deficit of KRW 8.2 trillion (-1.5 percent of GDP) in
2001.
NOTE: Five social security funds include National Pension Fund, Korea Teachers’
Pension, Employment Insurance Fund, Industrial Workers’ Accident Compensation
Fund, and Merit Reward Fund. Please find the attached table for consolidated fiscal
balance.
Foreign Investors See Opportunity in Seoul Stocks
(Korea Times)(2003-03-20)
Even though the current financial markets are in turmoil, the Seoul stock market is
not in a crisis, Salomon Smith Barney (SSB) said in a report yesterday.
``Investors are in a panic worried about potential systematic risk, but the situation
should be seen as an opportunity for investors,’’ said Daniel Yoo at SSB.
But he did not expect a systematic risk in Korea as large corporations have shown
improvements by reducing their debts and overall private sector debts appear sound.
``Even under the worst-case scenario, such as continued moral hazards, passive
government actions and continued mistrust, the total size of problems at SK Global
and the credit card industry is around 15 trillion won. This is substantially less than
the previous Daewoo problem of over 80 trillion won in debt and 50 trillion won in
losses,” Yoo said. But he believed investor sentiment could continue to remain weak
in the near future.
As for economic policies, SSB said the government is moving in the right direction by
trying to boost the domestic economy, creating a soft landing for consumer debt
growth and extending the maturity period of consumer debts.
He expected the Bank of Korea to cut interest rates in the near future due to the
tightening financial conditions and added that the market’s heightened credit
awareness will also be an additional bearish factor on the won.