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Chaebol Policy for Suppression of Economic Power Concentration Earlier Anti-Concentration Measures (1): Promotion of Ownership Dispersion

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Chaebol Policy for Suppression of Economic Power Concentration

Sub-Theme 1 | Earlier Anti-Concentration Measures (1): Promotion of Ownership Dispersion


It is around the early 1970s that the issue of economic power concentration began to draw the attention of the public and press in Korea. The size of chaebol groups, however, was not quite an issue at the time. It was the ownership concentration that people primarily protested and that the government wanted to ease. 

In May 1973, the President issued “Five Special Orders on Firms’ Public Offerings and Corporate Culture.” President Park stated that “it is now time [for chaebols] to … offer company stocks to the general public.” He called it as “their social responsibility as the people’s firm.” The President’s Special Order was preceded by two pieces of legislation, which yielded the Capital Market Promotion Act in November 1968 and the Initial Public Offering Inducement Act in December 1972.

They were intended to promote the ownership dispersion of chaebol companies through which the people at large would share the benefits of economic growth with chaebol owners. Various incentives were offered for the objective, including tax benefits for listed companies and their shareholders. In addition, the Minister of Finance was given the power to review target firms and select qualified firms to go public. The Minister of Finance could ask financial institutions to limit their lending and other assistance measures to non-complying firms. [Note]

Despite all these measures and the President’s special orders, chaebol owners rarely agreed to have key blue-chip firms to go public. Only a few secondary firms went to public. To address this situation, the government announced the IPO Supplementary Measures in August 1975. The measures came up with a new set of target firms, which included primary firms within each chaebol group. 

Although some firms refused to go public, the government’s effort was deemed a success. The number of listed firms and the amount of paid-in capital increased significantly in the late 1970s. 

 
[Number of Listed Companies and Distribution of Shares]
Source: Korea Stock Exchange, Securities Statistics Yearbook for 1987

The shares owned by those with less than one thousand shares, however, rarely exceeded 5 percent until 1986. In comparison, the shares owned by those with more than one hundred thousand shares never fell below 50 percent. Given this distribution of shares, one can hardly state that there had been a big advance in ownership dispersion. 

 
[Inside Shareholding of Listed Companies, 1976-1983]  
(Unit: %)
  1976 1977 1978 1979 1980 1981 1982 1983
Number of companies 273 322 356 355 352 344 344 328
Inside shareholding 34.28 32.60 32.54 30.02 27.89 27.36 26.53 27.82
Controlling family 27.51 26.52 27.30 24.19 21.91 20.19 19.14 19.07
Affiliated companies 5.90 5.50 4.89 5.32 5.44 6.57 6.70 7.95
Non-profit org. 0.87 0.58 0.35 0.51 0.54 0.60 0.69 0.80

1) A few list companies are excluded for lack of data.
2) The share ratios are simple averages.
3) ‘Controlling family’ includes the five largest of individual shareholders.
Source: Lee, Keun et al. (2007), Evolution of the Firms in Korea since 1945, Vol. I: Construction of the Database for the 1976-2005 Period and Descriptive Analysis, Seoul National University Press (in Korean).