Chaebol
Government ties, corruption, and abuse of power
### Government ties, corruption, and abuse of power

[thumb\|South Korean President [Park Geun\-hye](/wiki/Park_Geun-hye "Park Geun-hye") at a breakfast meeting with business magnates [Lee Kun\-hee](/wiki/Lee_Kun-hee "Lee Kun-hee") and [Chung Mong\-koo](/wiki/Chung_Mong-koo "Chung Mong-koo")](/wiki/File:Korea_President_Park_Business_Leaders_20130508_01.jpg "Korea President Park Business Leaders 20130508 01.jpg")
Since the inception of the chaebol, the government has been closely involved in its affairs. Many of the reforms enacted over the years, especially those under President [Kim Dae\-Jung](/wiki/Kim_Dae-jung "Kim Dae-jung"), have cracked down on kickbacks and preferential treatment. Moreover, the state is no longer a majority shareholder of any chaebol. But their sheer size and wealth have been used to gain influence. For the most part, the government sees the function of chaebols as crucial to the Korean economy. When President [Lee Myung\-Bak](/wiki/Lee_Myung-bak "Lee Myung-bak") took office, he pardoned [Samsung Group](/wiki/Samsung "Samsung") chairman [Lee Kun\-Hee](/wiki/Lee_Kun-hee "Lee Kun-hee") for [tax evasion](/wiki/Tax_evasion "Tax evasion"). President Lee then proceeded to champion pro\-chaebol deals, including a nuclear energy contract with the city of [Abu Dhabi](/wiki/Abu_Dhabi "Abu Dhabi"), and loosened laws preventing the conglomerates from owning financial services companies. Samsung's leader is not the only chaebol chairman to be excused from a criminal conviction. [Choi Tae\-Won](/wiki/Chey_Tae-won "Chey Tae-won") of [SK Group](/wiki/SK_Group "SK Group"), [Chung Mong\-Koo](/wiki/Chung_Mong-koo "Chung Mong-koo") of [Hyundai](/wiki/Hyundai_Group "Hyundai Group"), Kim Seung\-Youn of Hanwha, and [Shin Dong\-bin](/wiki/Shin_Dong-bin "Shin Dong-bin") of Lotte are a few examples of chairmen who have been charged, convicted, or are currently serving a prison sentence for white\-collar crime. Accusations include bribery, tax evasion, accounting fraud, embezzlement, and violent crime. Typically chaebol chairmen are pardoned. In the rare case that an executive is sentenced to prison, as the CEOs of SK and CJ group were, it is typically a relatively light punishment of up to 4 years depending on the charge.

Collusion between chaebol members and the government granted preferential statuses to the companies. A chaebol would funnel bribes to politicians and bureaucrats through slush funds and illegal donations. This could help maintain the government's position of power, allowing them to secure contracts for major government projects and provide favourable treatment to the donor firm. Examples of this type of corruption were widespread in the years leading up to the 1997 financial crisis. Many of the firms that benefited from this relationship were too indebted, had poor corporate governance, and were inefficient. There was a huge inflow of capital and a bending of regulation in favour of these problematic firms. Hanbo Group, formerly South Korea's second\-largest steel\-maker, is a good example of this. In the 1990s the company paid for special arrangements with high\-ranking politicians so that it could secure contracts for large government projects over its competitors. Hanbo went bankrupt in 1997 after defaulting on debt payments along with other governance issues. Numerous chaebol companies had similar private agreements with the government in this fashion. It would be most common in companies dealing with heavy industries or projects that involved government procurement and urban planning. In the past, most successful political elections were won with chaebol support. Each time a new administration or regime stepped in, it would gear its policy platform towards chaebol revitalization. This was under the claim that to be a competitive economy more power must be given to the chaebols. In recent years, the leading political parties of South Korea have shifted their focus from supporting large corporations to promoting economic diversification.


What is an example of a company that benefited from this relationship?