[Viewpoint] Time to Change Perceptions of Large Corporations

Choi Jun-seon, Honorary Professor at Sungkyunkwan University School of Law

South Korea's 'anti-corporate sentiment' runs deep. This 'anti-corporate sentiment' is actually 'anti-large corporation sentiment.' The most important reason this sentiment grows is due to ignorance about corporations.

However, the trend has recently shifted somewhat. This is due to the stock investment craze among the MZ generation (Millennials + Generation Z). As of the end of June, there were a total of 4,546,497 small shareholders holding less than 1% of Samsung Electronics' shares. Unless the company betrays them, shareholders generally support the company. Acts of betrayal include sudden physical spin-offs, mergers, and other restructuring, as well as large-scale fundraising such as issuing new shares or convertible bonds that cause an explosive increase in the number of outstanding shares, thereby reducing the value of shares held by small shareholders. Of course, such restructuring is necessary, serves as a long-term major growth engine, and is legal. However, if there is no consideration for the immediate stock price decline of existing small shareholders, dissatisfaction is inevitable. Large international funds like BlackRock emphasize ESG (Environmental, Social, and Governance), particularly stressing Governance (G). They do not hesitate to send strong warnings to corporate boards that change corporate governance but fail to enhance shareholder value.

The International Monetary Fund (IMF) releases annual GDP per capita forecasts as part of its World Economic Outlook. According to the latest estimate from April 2021, Switzerland ranks 2nd ($94,700), the United States 5th ($68,310), Japan 23rd ($42,930), South Korea 26th ($34,870), China 56th ($11,820), and Russia 59th. Countries ranked below 60th in personal income typically lack global large corporations. The total revenue of companies listed in the 2021 Fortune Global 500 exceeded one-third of the world's GDP, with revenues of $31.7 trillion, net profits of $1.6 trillion, and employing 69.7 million people worldwide. In other words, enhancing national competitiveness and creating quality jobs are driven by global large corporations. This is because only large corporations can lead high value-added innovative industries and secure global market dominance through their global networks.

'Global leading companies' are those ranked among the top 500 globally in both revenue and operating profit, with only 281 companies worldwide registered in 'S&P Capital IQ' meeting this criterion (as of 2020, with revenues exceeding 25.3 trillion KRW and operating profits over 2.3 trillion KRW). South Korea has only six such companies, five of which are manufacturers excluding Korea Electric Power Corporation (KEPCO): Samsung Electronics, SK Hynix, Hyundai Motor Company, LG Electronics, and POSCO. Their competitiveness is also very fragile; over the past three years, their revenue growth rate decreased by 0.4%, while the global average increased by 5.8% (estimated by the Korea Economic Research Institute). As of the end of 2020, South Korea had 2,268 listed companies with a total market capitalization of 2,365 trillion KRW. Samsung Electronics' market capitalization is roughly 480 trillion KRW, whereas in August 2020, Apple's market capitalization was $2.0228 trillion (2,674 trillion KRW). Apple's market capitalization alone exceeds the total market capitalization of all 2,268 major Korean companies. In this situation, focusing solely on regulating large corporations is like being a 'frog in a well.' It is time to change perceptions of large corporations competing in the global market.

Choi Joon-sun, Professor Emeritus, School of Law, Sungkyunkwan University