[Inside Chodong] The Nationality of the "Black-Haired Foreigner" Owner

Korea is the only country in the world with a unique regulatory system for conglomerates known as the "designated owner (controlling shareholder)" system under the Fair Trade Act. Every May, the Korea Fair Trade Commission (KFTC) announces business groups with assets exceeding 5 trillion won, and at that time, it designates a controlling shareholder based on shareholding ratios and actual control. Once designated as a controlling shareholder, not only the individual but also their spouse and relatives must submit details of their shareholdings and transaction records with affiliated companies. Even minor omissions can result in sanctions, and submitting false information can lead to criminal prosecution. This is a regulation that no native Korean conglomerate owner can avoid. However, Bom Kim, Chairman of Coupang, is an exception. Although Coupang was designated as a large business group in 2021, Chairman Kim has been exempted from being named as the controlling shareholder for five consecutive years because he is considered a "foreigner with black hair" (a Korean-born foreign national).

Chairman Kim holds a 10.2% stake in Coupang Inc., the U.S. parent company of Coupang Korea, but due to the allocation of multiple voting rights, he controls 76% of total voting rights. He is the de facto controlling force behind Coupang’s management. Although the parent company is headquartered in the United States and listed on the New York Stock Exchange, the majority of its annual revenue-over 41 trillion won-comes from Korea. This peculiar structure, where key decisions are made by an American while most revenue is generated from Korean consumers and Coupang enjoys its dominant position as the top e-commerce player in Korea, is at the heart of the controversy over the controlling shareholder designation.

One of the main reasons Coupang has avoided the controlling shareholder designation so far is the claim that "relatives do not participate in management." However, it was belatedly revealed through a U.S. Securities and Exchange Commission (SEC) filing that Kim’s younger brother, Kim Yooseok, has been serving as Executive Vice President overseeing Coupang's logistics operations and has received 14 billion won in compensation over the past four years. The KFTC is currently conducting an on-site investigation at Coupang’s headquarters in Songpa-gu, Seoul, and is securing evidence such as recordings, messages, and emails that could prove relatives’ involvement in major decision-making. If the facts are substantiated, it would become possible to change the designation of Coupang’s controlling shareholder from the corporation to Chairman Kim as an individual. The KFTC is also considering criminal charges against Chairman Kim and the Coupang corporation for submitting false information.

Under the previous administration, the KFTC felt considerable pressure regarding the designation of a foreign controlling shareholder. There had never been a precedent of a foreign national being designated as a controlling shareholder in the 40 years since the system was introduced. A senior KFTC official explained that the previous administration even amended enforcement ordinances to grant Chairman Kim and his family an exemption, saying, "There was a sense of burden about venturing into the uncharted territory of designating a foreign controlling shareholder." Whether the result of policy judgment or due to being overawed by Coupang’s aggressive lobbying, which leveraged trade friction as a weapon, the previous administration is now being criticized for turning a blind eye to law enforcement against Coupang and Chairman Kim.

However, there are also clear limitations and problems with the controlling shareholder system itself. The system was designed in the 1980s to prevent the negative effects of expedient inheritance and concentration of economic power under family-run ownership structures. Because it was originally conceived for domestic companies, it is practically difficult to designate and regulate a foreigner as a controlling shareholder. The KFTC cannot simply fly to Coupang’s headquarters in Wilmington, Delaware, and conduct an on-site investigation as it does in Korea. If the KFTC were to impose sanctions on overseas affiliates based on domestic laws not recognized abroad, it could face trade issues or diplomatic friction. With the Trump administration already pressuring Korea to increase its investments in the U.S. by leveraging tariffs, it is difficult to predict how trade conflicts surrounding Coupang might unfold. Given the system's inherent limitations, the low practical benefits of regulation, and the difficulty of imposing penalties, the KFTC faces a dilemma over how to address both the possible redesignation of a foreign controlling shareholder and the fundamental issues of the controlling shareholder system itself.