[WHY] All in the family: How conglomerates drove Korea’s growth — and deepened its divides

Korean conglomerates have been at the center of the country's explosive growth, but the familial nature of these empires has stratified society while suppressing innovation.

A poster for drama series ″Reborn Rich,″ a story surrounding an employee at a conglomerate who reincarnates as the grandson of his previous employer, left, and the cover page of the webnovel of the same name on which the drama is based [SLL/SCREEN CAPTURE]

Open your go-to streaming service, say Netflix, Disney+ or Hulu, and you will find a score of Korean dramas mostly concerning a romantic plotline — and nine times out of 10, one of the main protagonists will be an heir of a large conglomerate.

Large, family-controlled conglomerates that often span a diverse range of industries — everything from automobile manufacturing to semiconductors to cosmetics — dominate the Korean business sphere.

Koreans’ obsession with conglomerates are apparent not just in the hundreds of K-dramas featuring them, but also in the news, which covers conglomerate-related updates regularly and with fervor; in the job market, which is flooded with prospective workers willing to do just about anything to be hired at one; and in politics, too, where key lawmakers often seek direct support and a chummy relationship with their leaders.

Often, this obsession is translated into a strange likening of conglomerate success to the success of the country itself. Jang Ha-seong, a professor at Korea University and former director of the presidential policy office, deemed this “conglomerate-phobia” in many of his works on the entities, describing it as a sentiment where Koreans feel that if conglomerates do not do well anymore, the Korean economy itself will struggle.

The significance of conglomerates in the cultural mindset of Koreans is not unwarranted, as so much of the domestic economy is dominated by them. In 2022, Korea’s five largest conglomerates accounted for approximately 45 percent of the nation’s GDP, with Samsung alone contributing nearly a quarter, according to data from Statista.

But is this obsession really just that simple, or is there more to it? Where does the love-hate, phobia-like sentiment toward conglomerates stem from? And is the system still sustainable? And if not, what should be done about it for the Korean economy to proceed on an upward trajectory?

Conglomerate heads, including Hyundai Motor Group Executive Chair Euisun Chung, Samsung Electronics Executive Chairman Lee Jae-yong, SK Group Chairman Chey Tae-won and LG Group Chairman Koo Kwang-mo meet with Acting President Han Duck-soo and Deputy Prime Minister and Finance Minister Choi Sang-mok ahead of their task force meeting to discuss countermeasures to combat tariffs ordered by U.S. President Donald Trump at the prime minister’s office in central Seoul on April 1. [JOINT PRESS CORPS]

A history of development

It is not simply that conglomerates dominate so much of the Korean economy, but that the history of economic and social development of the country itself is directly linked to them.

After the devastation of the Korean War (1950-53), the country faced the monumental task of recovering and building up its economy, and the government identified industrialization as a pathway to recovery and collaborated closely with emerging business families. In fact, the modern conglomerate system traces its roots to the 1970s, when President Park Chung Hee’s government assigned industrial sectors to specific companies — Hyundai got autos, Samsung got electronics — and rewarded them for hitting export targets.

Emerging during the 1960s and 1970s under such government-led industrial policies, conglomerates received substantial state support to spearhead economic development. This symbiotic relationship facilitated rapid industrialization, with the firms diversifying into a wide array of sectors and dominating markets.

Conglomerate heads of the top five conglomerates of Korea walk into the main hall of the Blue House before a meeting with former President Roh Moo-hyun on May 25, 2004. Conglomerates often enjoyed a close relationship with the political sphere in Korea. [JOONGANG ILBO]

“Conglomerates are not simply large companies that emerged without context,” said Park Sang-In, a professor of public policy at Seoul National University’s Graduate School of Public Administration. “They are private economic empires — commanding massive resources, often with minimal checks and balances. This level of economic concentration would be unimaginable in most democracies.”

While Korea’s developmental history was linked in this way to conglomerates, and the system proved effective in that era, there are limitations to that model today, according to experts.

"The conglomerate model was effective in the era of heavy and chemical industrialization," said Prof. Park. "But now that our economy has matured, innovation is being stifled. Monopolistic subcontracting, technology appropriation and wage suppression have created a segmented labor market and stunted the development of small- and medium-sized enterprises."

Participants of a job fair held at Busan Exhibition Convention Center in Busan meet with representatives and recruiters from major companies in Korea on Nov. 20, 2024. [JOONGANG ILBO]

A strain on the labor market

Another aspect of the obsession with conglomerates is how they affect the labor market in the country; while so many young Koreans hope and strive for a job in one, the conglomerate system and its dominance create a dual labor structure.

“So many of my friends and classmates want to get a job at Samsung, SK or Hyundai, but it’s getting more and more competitive,” said Kim Hyun-min, 26, an undergraduate university student currently preparing to enter the job market. “I think a lot of people feel increasing frustration with the prospects of getting a job, and that could lead to more animosity and, at the same time, obsession with conglomerates.”

The dominance of conglomerates in the labor market, attracting top talent with promises of stability and prestige, has led to a dual labor structure, where small- and medium-sized enterprises (SMEs) struggle to compete for skilled workers, hindering their growth and innovation potential, said Prof. Park.

A scene from drama series ″Queenmaker″ (2023), starring Kim Hee-ae, a fixer for a conglomerate who turns on her employers to seek revenge for a colleague to takes her own life after suffering from abuse by her employer. [NETFLIX]

"High-quality talent is sucked into conglomerates, leaving little for SMEs. This blocks new sectors from emerging,” said Park. “Supply chains are locked into exclusive contracts, leading to price cuts, technology theft and suppressed wages.”

This dual labor structure, in which talent is concentrated at conglomerates and SMEs are left hanging, is shown through the wage gap between SME and conglomerate workers in Korea, which is among the highest for member states of the Organisation for Economic Cooperation and Development (OECD). In 2022, SME workers earned on average 63 percent of what workers at large firms made, according to the OECD.

So the conglomerates are directly tied with Koreans’ wages, aspirations and the structure of the labor market itself — no wonder the conglomerate-phobia.

Conglomerate heads of the top five conglomerates of Korea meet with former President Kim Dae-jung, third from right, at the Blue House on March 12, 2001. [JOONGANG ILBO]

What about reform?

Reforming the system is not easy, and even administrations that made promises and campaigned on changing it have not followed through, leaving the problem endemic.

The history of attempts to reform the conglomerate system is riddled with small improvements and failures. After the Asian financial crisis in 1997, the Korean government wanted to improve the finger-in-every-pie approach of conglomerate business and opaque corporate operations of the conglomerates.

While conglomerates appeared to improve in terms of excessive diversification, financial structure and profitability, not much improvement has been shown in ownership structure and managerial transparency, according to several studies conducted by experts, notably by Prof. Choi Jeong-pyo of Konkuk University.

Cast members for the drama series ″Cinderella at 2 a.m.″ hold a press conference at Conrad Hotel in Yeouido, western Seoul, on Aug. 22, 2024. Many drama series and films in Korea feature conglomerate scions, as does ″Cinderella at 2 a.m.,″ which is about a young woman who decides to break up with a seemingly-perfect conglomerate heir. [NEWS1]

Especially regarding ownership structure, around 25 percent of conglomerate groups in Korea belonged to “ownership loops” involving circular ownership and cross-shareholding by the early 2000s, with the proportion increasing, rather than decreasing, to 27 percent by 2011, according to the Journal of Financial Economics.

During successive periods following the Asian financial crisis, the Fair Trade Commission (FTC) introduced policies to limit circular ownership and cross-shareholding and regulate internal transactions among conglomerates. However, conglomerates circumvented these regulations by converting to holding companies.

In particular, during the Moon Jae-in administration, which proposed conglomerate reform as one of its core agenda items, actual reform based on legal sanctions were minimal as reform policies relied on voluntary change.

An office worker walks across a neighborhood in downtown Seoul where major companies' headquarters are located on March 24. [YONHAP]

Are conglomerates really so different?

As large conglomerates are spread across the world, one might wonder whether Korean conglomerates are so much different from, say, corporations like Amazon or Google.

The main difference between conglomerates in Korea and the likes of Amazon and Google is that those here have an owning-family-centered structure controlling the company system, while the typical global conglomerate has a professional management system with shareholders wielding much more influence. For example, in the United States, funds are often listed as major shareholders of companies.

The numbers also tell part of the story: The top 10 conglomerate heads in Korea can exercise 55.7 percent of voting rights with just a 0.9 percent stake through circular ownership and cross-shareholding, according to a report by the Korea Development Institute’s Economic Information and Education Center, which is not feasible in most other countries.

Another distinction is in the sectors dominated by conglomerates at home versus abroad — while companies such as Amazon and Google have monopolies over certain sectors, Korean conglomerates span a number of different industries, thus enjoying dominance over the overall market of the country.

And while the conflict between founders of a company and shareholders that arises as corporations grow is not entirely unique to Korea, with academics like Harvard Business School’s Noam Wasserman outlining the common dilemmas facing companies in this manner, the family-centered, finger-in-every-pie market-dominance system in Korea acts as a standout characteristic that complicates and aggravates the issue.

The heads of the five largest conglomerates attend the Blue House political and business meeting at the Blue House in central Seoul on Aug. 25, 1999. From right, former SK Chairman Son Gil-seung, former Hyundai Chairman Chung Mong-koo, former Daewoo Chairman Kim Woo-choong, former Samsung Chairman Lee Kun-hee and former LG Chairman Koo Bon-moo. [JOONGANG ILBO]

What would real reform look like?

Prof. Park bluntly described the extension of conglomerate influence beyond the economy into politics and other areas as “economic power capturing democratic institutions.”

“When new political powers emerge, conglomerates immediately seek to ‘capture’ them,” said Park. “This cycle of collusion repeats because presidential power in Korea is centralized and party politics are weak. Even after the 2016 scandal involving former President Park Geun-hye, there was no substantial reform. The Moon administration, contrary to public expectations, enacted few structural changes and even expanded conglomerate privileges.”

For Prof. Park, effective reform starts with breaking up control structures. “We need to reintroduce a strict holding company model — two levels max: holding and operating firms. Right now, we have five or more in some cases. It allows massive resource control with minimal capital.”

Members of the Joint Action Against the Special Semiconductor Act Favoring Chaebols speak at a press conference held in front of the National Assembly in Yeouido, western Seoul, on Feb. 10. [NEWS1]

He also advocated for minority shareholder rights.

“Introduce a majority-of-minority rule. Let outside investors veto insider deals like self-dealing or unjustified executive pay. It’s already working in Israel and India.”

Prof. Joh Sung-wook of Seoul National University Business School, former chair of the FTC, agreed that conglomerate reform is crucial but stressed the importance of an innovation culture.

“We can’t keep winning just by being diligent followers,” the professor said, adding that as a top global economy, "We must lead, not chase. That requires open, flexible organizations where failure is tolerated, and new ideas are nurtured.”

Prof. Joh warned that despite recruiting brilliant talent, conglomerates fail to empower them. “Young minds are drawn in, but many leave or give up. It’s not just about policy. It’s about culture.”

On governance, she added that “there has been progress — cross-shareholding has been reduced, and some regulations are working. But at smaller firms, opaque practices remain. Social awareness needs to catch up.”

A scene from the drama series ″Queen of Tears″ (2024), starring actor Kim Ji-won, who plays the heiress of a conglomerate family and marries an ″ordinary″ man who is deemed to be beneath her station.[TVN]

Pride and frustration

The contradictory role of conglomerates — symbols of national pride and inequality — is central to Korea’s identity crisis, and results in phobia and obsession.

Despite criticisms, conglomerates remain deeply ingrained in Korean culture, as they are often portrayed in the media as symbols of success and aspiration, reflecting the complex sentiments Koreans hold toward these conglomerates.

“There’s this paradox,” he said. “People feel national pride when they see Samsung abroad. But at the same time, they see inequality, corruption and succession scandals. Both feelings are real — and they coexist.”

In pop culture, conglomerate heirs are often romanticized and glamorized. But, Prof. Park cautioned, “When the media glamorizes the conglomerate lifestyle, it normalizes inherited privilege. It tells young people their future depends more on birth than ability. That’s dangerous.”

A scene from the 2015 hit film ″Veteran,″ starring actor Yoo Ah-in, center, as a corrupt conglomerate heir [CJ ENTERTAINMENT]

He worries about how this glamorization affects civic consciousness. “When we romanticize inherited wealth, we imply that merit doesn’t matter — that only your family background does.”

Prof. Joh agrees, adding that conglomerate legitimacy now depends on public trust — not just financial performance.

“Future consumers and employees are watching,” said Joh. “If these companies are seen as unfair, exploitative or unethical, they’ll lose the global support they rely on.”

A scene from the drama series ″Reborn Rich,″ starring actors Song Joong-ki and Lee Sang-min, the latter of whom plays the head of a conglomerate. Lee's character oversees the businesses of his family-owned conglomerate, which spans dozens of different industries [SLL]

She points to foreign investor behavior as a leading indicator: “Roughly 30 percent of Korean stocks are held by foreigners. If they begin to pull back because of governance concerns, it will hit hard.”

So, conglomerates are at a crossroads — their contributions to national development are undeniable, but as the economy matures, the old formula of state-backed capital, internal supply chains and monopolistic control no longer delivers sustainable growth.

"Conglomerates built Korea,” Prof. Park concluded. “But unless we reform how they operate and interact with society, they may end up holding Korea back.”

BY LIM JEONG-WON [lim.jeongwon@joongang.co.kr]