An unlikely revolutionary against Korean Chaebols with conviction toward justice

F&D (Finance & Development) introduced Hasung Jang, Dean of KUBS, in its People in Economics section of June 2010 issue. F&D is published by International Monetary Fund (IMF) which handles major issues such as global economy and financial policy. This is the first time that a Korean business scholar was covered in F&D.  In this section, F&D calls him ‘an unlikely revolutionary’ and retraces Jang’s revolutionary movement in the past decade to improve transparency and accountability of Korean conglomerates, Chaebols. This section highlights Jang’s belief and sharp insight on his justice. He was the first to revolt against Korean Chaebol’s unclear accounting practices and abuse of power.

The following is an excerpt from F&D People in Economics. It tells about the journey Jang took. In 1998, Jang filed a class action lawsuit against Samsung Electronics, the superpower in Korean business industry and the Supreme Court ruled in favor of Jang seven years later in 2005. 

After earning a Ph.D. in finance from the Wharton School of Business at the University of Pennsylvania, Jang did not, in his view, hold true for the opaque accounting practices, monopoly and abuse of power by the giant industrial conglomerates that dominated Korea’s economy. So he launched a crusade for greater accountability and transparency in the giant family-run conglomerates.

In 1998, under the auspices of a grassroots civic group, People’s Solidarity for Participatory Democracy (PSPD), Jang filed a class action lawsuit against Samsung Electronics. He accused the company of making illegal political donations and unlawful subsidies to its failing subsidiary. Jang pushed for the appointment of outside directors, forced light onto opaque accounting practices and demanded the company to throw away collectivism and consider for shareholders’ interests. However, this revolutionary movement put his friends, colleagues and relatives in an awkward situation. Moreover, he was branded as anti-business and anti-Korean person.

Despite all that, the reason he couldn’t stop the revolutionary movement was due to his confidence that the corrupt Korean conglomerates are lowering the market power. And the progress of the battle started to turn in favor for Jang and his supporters. The Asian financial crisis came and it shone an unprecedented spotlight on the accounting and management practices of the country’s Chaebol and their role in precipitating the worst downturn in Korea’s modern history. At the depth of the Asian slump, Jang targeted a plan by Samsung Electronics to provide debt guarantees to its ailing car manufacturing subsidiary. It was one issue of many that he and his followers wanted to raise during Samsung Electronics’ annual meeting in 1998. On that day, for more than 13 hours Jang and his supporters heckled and interrogated company directors. 

This case precipitated the change in public opinion-many who had looked askance at Jang came to the slow realization that the Chaebol must change or be forced to change.  The government policies embraced a swathe of corporate reforms including lowering the threshold to bring a motion to a shareholders meeting to 1 percent of shareholders then to 0.01 percent, establishing a requirement that one-quarter of directors be appointed from outside the company, a new securities law favoring minority shareholders, and tighter rules on disclosure, accounting and board selection.

No one will deny that it was Jang who played a pivotal role in the making such laws. The Supreme Court’s ruling on Samsung Electronics case in 2005 came in favor of Jang, seven years after the filing of the original suit in 1998. Jang’s sharp insight, conviction and action to realize justice rather than accepting the social phenomenon had finally paid off.

Jang is still keen on corporate governance, acting as the special advisor to Korea Corporate Governance Fund (KCGF). KCGF was launched in 2006 to unlock the value of small and medium-sized companies by improving the quality of their corporate governance and reversing the traditional undervaluation of Korean stocks. The initial capitalization of $35 million now increased to $250 million and so great in his brand recognition that the fund is known locally as the Jang Hasung fund.

Jang’s thesis on corporate governance “Does Corporate Governance Predict Firms' Market Values? Evidence from Korea(Woochan Kim, Bernard S. Black co-authorship)” ranked top global 10 in the number of total downloads in the past 10 years at Law & Economics of Law School research papers of Social Science Research Network (SSRN). In the past 13 years from February 1997 to August 2010, the number of paid downloads of Jang’s paper reaches 7565. The fact that Jang’s paper ranked global 7th in the over ten-year accumulation is more meaningful in that this paper is not just a one-off thing but is continuously acknowledged.

Jang who is a globally recognized scholar and first to serve three consecutive terms as KUBS dean played a pivotal role in stretching KUBS to globally acknowledged business school. Looking back on the history of KUBS growth in the past five years in Jang’s tenure, the vision to become one of the top three Asian business schools and one of the top 50 global is not just empty words.

First of all, KUBS has 105 teaching staff, the highest number among Korean colleges. Based on such solid faculty, KUBS not only provides various lecture benefits but also receives good evaluation in research and academic outcomes. As one of the outcomes, KUBS ranked 7th in Asia and first in Korea in UTD Top 100 Business School Research Rankings, Journal of Finance, Accounting Review published by University of Texas at Dallas.

Also, as part of the efforts to nurture global talent through international education environment, KUBS recently renewed two five-year accreditation by AACSB and EQUIS, two prominent business school accreditations.
 
 
In November 2009, KUBS ranked first in Korea by Eduniversal on universal business schools with major international influence. The 1,000 selected business schools’ deans voted to give their recommendations about the business schools of the EDUNIVERSAL Official Selection. KUBS which confirmed to be the best business school in Korea will energetically move forward to become Asia’s top and one of the top global 50 business schools by 2015.