SK Group, South Korea's third largest conglomerate, launched a holding company structure yesterday to enhance accounting transparency by its family-controlled management.
Shareholders endorsed plans to split SK Corp, the country's largest oil refiner, into SK Holdings and SK Energy, the group said.
SK Holdings, controlled by group chief Chey Tae-won, will be in charge of investments in subsidiaries and the group's new life sciences sector, while SK Energy will handle the energy and chemical businesses.
Seven major units
The holding company will have seven major units, including top mobile carrier SK Telecom, which controls more than half of South Korea's wireless market.
"The shift is designed to enhance the business focus for both the holding company and the operating company and will continue to advance transparency and good corporate governance," the group said in a statement.
Activists said the move would put pressure on other major family-controlled business groups known as chaebol to improve corporate governance.
"The new structure will result in considerable progress in corporate governance. In return, Chey will be able to strengthen his vertical control over the group," corporate reform crusader Jang Ha-sung said.
"SK's initiative will put pressure on Samsung and Hyundai Motor to follow suit," he said, referring two of the largest chaebol.
Jang said that the group had been under pressure to improve corporate governance since Chey was sentenced in 2003 to three years in prison for irregular business practices.
An appeals court suspended Chey's prison term later but Sovereign Asset Management, a Dubai-based investment fund that bought a 14.8 percent stake in SK Corp, launched a drive to oust him.
Sovereign left South Korea in August 2005 after selling its stake.
Its two-year presence had triggered a debate about the role of foreign investors in South Korean companies and corporate governance in general.
Foreign capital
Foreign capital was seen as a way to help make local firms more transparent after the 1997-1998 Asian economic meltdown forced South Korea to undertake a dramatic market liberalization.
However, as the foreign companies realized often large profits on their investment in distressed companies, public sentiment has changed, with some viewed as having profited unduly from South Korea's woes.
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