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Chaebol Families Dominate South Korea’s Economy: What to Know
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Chaebol Families Dominate South Korea’s Economy: What to Know

Chaebol Families Dominate South Korea’s Economy: What to Know

For decades, South Korea’s economy has been dominated by a handful of family-run conglomerates that hold outsize wealth and influence and factor into nearly every aspect of life in the country.

Because of their political heft, the chaebol, as these families are known, have long been a matter of immense public interest. The marriages, deaths, estrangements and legal troubles of these families are chronicled in the South Korean press. Fictional chaebol families have been depicted in Korean dramas. The Lee family of Samsung, the Koos of LG, the Cheys of SK, the Shins of Lotte and the Chungs of Hyundai are household names that have tightly held the reins of the companies that are some of the country’s largest private sector employers.

Their power has been increasingly scrutinized — both inside and outside South Korea — as an economic vulnerability, deepening inequalities and fostering corruption.

The chaebol system is a legacy of South Korea’s history. After an armistice ended the Korean War in 1953, the country’s military dictators anointed a handful of families for special loans and financial support to rebuild the economy. The companies expanded quickly and moved from industry to industry until they morphed into sprawling conglomerates.

Even as the companies grew in size, wealth and influence, and sold shares on stock exchanges, they remained under family control — typically run by a chairman who also presided as head of the family. Generational leadership changes have sometimes unsettled chaebol families, forcing companies to split or spin off into smaller groups.

More than two decades ago, during a family struggle, Hyundai was divided among the founder’s six sons. The eldest son took control of Hyundai Motor, now one of South Korea’s biggest companies. Under Chung Eui-sun, the founder’s grandson, the family is still in charge of the global automaker.

South Korea’s rapid rise from postwar poverty to a major developed economy in a couple of decades was closely tied to the rise of chaebol companies. Their early successes boosted wages and living standards, and drove the country’s exports.

The total sales of the five largest conglomerates have consistently made up more than half of South Korea’s gross domestic product in the past 15 years, topping 70 percent in 2012, according to the book “Republic of Chaebol” by the economist Park Sang-in. Their businesses also permeate South Korean life — from hospitals to life insurance, from apartment complexes to credit cards and retail, from food to entertainment and media, not to mention electronics.

Patronage from political leaders was crucial to the chaebol companies’ growth into industrial conglomerates, particularly under the regime of Park Chung-hee, who came to power in a coup and ran the country for two decades until his assassination in 1979. For Mr. Park, the chaebol were an instrumental part of his ambition to enrich and industrialize South Korea. To that end, his government steered funds to companies that were cooperative with his agenda, protected them from competition and spared them of public accountability.

While the close ties between the government and the businesses have lessened in recent decades, political leaders still frequently turn to them for support or counsel. In turn, the companies have at times been shielded as being too vital to the economy to be broken up or scrutinized — something critics have assailed as a “too big to jail” problem.

This summer, chaebol heads traveled with the South Korean president, Yoon Suk Yeol, on a trip to Europe as part of South Korea’s bid for the World Expo. They also accompanied him on his visit to the United States to meet with President Biden and were among the guests at a White House state dinner.

Chaebol companies have become enmeshed in political corruption cases.

One of South Korea’s biggest political scandals in recent years demonstrated the close ties between the political leaders and the family-run conglomerates.

Park Geun-hye, the country’s former president, was ousted from office in 2017 and later sentenced to prison after she was convicted of bribery, abuse of power and other criminal charges. Ms. Park and a longtime confidante were found to have collected or demanded bribes from three chaebol conglomerates: Samsung, SK and Lotte. Ms. Park was pardoned in 2021 after serving almost five years of a 20-year prison sentence.

Lee Jae-yong, chairman of Samsung Electronics, the country’s biggest chaebol, was also sentenced to two-and-a-half years in prison for his role. He was paroled and later pardoned by President Yoon in 2022, a move that allowed him to return to running the company.