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Just Don’t Take Away My Expense Account
Chaebol Object to Shareholder Activism: Not Shocking
This almost hilarious article appeared in the FT Beyond BRICs blog. Koreans have long known that the chaebol dominate Korean life. Shareholder rights is, for the most part, a foreign concept. Financial efficiency may be a stated goal but is not seriously pursued. That should be the demand made by shareholders. The funny thing is that the article tries to point out the NPF is being criticized for being a silent partner of the chaebol. That is a fact. More importantly, the problem is that the status quo affects not only current and future shareholders, but also affects disaffected employees, and Korean society as well.
Korean Corporate Personnel Practices are a Mess
Korean corporations perform an annual re-shuffling at the higher echelons of the executive ranks. At the end of each calendar year, horse-trading occurs in earnest. Executives lobby and politic to obtain new roles, or to keep their existing ones. In addition, this promotion process includes the promotion (or not) of junior executives to become senior executives. To native Koreans with working experience at a chaebol, this is nothing new. It is an age-old, antiquated process in which the level of executive productivity drops to…almost zero. All day, all night, at dinner, and thereafter, this process dominates everything. This type of deal-making, in which executives are shuffled among divisions or departments, occurs in a way that would make the team owners of the U.S. NFL or English Premier League jealous.
On an individual level, the effort of an executive to obtain job security for the next year is understandable. As a senior person rises in the ranks of a chaebol, the number of alternative jobs at different companies declines precipitously. Therefore, that executive wants to, needs to, secure himself for the coming year. Given that there are relatively few large Korean corporations, the options are very limited, which means that if there is no position, then there is almost certain unemployment (after a transition period), without the sophisticated pension plans that exist in the U.S. or Europe. Without an economic structure that supports small-business creation, the choices of alternate employee are few and far between. It is no wonder, then, that an individual executive must be involved: he has virtually no other choice.
Shareholders Should Be Appalled
While an individual employee may be acting in his own best interest, the shareholder should be appalled at this annual practice. At the end of each calendar year (in Korean language newspapers), an announcement by each of the largest chaebol which reports the names of the new heads of particular divisions. Given that this process lasts for at least a month and more likely six weeks, this is more than 10% of the entire year is used for this archaic practice.
This, of course, is only the tip of the very large iceberg. Executives at the largest chaebol have had, and continue to have, expense accounts from which dining and entertainment, of all sorts, are paid. The efficiency at the largest chaebol have been called into question for a long time. The compensation of these executives in shares of the company are relatively low. It is the view of the Seoul Gyopo Guide that this practice, i.e. low equity participation by employees, is one source of the continued divide between the rise in stock prices and the lack of increase in Koreans’ wealth. When coupled with inflation, the Korean corporate employee’s real earnings (nominal earnings adjusted for inflation) has made life even more stressful for the “salary man” in Korea. Given that the employees own little stock in their own company, why would this person challenge the status quo to improve the financial performance of his/her company? It would be almost foolish to do so.
The “greater good” of the Korean economy as a whole has been used to excuse the obvious missteps of certain Korean chaebol. Samsung Everland convertible bond, SK Corporation accounting: these are just two, but not the only, famous cases where obvious wrong has occurred but in which management remains. Another company is being charged now of keeping accounts outside the corporation for personal use. The Seoul Gyopo Guide’s only statement about these and other similar events is that native Koreans are well-aware of these practices, therefore it is no wonder that an everyday Korean believes that he/she is powerless against the status quo, and that conformity is the safer, more prosperous route.
“Shareholder Rights” is a Foreign Concept in Korea
The FT blog points out the NPF to be the largest shareholder of many of Korea’s largest companies. That is a fact. However, the issue that the article does not make is that as the largest shareholder, and one of the most important investors in the world, it is not using its voting power to demand greater improvements in efficiency and performance of its largest holdings. The implications are two-fold at the minimum. First, outside investors would find Korean companies even more attractive investments if there were greater transparency and efficiency at the corporate level. The NPF, as the article has mentioned, has been accused of being a silent partner of chaebol management. Second, the Korean population has grown immune to this entire practice as “the way it is.” Koreans have little belief, systematically, that their savings are being properly, efficiently managed. Korean employees do not want their earnings invested in their own company’s stock, because they see and understand how great the inefficiencies are, and how much they affect the company during the year.
Conclusions
Of course, there are exceptions to all of these statements. Nevertheless, everyday Korean life is full of an incredible amount of stress. Part of that stress can be attributed to the knowledge of large, systematic issues facing Korean life, and perhaps more importantly, the lack of hope for future changes to these fundamental issues. It is the opinion of the Seoul Gyopo Guide that the lack of shareholder rights and the lack of exercise of those rights when obtained is a systematic barrier to the fundamental improvement of the Korean economy. Perhaps some of the observations above are news to those unfamiliar with Korea. Korea itself is a country full of contradictions and is widely misunderstood: the Seoul Gyopo Guide exists to remove some of that misunderstanding. However, everyday Koreans are well-aware of the statements made in this post; perhaps it will require greater shareholder activism from foreign investors to help improve the situation. Clearly, those that benefit from the status quo aren’t interested in changes, and this blog has made that clear on numerous occasions. Perhaps the FT Blog article will help in some small way. Until the largest shareholders begin to demand fundamental changes on behalf of their clients, that change is unlikely.
In the basement, a book review
At Goodreads, I gave it four stars because I see great relevance with my own teaching position. Otherwise, the discussion about his life choices and family problems – though well-written – didn’t appeal to me and took a little away from the book. I was also disappointed in his overly florid prose, brimming with metaphor and allusions to literary classics. Perhaps he was working to defend employment; a sort of “Look at me! I know books! I really am a good teacher.”
I do think he is a good teacher and I intend to try a few of the techniques he described in my classes. I can do that because the whole adjunct professor – community college- education inflation thing he describes is a pretty good description of my own work as an ESL teacher at a university in Korea. The parallels might not be perfect, but they are clear.
Professor X has written an excellent expose on the problems of an artificial demand for education requiring an artificial supply of professors. There are several types of jobs out there that don’t require a university education. Although getting an education is not normally a bad thing, getting hugely in debt to find a job that doesn’t really require that training is.
X didn’t mention it, but I think this artificial need for a university degree could be compared to the artificial requirements for police jobs that limited the number of females that could apply. Eventually, feminists pointed out that most police work doesn’t require as much masculine physicality as claimed and more women were hired.
Anyway, more jobs either claim to require a degree or have so many degree holders applying that not having one is an immediate negative. President Obama and general opinion in the wider world hold that everyone should get as much education as they can.
Universities now see a lot of students who don’t have the basic skills necessary so they need to offer classes in remedial studies. The tenured profs are busy so adjuncts are hired. They are not treated so well by the university they work for. Prof X had no complaints about his superiors individually but did point out that he received no benefits nor was there a system for advancement. He often felt closer to his students, arriving almost by stealth at night, spending a few hours and going home, than he did to the ‘real’ professors who had perks like desks and such.
The students, however, had never planned on a university education and now were trying to catch up on years of neglect in order to attend real university. A quote from a student’s evaluation of X: “Before this I would of never voluntarily read a book. But now I almost have a desire to pick one up and read.”
It’s too late to choose a pseudonym for myself, so let me describe working conditions at X University in South Korea. The decision was made years ago to require six semesters of ESL for every student. A large number of native speakers were hired and described as “Visiting Professors” in English but as “Instructors” in Korean. Many of their students could use English capability in looking for work or in other ways to expand their horizons but few really needed it. The ESL department was a PR exercise to attract, I don’t know – Parents(?) to think about the university. Luckily for the students, the profe..sorry, instructors were expected to follow a bell curve by first filling in the A quota, then the B quota then the rest. It was a required class but luckily it was an easy one to get high grades in.
The book was also reviewed in Salon twice (1, 2) and I started writing about it when I was partway through.
Today’s NK Dump
The launches and the threats they provoke do raise concerns. North Korea’s been pretty aggro as it undergoes a leadership transition, shelling a South Korean island near the two countries’ disputed border and showing off a new nuclear weapons facility. Provoking the North with a balloon bombardment during this sensitive time might provide some inspiration to North Koreans — but it might also provoke another showdown with an increasingly itch-trigger-fingered North.
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North Koreans Hard at Work on New Uranium Reactor:
The new reactor, or at least the apparent construction of one, may be little more than cover for an extensive uranium enrichment program, since we presumably won’t be able to verify the degree of enrichment. Uranium must be highly enriched before it can be used in a nuclear (but not a radiological) weapon. A new reactor allows the North Koreans to claim that its uranium enrichment program is for the generation of electricity, which is exactly what it said about its plutonium program back in the early 1990’s.
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Time to Wise Up on North Korea:
There were, to be sure, a couple of simple requests – nothing that reasonable men couldn’t attend to. There was, for instance, the matter of a “security guarantee”.
The North Koreans apparently feel the American forces, down to 28,500 from 45,000 when Carter was president in the late 1970s – he had to swallow his pride and keep them there when he wanted to bring every one of them home – are poised to attack. What would be so hard about US President Barack Obama promising to do no such thing? And while they were at it, the Americans should also agree to a formal peace treaty instead of that outmoded armistice that ended the Korean War in 1953.
Carter evinced no sign of having comprehended the advice the quartet received from Daniel Pinkston, head of the International Crisis Group’s Korea office, when he briefed the quartet in Beijing before they took off for Pyongyang.
“The US is obligated to provide negative security assurance to North Korea,” said Pinkston, but Carter’s remark “seems to imply that the US has not provided negative security assurances”. That, said Pinkston, “is not the case.” Actually, the US has offered the requisite assurance “on several occasions”, he observed.
But what “would be sufficient in the eyes of the North Korean leadership?” Pinkston asked rhetorically. “If it means things such as renouncing extended deterrence for allies in East Asia and withdrawing US forces,” he responded to his question, “then it’s not going to happen.” And as for “credible commitments and implementation of previous agreements”, he added, North Korea “clearly has reneged on its commitments or failed to implement them”.
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Armitage: Korea-U.S. Relations ‘Eight and Half’:
“We don’t have to rush forward every time North Korea barks,” said Armitage. “We want a changed regime, not a regime change.”
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UN Launching Emergency Food Aid Program in NKorea:
WFP stressed in a statement that the aid operation in the authoritarian single-party state “will include the highest standards of monitoring and control to ensure that food gets to where it is needed.”
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Jimmy Carter Gets Hoodwinked by Pyongyang Again:
Providing food aid to North Korea remains a difficult policy decision. Clearly there is a need since the North Korean populace is suffering from the abysmal conditions imposed by the country’s economic system. Yet North Korea’s track record of belligerency, violation of UN resolutions, diversion of food aid, and resistance to economic reform and monitoring requirements undermine support for providing food assistance. Large-scale aid should not be provided without tangible changes in North Korean policies and behavior.
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Filed under: IGOs, Korea, Link Dumps, WMD Tagged: jimmy carter, kim jong il, north korea, richard armitage, world food program, yongbyon
The Best Totalitarian Regime
Daniel Pinkston at ICG discusses North Korean-Style “Democracy” and the Prospects for True Democratisation.
Under the concept of “democratic centralism” Kim Il-sung began to establish a personalistic system fitting the term “totalitarian” or “sultanistic” in the words of Juan J. Linz.[iii] Others have described the DPRK political system as “Stalinist, corporatist, mono-organizational, neo-traditional.” Charles Armstrong correctly points out that the state has displayed all of these characteristics and the state has transformed since it was founded in 1948.
(…)A modern democracy must include free and fair elections, the protection of human rights and civil liberties, freedom of thought and of the press, freedom of religion and a separation of powers with an independent judiciary. The DPRK fails in every single category necessary for a functioning democracy. The DPRK probably has come closer to the totalitarian ideal than any of its predecessors that attempted to build a totalitarian system, and the DPRK has lasted longer than any of its peers.
Dictators and totalitarian leaders always face threats and challengers. The rent-seeking opportunities are extensive in personalistic systems, but even the greatest dictators are victims of the system because of the attention and resources that must be expended to remain in control. Terror is a common instrument in non-democratic regimes. The ruthlessness exercised in these systems and the consequences of losing power, which often results in death—or exile if lucky—lead to a culture of settling political differences violently.
The lack of internal checks and balances, and the very militarized societies built to maintain personalistic systems, often result in dictators using their militaries to settle international disputes. The North Korean case is exacerbated by national division and a sclerotic economy that obstructs any modernization of its conventional military forces. The result has been a long-term commitment to the development weapons of mass destruction (WMD) and their related delivery systems.
The need for critical technologies and materials, and the desire for economies of scale in production have led to the establishment of procurement and proliferation networks for the most dangerous materials and weapon systems.[vii] WMD development, including two nuclear tests, has brought international sanctions that have compounded the DPRK’s economic plight. North Korea’s WMD threat cannot be ignored, but the very sanctions and other international pressure designed to compel Pyongyang to disarm have had little effect. Instead, they almost certainly reinforce hardliners in North Korea. This is not to suggest that sanctions should be lifted. To the contrary—but we must have realistic expectations about the effectiveness.
We should not be very optimistic about WMD disarmament, economic liberalization, the protection of human rights and civil liberties or democratization until there is a change in leadership and a change in the political structure/system. Without structural change—in other words, without a dismantling of the inter-locking institutional arrangement of the KWP, the military, and the security apparatus and the tight centralized control of economic resources—whoever is the suryŏng will not matter. Anyone would rule in a similar fashion in such an institutional environment or risk being toppled from within.
The current DPRK system is doomed to failure, but it could last for a considerable time. The international community could impose democracy through force, but that would require a very costly war that is politically untenable. Deterrence and containment are the primary policy instruments for dealing with Pyongyang for years or decades ahead. That means waiting for change generated from within, but the prospects are bleak.
Democracy in a North Korean context is almost Orwellian. But, the decent comparative analysis aside, is Pinkston implying that North Koreans gave some claim to perfecting totalitarianism, what with all the other examples in human history? What’s missing is the international context that feeds the North Korean state, and that accounts for this “prodigy”.
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Filed under: Korea, Social Science Tagged: dprk, international crisis group, north korea, totalitarianism
Getting The Shot 3: Lanterns
Lanterns are everywhere during this time of year and the biggest challenge is getting an image that stands out. Here is one of my favorites because of the angle and color. There are a few elements that make this style of shot work and I will try and be as detailed as possible.
First of all this is an HDR shot but, it is a very controlled on at that. I will explain later after I explain the set up and whatnot, I just wanted to prepare you for that as some might not have noticed that it was.
The main part of this photo is the angle in which it was taken. I set my tripod up on the shortest setting. Basically, I just opened the legs and sat it down. I then framed the shot so that there was a little break in the pattern making it a little more interesting to the eye than just a straight flood of color (which also would have worked too!). If you notice the rich blue popping out from between the lanterns, well that is because I timed this shot to get the blue hour. These days you are looking to hit blue hour around 7 to 7:30 pm, so try to be at your location a little bit earlier and get set up.
As I said before, this is an HDR shot, so I have bracketed the shots about 2 stops apart and used a cable release to make sure there was minimal camera shake. Alternatively, you can set your camera to timer (what you would use for taking a shot that you want to be in) and if you are using a Canon, it will fire all three bracketed shots for you without having to press the button each time.
Once I get on the computer, I load the images into Photmatix and tone map them. What you are looking to do here is bring out the colors but not go way over the top. I usually bump up the saturation and the strength to create a rich effect, but here you have to be really careful (be controlled). I adjusted the white and black sliders to bring out more of the sky and also create more contrast. I kept the strength around 83 but dropped the saturation to around 50 or so to not blowout the reds.
You really have to be careful with the saturation and especially the reds. With this shot, the reds are extremely strong and thus when brought into aperture or photoshop, I had to desaturate the red a lot to maintain balance. The other tip is that if you find that you are getting a purple sky, cool your photo down by either adjusting the temperature slider or using a cooling filter. When all is said and done, add a light sharpening layer and you are done.
Favorite Day in Korea: 지 리산 (Jirisan) Hike
63
Here’s a new video I recorded and edited using my iPhone4 and the ReelDirector app.
I recorded this back in January when myself, Herself and her thirteen year old cousin all went to the 63 Building in Seoul. I’d never been and if wasn’t for the Picasso exhibition in the gallery on the top floor I don’t think I would have bothered going up. As you can see, it was absolutely freezing outside. In fact, I’m not even sure why there are people outside, let alone taking a tour boat down the frozen Han River
The ReelDirector app is ok, I’d like a bit more variety in the choice of fonts for adding titles and for a feature that allows you to playback after you add or edit something. The last time I used it you had to edit the whole thing, save it, then play it back. Now, in fairness, there was an upgrade a while ago and I haven’t used it since so maybe this has been rememdied. Unfortunately, you don’t get enough time to see some of the pictures and the glass in the windors is a bit dirty so it doesn’t look great at times – you’d think they’d get someone out there and give them an ould wipe!
Please let me know what you think here or on youtube
…and while you’re at it why not visit my youtube channel
- Conzie Visual -
Including
- travel videos from Ireland, Korea and Japan
- live poetry readings
- Poetry videos
- People
Letter from Korea, April 2011
Suwon, South Korea
April 30, 2011
Dear Ireland,
Apologies for my lack of correspondence, I’ve been busy believe it or not. I won’t bore you with the details but I would in fact prefer to inform you of one of the reasons that I haven’t had as much time as usual to sit down and write you a lovely letter, as has been my wont for almost a year.
Recently, myself and Herself have become business people. We are proprietors. Not in the traditional sense, more in a temporary and experimental sense.
As I wrote in a previous post, I spend a lot of time in my friend’s traditional Korean tea shop that is close to our home. Recently the owner propositioned Herself whether or not she would like to run the tea shop. Herself was duly excited by the prospect and we decided we would take it on board for a few months and try it out.
This was duly done. The menu was changed and modernised – we brought in fresh juices, smoothies, coffee, beer, sangria and wine to drink, and we added sandwiches, soups and curries to the menu. Herself also bakes daily. As the owner is a vegetarian she asked us to keep it vegetarian fare, which isn’t a problem as dealing with meat is something I think we should avoid until we have a bit more experience outside of cooking our own dinners. As far as I can tell, everyone who has eaten in our new business has only complimented the food.
Along with changing the food, we changed the name to The OK Café. ‘O’ is for O’Reilly and ‘K’ is for Kim, and ‘Café’ because it is more like a café than a coffee shop or a tea shop – for me a café sells drinks, food and alcohol. I think in Korea the meaning of café has been confused with a place that just sells coffee and cakes. This is definitely not the case in most of Europe, and I’d wager that stateside is a similar state of affairs.
Last Saturday we had a music festival to celebrate the opening and new partnership with our friend Suni who still uses much of the space as a yoga studio, for holding group meals and other reasons. The 2nd International Music Festival was a huge success – We had over twelve performers with traditional Korean 창stealing the show followed closely by the mesmeric guitar work of LRD. We even managed to pull some people out of the crowd to sing a song or two with the music continuing long into the night and early hours. Fortunately it was worth it with not a drop of drink left in the house at the end of it all.
The whole experience has been unique. We have talked about opening our café or small restaurant for a long time and when the opportunity landed at our feet we didn’t know how to refuse. Of course, it is a temporary experiment for all concerned. Opening a business is a difficult task for anyone, and it is especially difficult when you have little to no money.
In Korea, to open a business as a licensed company, the best alternative if you will need financial backing from the banks, you must have 50 million won. There are two possible reasons for this. If you are a foreigner you need it to get an investors visa. Also, and this applies to Korean citizens also, it is a legal stipulation that you have this money – I suppose that you can prove that you have financial support in case things go slower than expected or belly-up in a fortnight and you have to pay suppliers etc. We avoided both of these.
We are only subletting the premises, so we don’t actually own the business. We just manage it. So this is handy. I suppose. I won’t go into the current complications with this.
That being said it’s not all rosy. Finding customers is a problem. Our menu, sandwiches and curry essentially, doesn’t really tingle the taste buds when you mention it to the Yeongtong locals, an area devoid of fine dining but rife with barbecue restaurants, noraebang and bars (not to mention the room salons on the outskirts). Yes there are a lot of foreigners in the area, but the standard practice is to gravitate towards NOW Bar or escape into Seoul. They certainly aren’t gravitating towards The OK Café.
We started this with very little money and even less planning. Our expectations weren’t high but at the same time when these aren’t met how can we expect to make further progress. I look at all the other venues that are operated by westerners in Korea and they seem to be packed full of events every day of the week. But what about people who don’t want to go to events and who want to just relax and have a glass of wine or just sit and read in comfortable surroundings? That’s what we have created. A space that is not what everywhere else is offering. But are we open in the wrong part of the world? Do people not want this in Korea where the gimmick is king?
Atmosphere alone was our selling point, but do we have to get the ring of balloons around the door and the dancing girl in a short skirt just to get people to walk in the door and up the stairs? Maybe we should we scrap the healthy food and throw down a pig roast served by topless women covered in cream?
Or maybe we should just wait and see what happens.
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