LG Group's Success: Making Compromise Work
DOW JONES NEWSWIRES
While markets seem to be enthusiastic about the increased autonomy of the operating units, they are lukewarm about the holding company itself. LG Corp. currently trades at a deep discount of about 70% to the net asset value of its holdings, says J.D. Song, Seoul-based research analyst at Samsung Securities. Investors appear to be taking a wait-and-see approach to LG Corp.
"It takes time, but the holding company may become a good proxy for the companies they own," says Henry M. Seggerman, president of International Investment Advisers, a Korea-focused investment-management company in New York.
Still, some investors and shareholder rights activists are less enthusiastic. They remain uneasy about LG's overall restructuring because of what they perceive to be the holding company's uncanny resemblance to the now defunct "chairman's office" -- the pulpit from which founders would exercise despotic control over the entire conglomerate.
"Coordination of the group's direction, investment decisions, and people development -- these functions are still valid," says Lee of LG Corp., addressing such concerns. But, "unlike the chairman's office, the holding company has legal legitimacy and must act in a rational, accountable way."
The Seoul-based Centre for Good Corporate Governance plans to keep a watchful eye on just how much influence the holding company exerts on its affiliates, says Jooyoung Kim, executive director of the centre.
Indeed, all eyes are on LG. Last month, a 12-member team from the Vietnamese National Steering Committee for Enterprise Reform and Development and other agencies visited LG executives to learn more about the group's restructuring.
LG's new holding-company structure may provide a new way of managing big business in Korea. But Samsung, so far, appears to be successfully barrelling along under its traditional structure of intricate business and financial relationships between its...