Journal of Contemporary Asia
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Korean elites: Social networks and power
Yun Tae Kim
To cite this article: Yun Tae Kim (2007) Korean elites: Social networks and power, Journal of
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Journal of Contemporary Asia
Vol. 37, No. 1, February 2007, pp. 19 – 37
Korean Elites: Social Networks
and Power
YUN TAE KIM
Faculty of Liberal Arts, Konyang University, Korea
ABSTRACT During the period of rapid industrialisation, Korean business elites sought to establish a ruling alliance of state officials, politicians, business owners, and professional managers that formed a social coalition to influence the state and society as a whole, reinforced
through extensive social and political networks with various ruling groups. The elite community
has generated a high degree of self-recruitment and social closure through school, marriage and
kinship networks. In this way, the leading sector of the Korean business elite has formed complex, often contingent, relations with the state elite, and acts as an integral part of the upper
class in society.
KEY WORDS: Social network, inner circle, career mobility, power, informal ties, class alliance
Statist theorists argue for the autonomy and power of the state and formal
institutions, and have termed Korean (and East Asian) capitalism, ‘‘command’’ and
‘‘developmental’’ capitalism (Amsden, 1989; Haggard; 1990; Wade; 1990). Thus, the
business class is generally regarded as a ‘‘junior partner’’ of the state elites in the
process of economic development (Lim, 1985; Fields, 1995; Weiss and Hobson,
1995). But rapid economic development has led to the expansion of business power.
At the same time the formal and informal networks arising from various social
relations have provided the basis for business activities and have been an important
factor in Korean capitalism. However, there is very little research on business
networks and social relations compared with sociological literature on the origins
and development of state structures and roles in Korea (Suh, 1989).
This article raises an important question: Why and how has the business class in
Korea developed a wide set of relationships (networks) with the state and other elite
groups in society? The aim, then, is to estimate the extent to which the business elite
has transformed its economic domination into social and political power. In
particular, this analysis explores why and how large companies have developed their
social ties with state officials and politicians in order to pursue their own interests,
demonstrating marriage and kinship networks, common regional and educational
backgrounds and other social ties. This article seeks to provide an understanding of
Correspondence Address: Yun Tae Kim, Faculty of Liberal Arts, Konyang University, 26 Naedong,
Nonsan, Chungnam, Korea, 320-711. Email: yunkim2004@hanmail.net
ISSN 0047-2336 Print/1752-7554 Online/07/010019-19 Ó 2007 Journal of Contemporary Asia
DOI: 10.1080/00472330601104482
20
Y. T. Kim
the underlying nature of the Korean business class by examining the social cohesion
networks, and their degree of self recruitment and social closure.
Here we shall analyse four sets of data: (1) the institutional networks of big
businessmen; (2) career mobility between state officials and the business elites; (3) the
political involvement of big business in the political parties and the National
Assembly; (4) informal networks – school, regional and marriage ties – between the
state elites and the big business leaders. The annual Korean Business Directory and
the Korean Biographical Directories provided the information on all the present
positions held by the top leaders of the 100 largest firms, in terms of total sales,
identified in annual reports lodged with the Korean Stock Exchange. The
interlocking positions are examined at an earlier chronological point in the
individual’s life, beginning with place of birth, educational location, and adult
residence. Other primary data are taken from personal interviews and media reports.
Social Class and Social Network Analysis
Many social scientists have been intrigued by the level of interlocking positions
between state and society (Mills, 1956; Domhoff, 1967; Miliband, 1969). Since World
War II, many studies of the distribution of power in modern societies have been
much concerned with the existence or non-existence of stable ruling elites or ruling
classes. The American elite theorist, Floyd Hunter (1953), attacked the pluralist
conceptions of open and democratic city politics, identifying a stratified pyramid of
power in American cities in the control of business and social elites outside the
formal structures of local political institutions. Sociologist C.W. Mills (1956)
developed the concept of a ‘‘power elite’’ at a national level. Mills attempted to
demonstrate the coalescence of a single power complex drawn from big business, the
military and the politicians at the pinnacle of power in America, arguing that the
power elite owed its coherence in part to its members being drawn from similar social
backgrounds.
But it is widely assumed that there are major divisions of interest between elite
groups, who may collude in certain circumstances, but in others are more
fragmented and often conflictual (Giddens, 1973: 171). The problem of the effects
of corporate power upon government has been extensively discussed over several
decades. Modern elitist and neo-Marxist theories have become intertwined in dealing
with problems of defining and distinguishing the relations between the state and
capitalist classes (Miliband, 1969; Poulantzas, 1973; O’Connor, 1971; Block, 1977;
Therborn, 1978; Wright, 1978, 1985; Domhoff, 1990).
William Domhoff (1967) described the structure of the ‘‘ruling class’’ in the US,
showing the over-representation of its members in business and governmental posts
as well as its disproportionate wealth and income. Domhoff (1970) also analysed
how important public policies are created and implemented by the ruling class in
America. Business regards the state as instrumental to a cohesive property-based
class of capitalists because it is literally staffed by capitalists or associated social
groups, especially in key executive decision-making positions. Salzman and Domhoff
(1980) tried to identify further evidence for extended business networks in America.
Their research reveals the extensive involvement of the corporate community in the
executive branch of the US federal government (Stanley, 1967; Mintz, 1975: 851-69;
Korean Elites: Social Networks and Power
21
Freitag, 1975: 137-52). Domhoff (1990) also argued that most modern American
politicians are recruited from big business and corporate law firms. These analyses
are more or less based on the assumption that the capitalist class is a ‘‘ruling class’’
(Aaronovitch, 1961; Miliband, 1969).
It is often suggested that direct participation in government by personnel from big
business has characteristically declined in modern liberal democracies, except in the
US (Wright, 1985: 122; Dunleavy and O’Leary, 1987: 238). However, the state
apparatus in advanced capitalist countries remains staffed overwhelmingly by strata
of society who can be relied on to accept pro-capitalist stances on economic and
industrial issues (e.g., members of professions, lawyers, accountants and so on). The
elected agents of the state sector, of course, do sometimes respond to popular
pressures and aspirations expressed through the ballot box or through lobbying and
other organised activities. But those politicians are more often linked with private
capitalists through diverse social networks such as policy-making groups, thinktanks and foundations (Domhoff, 1990). Mizruch (1992) argues that the network of
relationships and economic interdependence reinforce a political unity in the
business world that overcomes the narrower interests of business corporations.
The role of social organisations and interpersonal ties have been addressed by socalled ‘‘social network analysts.’’ These scholars assume that actors do not behave or
decide as individuals outside a social context, and that their attempts at purposive
action are embedded in concrete, ongoing systems of social relations (Granovetter,
1985: 487). By definition, a network consists of a set of relations, or ties, among
actors, either individual or organisations, or both (Powell and Smith-Doerr, 1994:
377; Davis and Powell, 1992). Network analysts are concerned with informal
institutional influences, and have coined terms such as ‘‘alliance’’ capitalism
(Gerlach, 1992) to signify interconnected firms. These scholars also emphasise the
role of networks of social ties in recruiting individuals into, and then maintaining
their collective identification with and commitment to, corporate communities and
even larger political communities (Powell and Smith-Doerr, 1994).
These perspectives correspond with those who emphasise the importance of ‘‘civil
society’’ and its networks of voluntary organisational activities as a mechanism for
democratic compromise and as a bulwark against state oppression. Such
perspectives may also be found in the work of Marxists who emphasise the
importance of class-based collective action. However, they often neglect the ways in
which state actions prevent the formation of voluntary organisations, or shape the
formation of a corporatist design. Moreover, network analysts often suffer from the
criticism that social networks may provide opportunities for communication
between state and social groups, but do not prove the influence or power of such
groups in the decision-making process.
Using network analysis, however, social class theorists have analysed the closely
tied networks of corporate leaders, key policy-making bodies, and elite social groups
that promote the continued dominance of ‘‘upper class’’ interests. They have been
supported by impressive empirical evidence from the US, illustrating, for example,
the disproportionately powerful role of big banks, the effects of family stock
ownership, and the power of class-based corporate activities (Useem, 1984; Mintz
and Schwartz, 1985; see Scott, 1997 for Europe, Australia and Latin America).
Michael Useem (1984) observed an ‘‘inner circle’’ of senior corporate directorates
22
Y. T. Kim
with positions on boards of other leading companies in the US and UK. Useem
extends his observation into the disproportionate influence of the capitalist classes in
Western countries in terms of their more frequent membership of public and private
decision-making bodies as well as their own business corporations. Thus Useem
(1978: 3) argues that this ‘‘politicised leading edge of the leadership of major
corporations has come to play a major role in defining and promoting the shared
ideals of large corporations’’ in the industrial economies of the US and UK. John
Scott (1997) presents that Japan, Canada, Netherlands and Germany also have a
similar picture of business elite formation and the existence of a business
establishment.
We assume that the formal and institutional separation of the state sector from
business corporations, to varying degrees and in different ways, influences the
interlocking relations between state and corporate elites. As we shall see, interorganisational networks assume many forms. In Korea, many interest organisations
are highly centralised and hierarchical with a dominant organisation at the peak
level. Some consultative bodies are divided into multiple layers of organisational
clusters. Others are disorganised and even fractious in highly informal institutions.
Such different structures are significant both for the communicative opportunities
between organisations and for explaining the power and influence of individual
organisations.
The Institutionalisation of Business Networks
In Korea, the founding families of the chaebol have virtually controlled most of the
big business activities and consolidated their positions as the dominant economic
group in society. The chaebol is generally regarded as a family-controlled group of
businesses operating in many related and unrelated industries. The club of chaebol,
the Federation of Korean Industries (Jôngkyôngnyôn) has become the most
important interest group and consolidated a set of inner circles within the business
community. The professional managers, mainly chief executives, have organised the
Federation of the Korean Employers (FKE), but they are under the control of the
Federation of the Korean Industries (FKI). The FKI represents the most powerful
chaebols in the country, and insofar as they act in concert, the FKI also represents,
in one sense, Korea Inc.
The FKI, as an association of big businessmen, was founded with 57 large
companies in 1961, and this was extended to 380 member corporations by 2004. The
criteria for membership are annual sales of 600 billion Won ($75 million) or more in
industry and commerce, and 120 million Won or more in trade. But the power of
member companies is not equal. The member companies form the Chong’hwôi
(General Assembly), the Isa’hwôi (Board of Directors), including 135 chaebol
leaders, and 12 sectional committees dealing with corporate ethics, finance and
labour affairs and so on. However, a very small number of 17 large company
chairmen, mostly chaebols’ founders, constitute the Presidential Council (Hwôijangdan) that controls the most significant part of the decision making of the FKI.
As an officer in the FKI said: ‘‘the Presidential Council, has regular meetings at least
once a month, and often organises special meetings with economic ministers and
presidents to manage macroeconomic issues, such as investment, trade, money
Korean Elites: Social Networks and Power
23
supply, interest rate, exchange rate, taxes’’ (Interview with Lee Yong Hwan, Director
of FKI, 30 July 1999). The Presidential Council also discusses diverse societal and
political matters such as trade unions, government, political funds, education, and
almost all social issues. It should be evident that a very small number of chaebol
leaders at the centre of the business community control the most powerful economic
group at the peak level (Kim, 1999).
The FKI also operates a wide variety of committees to co-ordinate policy issues
between business and the state (Hwang, 1990). As of 1995, the FKI’s 33 committees
covered the entire range of economic issues, both domestic and foreign, and are
chaired by leading big businessmen. The staff of these committees stay in constant
contact with lower and middle level bureaucrats in relevant government ministries.
In contrast, the Japanese equivalent, the Keidanren (Federation of Economic
Organisations), takes a back seat to industry-specific industrial associations and
informal policy networks (Vogel, 1975; Okimoto, 1989). The FKI also intervenes in
the economic policy-making process in Korea. Policy consultation has developed
into a strategic and institutionalised form of collaboration between political and
economic actors. The government organised informal meetings to discuss diverse
issues with the business corporations. The FKI also plays a leading role in coordinating different business organisations. In September 2005, for example, the FKI
brought together the major industrial associations such as the FKE, the Korean
Chamber of Commerce and Industry (KCCI), the Korean Foreign Trade
Association (KFTA), the Korean Small and Medium Enterprise Association
(SMEA), and the Federation of Korean Bankers, to oppose the enactment of the
Temporary Workers Bill. The FKI demanded a more flexible labour market policy
to allow business corporations to hire and fire workers more freely.
The same pattern of business predominance is found in the various foreign
relations organisations. Chung Se Young, the president of Hyundai Automobile, is
also the president of the North East Asian Economic Co-operation Association,
and Koo Ja Gyông, the chairman of LG, is the president of the Korea-Japan
Cultural Exchange Foundation. Other chaebol leaders also hold various
presidential positions in international organisations such as the International
Private Economic Co-operation Association in Korea, Pacific Basin Economic Cooperation (FKI, 1991-95). These various foreign relations and business-related
associations provide not only foreign connections, but also regular policy meetings
with state officials.
Policy Networks between Government and Business
The Korean political system of the 1960s and 1970s bore some resemblance to the
‘‘corporatism’’ that emerged in interwar continental Europe. During this period, the
Park military regime presided over a kind of mercantile or patrimonial industrialism
closer to the ‘‘developmental state.’’ The decision-making process at the national
level had been supported by the corporatist and authoritarian political arrangements
(Kim Yong Rae, 1990). The state officials often preferred to command organised
groups directly, calling private business leaders into government offices and often
forcing them to change their demands (Y. Kim, 1998). This is quite different from
the militant, conflictual tendency against negotiations in France, and intimate
24
Y. T. Kim
negotiations which often mark relations between the government and organised
interest in countries like West Germany and the US.
While economic liberalisation has advanced, the Korean business community is
still as closely connected with government as it has been, but the state appears to be
less powerful or aloof from societal interests than it was once thought to be. While
the national system of corporatist representation declines, various forms of nonmarket economic governance are widely connected and multi-layered. Over 100
councils, committees and commissions had been created and attached to the
government. The recruitment of businessmen into these appointive government
positions prevails. By 1995, members of the Korean business community have joined
78 advisory, consultative and decision-making commissions attached to the
government (Ministry of General Administration, 1995). The 1980s saw a wave of
expansion as governments sought to establish consensual images in the public eye. A
number of consultative institutions appeared, particularly the Commission on Price
Stabilisation and the Commission on Employment Affairs. In addition, the
Commission on Democratic Reconciliation and the Commission on Globalisation
were designed to function to co-ordinate national policy-making in the transitional
period of the government. They brought together people in top positions from the
corporate world, the universities and the government to develop explicit policies and
programmes for submission to the president and the nation.
Other consultative bodies attached to government were mainly concerned with
particular industrial sectors and specific policy areas. The business executives were
directly involved in the formulation of industrial policies through their sectoral
associations such as Korea Automobile Industry Association (Chu, 1994). The
associations of the big business leaders, the FKI and FKE, have also regularly
organised semi-official meetings (Kandamhwôi) with relevant ministries in order to
co-ordinate important economic policies such as wages, interest rates, employment,
and industrial dispute (Interview with Lee Yong Whan, FKI Executive Director, 30
July 1998; for more details, see FKI, 1991). The FKI has made an average of 30
formal policy suggestions every year to the economic bureaucracy since the 1980s
(FKI, 1991). Michael Shafer (1994) argued that the government accepted 90% of the
FKI’s policy suggestions since the 1990s (see also Fields, 1997). The strong patterns
of co-ordination and collaboration between business elite and the state elite provide
the social basis of an effective ruling coalition.
The established practice of consulting on the details of legislation meant that big
businessmen could be very influential in the consultative structures where diverse
channels operated to communicate between the state elite and business elite. This
appears to contrast with the Taiwanese government, which, according to some
researchers, has developed a very weak policy network linking the central economic
bureaucrats with the private sector, relying more on public enterprises and other
public agencies (Wade, 1990: 296). It is argued that this weak network has made
long-term strategic bargaining with important private economic groups difficult in
Taiwan. The wide-ranging policy networks in Korea show the growing tendency
towards the state-business co-ordination and co-operation that replaced the state-led
policy-making process.
Apart from the official consultative bodies, the business community operates a
system of continual consultative meetings with senior policy makers in government.
Korean Elites: Social Networks and Power
25
Before many major policy initiatives, elaborate consultations are taken, involving
the creation of new governmental or outside related commissions, reports from
distinguished policy groups of experts, and scrutiny of the relevant organised
interests. Therefore, the business community is already fully involved in the policymaking process in addition to the proliferation of consultative organisations. In the
process of consultation, what is remarkable is the increasing strength of business
leaders in key decision areas. Many important economic policies, despite many
official consultative bodies, still tend to be co-ordinated through the peak level
meetings between the top governmental officials and the top business leaders.
However, there is often a radical disjunction between the vague consultation that
precedes a policy decision and the hard politicking that follows it. Depending on the
strength of the complaint or protest of relevant social groups, policy proposals were
often changed at the last stage or even withdrawn. In 1997, for example, despite the
government claim of neutrality, the ruling party abruptly enacted the labour reform
law, including the flexible labour market policy, in favour of the big business, in a
semi-secret session from which opposition assemblymen were excluded. Under
pressure of a general strike, however, the government finally had to revise the law to
allow more unionisation rights and job security than had previously been proposed
(Dong-A Ilbo, 8 March 1997).
Career Mobility between the Government and Big Business
A considerable amount of empirical evidence has been collected by Western
sociologists on the large number of corporate leaders who enter major positions in
the civil service, as discussed above (Useem, 1979; Scott, 1982; 1991a; Bottomore and
Brym, 1989). Career mobility between the state sector and the corporate community
in Korea, however, is unilaterally developed: while career mobility from big business
to the government is relatively low, the reverse is quite high.
One of the most prominent features of the Korean government is the very limited
entry of businessmen into higher non-elective government offices. As Table 1 shows,
the Ministry of General Administration figures show that from 1945 until 1992 big
businessmen account for no more than 10% of ministerial positions. The political
needs of the military regimes to gain popular support left little room for the
appointment of the chaebol leaders to ‘‘political’’ cabinet posts, though they
provided the chaebols with special financial favours in the industrialisation process.
As far as personnel involvement is concerned, therefore, the business community is
not a major part of the government. The military and state bureaucracies have been
the major channels leading to ministerial positions. Under the military regimes
(1961-92), the military filled 20% of the total ministerial positions and state officials
filled 56% (see Table 1). By contrast, being a big businessman is not a major route to
the top government positions.
However, a different pattern prevails in the recruitment of state officials into higher
corporate positions. The state bureaucrats tend to enter the private business
community that has close working relations with their ministry (Table 2). For
example, people from the EPB and the Ministry of Trade and Industry tend to enter
big manufacturing business, while the Finance Ministry bureaucrats go to big banks
and other financial institutions. The Defence Ministry officials and military officers
43
18
2
5
2
5
10
85
44
21
10
3
2
8
1
89
Chang Government
1960-61
Source: The Ministry of General Administration, various years.
State official
Scholar
Politician
Military
Journalist
Businessman
Others
Total
Rhee Government
1945-60
35
18
3
33
2
3
0
94
Park Government
1963-71
62
10
0
16
2
0
1
91
Park (Yushin)
Government 1972-79
[Unit: Number]
59
11
0
21
3
1
0
95
Chun Government
1980-87
Table 1. Occupational background of Government ministers, 1945-92
69
9
2
13
2
2
0
97
Roh Government
1988-92
Korean Elites: Social Networks and Power
27
Table 2. Occupational backgrounds of the higher executives recruited from outside in the 451
largest Korean corporations, 1989
[Unit: Number (%)]
Government
Military
Finance1
Economic organisation2
University
Other companies
Total
Chairman &
Vice Chairman
President &
Vice President
Managing
Executive
46 (20.0)
3 (1.3)
28 (12.1)
55 (23.8)
27 (11.7)
72 (31.1)
231 (100.0)
84 (12.6)
44 (6.6)
102 (15.3)
55 (8.1)
41 (6.1)
342 (51.2)
668 (99.9)
47 (8.6)
15 (2.7)
60 (11.0)
5 (0.9)
20 (3.7)
399 (73.1)
546 (100.00)
Notes:
1
Finance includes government-controlled the central bank and commercial banks.
2
Economic organisation includes government-controlled research institutes like Korea Development
Institute (KDI), and business organisations such as Korea International Trade Association (KITA).
Source: Kang Chul Kyu (1991: 77).
are recruited by many large defence-related corporations. As a rule, the business
community actively looks for retiring bureaucrats who have close personal connections within the relevant ministries. The large chaebols provided the state officials
with higher positions as executives or affiliated consultants within their business
groups. The former bureaucrats-turned-business executives play a very important
role in lobbying with the state bureaucracy because there are few independent
lobbyists in Korea. Moreover, the Korean large chaebols gather many influential
consultants and lobbyists overseas, in particular in Japan and America.
When the chaebols are lobbying the government or the military for contracts or
favourable regulatory rulings, it allows the chaebols’ groups to harness those with
the best contacts to do the lobbying. This pattern is quite similar to the case of
Japan. Taira and Wada (1987) argued that there is a stable inter-generational elite
reproduction mechanism which can be seen as Todai (Tokyo University) – Yakkai
(government) – Zaikai (business) complex in Japan (Curtis, 1980: 44-5; Johnson,
1995: 141-56). But it is very different from the high degree of career mobility between
big business and top government officials in the US, as noted above (Salzman and
Domhoff, 1975: 133).
There is a much more extensive flow of personnel from junior officials to leading
managerial positions in the private sector. The Korean business community has a
close relationship with ‘‘middle-level’’ officials from economy-related ministries.
While a relatively small number of top officials have moved to the business
community, several hundreds of lower state officials have entered private
corporations (Seo, 1984). At the same time, some chaebols have also recruited
retired executives from state-controlled banks. The business community prefers
middle-level state officials because such professionals have technical skills and
knowledge in economic administration as well as a wide network within the
government. Certainly, this plays a key role in facilitating intimate co-ordination and
co-operation between state officials and the business elites.
28
Y. T. Kim
The Political Networks of the Business Elite
One of the most important features of Korean politics has always been the great
dependence of the ruling party on big business contributions for its political funds
and the secrecy of the sources and amount of political donations. This extensive,
illegal financing of most politicians and the political parties became an integral part
of the Korean political system.
However, the frequent political upheavals in Korea often resulted in serious
troubles for the chaebols. Korea has experienced a series of radical political changes
such as colonisation, liberation, civil war, student revolution, and military coups.
Political financing of government and political parties often caused serious trouble
when a regime or individual faction collapsed because of political disruption. But the
chaebol could not turn down the requests of the elite groups for political financing,
not only because of strong – almost coercive – pressures from top elites, but also
because of significant mutual benefits between them.
There are two different methods of political donation from the big business
community: official and unofficial. Since the Rhee regime, some big businessmen
have officially participated in the ruling party and have regularly donated political
funds to the president and party politicians. Top political contributors are drawn
from the corporate world and the nation’s wealthiest population strata. In 1990, 22
chaebols’ owners out of the top 30 chaebols’ participated in the financial committee
of the ruling Democratic Liberal Party (DLP). The committee gathered political
funds of 10 billion Won ($12.5 million) annually, about 30% of the total costs of
running the party (JoongAng Ilbo, 23 January 1990). Favouritism is a frequent
motive for large contributions by the chaebols’ leaders and corporations who are
dependent upon government contracts, licenses, or regulatory decisions. According
to the Central Election Administration Commission (1988), for example, Dongkuk
Steel donated 600 million Won ($750,000) to the ruling party after they were allowed
to buy three firms of the bankrupted Kukje Group with government assistance. The
Kumho Group donated 100 million Won ($125,000) following the government
approval for the second national airline company.
Another important reason for political contributions is political ideology: there is
an impersonal motive behind big business’ support for the government and the
political parties. The FKI has selectively provided political funds for the conservative
parties, policy groups, and right-wing foundations including the US’s Heritage
Foundation. Even the president of the FKI, Koo Ja Gyông, publicly remarked in
1988 that ‘‘the business community could not give political funds to a political party
that did not support the free-market economy’’ (Yoo, 1990: 203). It can be said that
big business needs to funds its friends to keep its enemies out of power.
More importantly, the larger part of political funds from big business was handed
over to state officials and politicians in secret. It is widely known that all major
chaebols have made substantial financial contributions directly to the presidents.
Thus, the major chaebols have raised an enormous amount of ‘‘bich’agûm’’ (secret
fund) by illegal means in order to finance political lobbying (Park, 1989: 280-300).
Hyundai formally admitted making such donations in a public hearing on
irregularities at the National Assembly in 1988. Before the presidential election in
1992, Chung Ju Yung, the owner of Hyundai, said that he gave ‘‘political funds
Korean Elites: Social Networks and Power
29
amounting to 2 billion Won to President Park regularly, two or three billion Won to
President Chun, and thereafter 5 billion Won to President Roh’’ (Hangyôre Sinmun,
9 January 1992). These political funds were handed over as a kind of ‘‘semi-tax’’ for
the business security of the chaebols. There is no doubt that money can buy political
influence in policy-making process as it does elsewhere.
Despite the enormous amount of political donations, there were very few big
businessmen who were directly involved in politics or the parliament. Table 3 shows
that a relatively small number of big businessmen were elected as national assemblymen
under the military regimes. Before the 1963 general election under the new constitution
of the military government, the FKI, an association of big businessmen, made an
important decision not to send its formal representatives to the National Assembly.
This policy resulted from a serious debate among members of the FKI. In the process of
that debate, the ‘‘illicit wealth accumulation episode,’’ following the Student
Revolution in 1960, which concerned illegal collusion between government and
businessmen, was a crucial element in the decision (Lee, 1993: 147-50). Also, the
chaebols observed the strategy of the Japanese Keidanren, according to which business
representatives are not sent to the Diet (parliament). Instead, the FKI proposed the law
on political funds in order to legalise political financing from the corporate community
(FKI, 1983). Since then, the large chaebols have never sent representatives to compete
for political office, except for some personal involvement in political parties. It is also
important to note that Koo Ja Gyông, the president of the FKI, publicly remarked in
1987 that the business community would not be directly involved in politics because of
acute public criticism in relation to ‘‘politics-economy collusion’’ (Jôngkyông yuch’ak)
between government and big businessmen (Kim Jin Hyun, 1987).
But the most important reason for avoiding direct involvement in politics is that
the National Assembly has limited power in the national policy-making process.
Table 3. Occupational backgrounds of National Assembly Members, 1980-2000
1
Politician
Businessman2
Big businessman
Bureaucrat
Military3
Lawyer
Educator4
Journalist
Medical doctor
Farmer
Other
Total
1980
1985
1988
1992
1996
2000
118
27
16
30
22
19
17
6
5
6
12
176
180
12
4
28
22
4
8
5
1
3
19
276
176
7
9
31
18
16
9
5
5
4
19
299
210
14
4
29
13
9
4
–
3
1
12
299
170
19
10
13
14
19
15
8
6
–
18
299
70
16
8
50
3
34
16
39
3
–
34
273
Notes:
1
Politician includes professional politicians.
2
Businessman includes owners and managers of small and medium-sized firms.
3
Military includes military generals and officers.
4
Educator includes university professors and researchers.
Source: The Central Election Administration Commission, various years.
30
Y. T. Kim
The role of the National Assembly is weak and primarily obstructionist in nature.
Immense power resides in the president’s office. Since the Park regime, the
president’s office and the economic bureaucracy have played the most important role
in making national policy. The capacity for political parties to intervene in decisionmaking has been limited. Before the ruling party proposed laws, in most cases, the
consultative meetings between the party and government took place in several stages.
As a rule, however, the president’s office is most often directly intervening in the
policy-making process. State officials often revised the laws that had been proposed
by the politicians and party expert commissioners. This is why the Korean business
community has been more concerned with its channels to the president and
government bureaucracy than with the political parties.
We can find a relatively small number of businessmen-turned-politicians: 19 small
businessmen (6.4%) and ten big businessmen (3.3%) were elected as assemblymen in
the 1996 general election (see Table 3). The big businessmen included Chung Mong
Jun, the president of Hyundai Shipbuilding, Roh In Hwan, the vice president of the
FKI, and Kim Suk Won, the chairman of the Ssangyong Group. At the same time, a
small number of businessmen from small or medium-sized enterprises were elected as
party candidates. They were very often appointed as members of the financial
committee in the political parties in which they were involved. This low level of
political recruitment of businessmen reveals that the business elites need alternative
methods to connect between politics and business world.
Informal Social Networks
Mills (1956) argued that informal social ties among elites reinforce a common value
consensus, provide opportunities for arriving at policy decisions, and are thus an
important source of power. When we apply the elitist approach to Korea, the result
is full of intimate, personal interactions of businessmen, state officials and politicians
working together to make public policies. It is widely acknowledged that informal
ties are an essential element of rent seeking activity in the country. Although it is not
easy to gather information on the way in which informal ties influence the policy
making process, there is no doubt that they strongly bind together Korea’s elite
groups. Thus, the business community has vigorously developed regional, school,
and marriage, and other personal ties with the government and other elites (Park,
1975: 96).
First, regional ties are based on place of birth and early educational location.
Regional ties have long been a very important factor connecting Korean elites. In
particular, Kyôngsang province has almost half of the chaebols’ founders, higher
executives and government ministers. Also, Seoul and Kyônggi are highly
represented among corporate executives in the chaebol companies (see Table 4).
The Park regime had a great impact on the creation and development of the so-called
‘‘TK mafia,’’ or those politicians and military generals who hail from the Taegu and
surrounding North Kyôngsang province and who ruled South Korea until the 1992
presidential election. This is closely related to the high representation of the
Yôngnam (Kyôngsang province) chaebols.
Under the subsequent Chun and Roh regimes, regional ties played a very
important role in connecting the business leaders and the top policy makers.
Korean Elites: Social Networks and Power
31
Samsung has been clearly aligned with the ‘‘TK mafia.’’ The Samsung group has its
roots in Taegu, and has assiduously cultivated its ties with the ‘‘TK mafia’’ for
several decades. It has, like other chaebols, poured huge campaign funds into the
coffers of that region’s politicians over the past 30 years. The Samsung Group
employed a former prime minister, Sin Hyun Hwak, the so-called ‘‘Godfather of the
TK mafia’’ as honorary chairman of the Samsung group. In 1992 Samsung won
government approval to enter the securities business and to produce commercial
vehicles and laundry detergents. It is important to note that this happened in the face
of president Roh’s policy of restricting the chaebols from expanding into unrelated
lines of business.
The second important area of the social network is school ties. Table 5 shows that
in 1995 graduates from three major universities (Seoul National University, Korea
University and Yonsei University) held almost 60% of executive, government
minister, senior official and national assembly positions. Personal wealth grants
Table 4. Regional backgrounds of Chaebol Founders, Big Business executives and
Government ministers, 1991/1995
[Unit (%)]
Region
Seoul
Kyônggi
Kyôngsang
Chôlla
Chungchông
Kangwon
Northern
Total number (%)
Chaebol founders
Big Business executives
Government ministers
7.2
8.7
31.7
10.9
9.8
3.3
28.4
92 (100)
34.4
7.0
34.6
6.2
8.0
3.5
6.3
96 (100)
15.9
4.3
32.0
15.9
23.2
1.5
7.2
60 (100)
Sources: 30 chaebol founders from author’s own investigation; the largest 956 executives from the Korea
Stock Exchange, Sangjang Wolbo, October 1991; 779 government ministers from Wolgan Chosun,
February 1995, pp. 142.
Table 5. Educational backgrounds of the Chaebol company executives, Government ministers,
Senior Officials, and National Assembly members, 1991/1996
[Unit (%)]
Position
Executive
Minister
Senior official
National Assembly
Member
Seoul
University
Korea
University
Yonsei
University
Military
Academy
Other
Total
37.2
52.5
53.8
32.1
8.9
7.3
13.4
10.3
10.9
–
6.7
3.0
1.4
10.1
–
3.6
55.7
30.1
26.1
51.0
100.0
100.0
100.0
100.0
Sources: 956 chaebol executives figures from the Korea Stock Exchange, Sangjang Wolbo (October 1991);
779 government minister figures from Wolgan Chosun (February 1995); senior official figures from
Sindonga (February 1990); 229 Members from National Assembly (1996).
32
Y. T. Kim
access to a privileged education, and wealthy families may convert their economic
assets into the cultural assets of education certificates and accomplishments.
These cultural assets play a role in getting well-paid jobs in capitalist locations.
Pierre Bourdieu (1971) argued that a transition from a ‘‘personal’’ mode of class
domination to a ‘‘structural’’ mode of domination corresponds more closely to the
requirements of impersonal possession. As Scott (1997: 310) observes, wealthy
families may reproduce and enhance their life-chances without having to transmit
controlling blocks of corporate shares to the next generation.
It is also obvious that common educational backgrounds produce wider social
networks, prompting greater possibilities for personal interactions. As in Japan, the
same high school or university can also be a very important ascriptive link. For
example, the ‘‘K-S mark’’ (Kyônggi high school – Seoul National University) has the
basis for enhancing a powerful collaborative bond. Many chaebols’ executives joined
the alumni networks of the Business Schools at major universities such as Korea and
Yonsei.
Third, marriage is a key mechanism for creating social ties between elite groups.
The maintenance of marriage and kinship networks has played an integrating role
not only for business elites but also for other social elites in general. One can easily
find family charts in journalistic publications but Korean kinship has a very complex
genealogy (Seoul Kyongje Sinmun, April 1990; Paik, 1991). These kinship ties include
relatives of founders, direct marriage ties, and indirect marriage ties. In Korean
society, a marriage results in a very close social relationship between two families.
The fervour of the chaebols’ matrimonial practice is based on the notion that
marriage should consolidate family ties and strengthen the financial and political
situation of the family through the establishment of advantageous alliances with
other influential families. Such a tendency has generated the unique ‘‘status cultures’’
of the chaebols’ families with regard to the norms and processes of marriage
(Walraven, 1989: 4-11; Shin, 1995). Many chaebols’ families perceived marriage as a
union between the families involved, rather than a coupling of individuals, through a
marriage broker who has detailed knowledge concerning the financial, political and
social backgrounds of both families.
The 23 chaebol families among the top 30 chaebol are all connected with each
other through complex marriage networks (Park, 1996: 404-13). Samsung is now
linked through marriage to the families of LG. Lotte is connected with Nongshim,
Taepyngyang and Namkyong. It is expected that those chaebol tied through
marriage with each other are co-opted in their business interests, as already noted
above. State officials are also linked with chaebols’ families through their children’s
marriages and some have become executives in the chaebols’ companies after their
retirement from government. In 1995, each chaebol has marriage connections with,
on average, three ministerial-level members of the state elites and with 5.7 elite
members in total. Former president Roh Tae Woo also had connections with
chaebols’ families: Choi Chong Hyun, the chairman of the Sunkyong (now SK)
Group, is father-in-law to his daughter, and Shin Myung Soo, of Dongbang Oil, is
father-in-law to his son. There is a strong connection of business and governmental
interests, often facilitated by direct personal contacts. Many major decisions are
taken in contexts outside the public sphere of cabinet and boardroom meetings, and
in the more informal settings in which some of these individuals come into regular
Korean Elites: Social Networks and Power
33
contact with each other. For example, when the real name deposit system that aimed
to curb illegal financial dealings was indefinitely suspended in 1990, the FKI
president, Choi Chong Hyun, who is related to president Roh through the
marriage of their children, played a very important role in delaying the proposal
(Kim, 1995: 345).
Finally, Korean big business leaders tend to belong to various social clubs. Many
chaebols’ owners join Janchunwhôi and Chungchôngwhôi clubs that include many
senior chaebol founders. On the other hand, the 70 eldest sons of the chaebols’
founders have joined the YPO (Young President’s Organisation) that had global
business networks across the world (Hankyong Business, 1 July 1997: 30-31). The
other major social clubs of the chaebols’ leaders include the Korean Business
Friendship Club, Kyôngyôngyônguhwoi (Management Research Group), Purunhwoi
(Green Club), the Crimson Forum, the PP Club, the Taebaek Club and the Kaesông
Club. The corporate community is also closely related to other elites through these
social clubs. The Seoul International Forum, for example, includes many top
chaebols’ leaders, top government officials and senior politicians. There is no doubt
that personal interaction, consensus-building and friendship networks all develop in
the club milieu. These private clubs provide an opportunity for informal interaction
among elites in different segments of society. The business community also has
transnational links such as the Korean-American Wiseman Association. They
include top chaebol leaders and former top US policy makers such as former
Secretary of State, Warren Christopher, a former president of the World Bank,
A.W. Clausen, and former president of US Steel, David M. Rodrick.
The major Korean chaebol have made systematic attempts to connect with other
elites through diverse personal relations and social ties. For example, Samsung
employees, from line managers to senior executives, are obliged to develop and
maintain ‘‘connections’’ in the government, the military, among academic institutions
and politicians. Nearly 200 people work for the group’ chief information officers, who
are positioned by the chairman’ office in the majority of the group’ 40 subsidiaries and
affiliates. The Samsung group secretariat set up the Strategic Management Team that
ensures the groups’ connections with state officials, particularly in the economic
ministries. The group secretariat also collects, from employees, the names and details
of all their friends, relatives and classmates working in government, political parties,
the military, universities, think tanks and business. Thus, the group secretariat can
make private arrangements, including wedding and funeral occasions, for various
informal networks. The result is that Samsung is Korea’s best-connected chaebol.
Why has this kind of informal social network developed more than direct
involvement in the government sector in Korea? There are several reasons why the
Korean business community prefers ‘‘invisible ties’’ between businessmen and state
officials. First, there exists an internal conflict between the elite groups of society.
After the military junta came to power in Korea, the military officers dominated
state power in collaboration with state bureaucrats. Under these circumstances, the
military was a senior partner and the government bureaucracy was a junior partner.
Although they often flirted with distinguished professors and journalists, the military
and bureaucracy were the main architects of state power until the late 1980s (Paik,
1982: 49-65). Since then, the civilian regime has established a new ruling alliance of
political elites and state bureaucrats. Therefore, there are a relatively small number
34
Y. T. Kim
of big businessmen who take higher positions in the government as we noted above.
Instead, the business community attempts to connect powerful elite groups through
‘‘informal ties’’ such as personal interactions or marriage networks.
Second, there is strong populist criticism against the illegal politics-economy
coalition. The big businessmen have suffered from widespread public mistrust since
the ‘‘illicit wealth accumulation’’ episode in the 1960 Student Revolution (Suh,
1989). The popular sector and intellectuals have been very critical of the illegal
conspiracy between the government and businessmen that arose from the rapid
growth strategy in a close coalition between the state and big business. For these
reasons, the big business community has sought to produce informal ties with
government officials. As Koo Ja Gyông, the president of the FKI, remarked in 1987,
the big business community avoided the formal support of their members for
standing as assemblymen because of the public criticism of the ‘‘politics-economy
collusion’’ (Sindonga, March 1987: 326). As a result, less visible social ties have
become the preferred alternative to direct involvement in government.
Conclusion
Empirical data presented show clearly that the core of the Korean chaebols has a
wide set of connections with state officials, politicians and military elites. Korea’s
capitalists are much better organised than other social groups and exert a
disproportionate influence over the government through extended policy networks.
But the policy network has only a limited function in the government. During the
last decades, the military regimes have never exhibited this level of exchange between
the state and the private sector. Therefore, the direct participation of big
businessmen is very limited in the government sector and the business community
has little direct role in controlling the state agencies. In other words, Korean big
businessmen are not a major part of the society’s political governing group.
The historical predominance of military regimes over the capitalist class in the
political arena is an underlying characteristic of the particular pattern of
contemporary capitalist networks. Therefore, very few big businessmen were elected
as national assemblymen under military regimes. Instead, the big business
community has developed official and unofficial networks with political party
apparatuses and senior-rank politicians. Furthermore, over the course of the
economic liberalisation and political democratisation, the big business community
became an increasingly important feature in the political arena. In most cases, the
Korean chaebols have maintained the so-called ‘‘politics-economy collusion’’
through political financing and dense social networks.
Unlike the little direct involvement in government sectors and political parties, the
informal networks of capitalists are highly developed. The business community also
generates complex marriage or kinship relations, friendships and ‘‘old boy
networks’’ among other elite groups of the society. Many informal connections
have provided chaebols not only with communication channels, but also with
significant power and influence over policy-making process. The overlapping social
positions have contributed to a fluid social stratum which manages specific social
and economic opportunities. This analysis also shows that the organisational
solidarity among big business, the bureaucracy, political parties, the military, and the
Korean Elites: Social Networks and Power
35
mass media, has contributed to the formation of dominant positions within the
society. Thus, the Korean chaebols have become an integral part within the fluid
structure of class alliances over the rest of society, achieving higher positions than
others from less privileged backgrounds.
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