Strong negative incentives create weird workarounds.
> you enforce power through social contracts in the upper strata of classes
Do you have any links that explain this?
I'm planning to visit South Korea so understanding some of the politics is interesting...
The following links here are a good place to start.
Elliott's activist letter to Samsung: http://sevalueproposals.com/assets/downloads/SEC-Press-Relea...
Elliott's presentation: http://sevalueproposals.com/assets/downloads/SEC-Presentatio...
Elliott famously disapproved of the Samsung C&T merger, which ultimately went through. The Korean media demonized Elliott for trying to reform the company. It was an eye-opening experience seeing how Samsung effectively captured Korea both politically and through the media.
McKinsey Report (ctrl-f: "korea discount") https://www.mckinsey.com/kr/~/media/mckinsey/locations/asia/...
Bloomberg report on the Korea discount: https://archive.md/eBJdl
FT Report about cross shareholding: https://archive.md/eYXGM
For all claims of Korea's dynamism, it's still seen as investment rat poison and it's telling that it's still considered an "emerging market" by MSCI. Public markets aside, SK's venture capital scene is, for all intents and purposes, non-existent.
Perfect information! Snippets for other readers:
Investors have undervalued South Korea's company stocks compared to other countries, leading to the term "the Korea discount."
This "discount" is in part attributed to corporate governance in South Korea where some companies may have less incentive to grow their share price to pay less tax when gifting or inheriting financial assets.
with analysts saying poor corporate governance is one factor behind what is known as the “Korea Discount.”
But investors often price [Korean shares] below their book value
[Another] explanation is the risk discount because of nuclear-armed North Korea.
To maintain control across generations despite South Korea’s unusually high 50 per cent inheritance tax, they have resorted to elaborate solutions that depress the country’s stock valuations.
At Samsung, heir apparent Lee was sold equity at well below fair value to the detriment of other shareholders. Lee's equity value went from ₩9.5 billion to ₩6.7 trillion
[The Hyundai family owners syphoned value] largely at the expense of shareholders in other Hyundai companies, according to court and regulatory findings that affiliates unfairly supported a company through noncompetitive contract awards at inflated prices.