Friday, September 7, 2007

Hyundai CEO Avoids Jail Because of His Importance to the Korean Economy

Hyundai Motor Group CEO Chung Mong-koo had his three year jail sentence for diverting over $100 million from the company into a political slush fund suspended by the Seoul High Court in favor of what is in effect five years of probation.  Hyundai accounts for approximately 7% of Korea's exports, and Chung's absence likely would have caused significant problems for the company because of the degree of control he exercises over the organization.  Along the lines of the old "too big to fail" approach to banks and other large industrial enterprises in the 1980s -- remember the Chrysler bailout? -- the appellate court viewed the collateral consequences on the country's economy from sending away Korea's second wealthiest man as more important than enforcing the sentence.  While the argument is sometimes made at sentencing in the U.S. that the leader of a company, usually a closely-held one, is too important to the business to be incarcerated, it would be very unlikely that any one individual in the United States would be viewed as so important to a publicly-traded company that he or she could not be removed as CEO to serve a jail sentence -- even at a company that makes iPods, iPhones, and other cool gadgets.  A Reuters story (here) discusses the sentencing. (ph)

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