Corporate governance reform: the case of Korea

Due partly to the expectations of foreign investors, the reform of corporate governance following the 1997 financial crisis has largely been in line with the Anglo-American outsider model at the expense of Korea’s traditional insider model. The increased role of the (equity) market vis-à-vis banks and shareholder activism, NGOs and foreign investors has helped to constrain ‘tunnelling’ by controlling shareholders. While the complicated ownership structures have yet to be resolved, the governance paradigm of chaebols has gradually changed from one dominated by family or controlling shareholders to a system in which the power of professional managers and monitoring of markets have increased substantially.