How the Rich Ate South Korea: Dark World of Chaebols. (Documentary)

I still remember how I first learned about them in current drama it's a typical story idea most often the story will zoom in and depict the rivalries and love lives of Young Rich heirs from various families [Music] I never knew this seemingly innocent story idea was actually inspired by a much more corrupted reality Korean they basically single-handedly run the economy there's rich and then there's Super Rich this is like rich like can't be touched by law control president typ of Rich Pak has been detained on a slew of charges EJ Yong was arrested in the is now under a bribe of nearly million us from Thomson grp tell you this RIT hole that I discover in the most interesting way possible where do I begin [Music] December 5th 2014 New York John F Kennedy Airport at 2:05 p. m. Korean Air flight 086 cab crew began to distribute nuts as snacks two passengers distribution started from the first class suddenly a hit argument was burst out between a passenger and the cabin crew but nobody really knew how powerful this passenger was until it escalated into hit confrontation explain a woman named Heather Cho Korean airs vice president for cabin service and W for daughter of the airlines chairman she was served macadamia nuts in a bag instead of on a plate Miss Cho forced the plane to return to the gate where she had the head of the cabin crew kicked off had show was shot with violating Aviation law by changing the flight plan carrying a sentence of up to 10 years and after the story sparked outrage throughout South Korea and much of the world she resigned some of her duties but only after 3 months the show was suspended for 2 years and the sentence was reduced to 5 months months later she was found not guilty of all [Music] charges well H Cho said she would resign from all positions under the hunting group in 20 8 Cho made her comeback as the president of three Hing group Affiliated companies in fact back in 2013 a similar incident happened to Cho but it was eventually covered up by the Korean Air Korean Air attempted to destroy evidence related to the inflight nut rage 4 years later the younger sister of Cho came under Fire as well former Korean Air executive involved in the Water Rage Scandal over allegations she threw a glass of water at an ad agency in employe and right here it's where I was hooked so I did a bit of research then I start to realize who these people really [Music] are chbl are what they being called by definition a Cho is a big conglomerate that's controlled by a family dynasty of its founder but if you not not familiar with it then perhaps you're familiar with these iconic companies of South Korea as of 2023 there are a total of 52 chapels in South Korea but as I went further down into my research I realize that with these Chels scandals are never ending [Music] [Music] [Music] there's a hidden terate rule in South Korea's Judiciary System written for the Chapels which is the 35 rule the rule refers to a 3E suspended prison sentence if no further violations occur in the following 5 years the sentence is then fully exempt regardless of the crime committed and I kept wondering how could this happen [Music] South Korea the chbl are the key to its economic growth perhaps the best demonstration is looking through a single ey popping data the revenue of the 10 biggest Chels accounted for almost 60% of South Korea's GDP and the Staggering degree of economic concentration makes even the most extremes examples in the rest of the world appear routine Japan's spers company Toyota accounts for about 5% of GDP in the US Walmart sit as just 2.

5% and because these business Empires are kept with family dynasties which means that just a few families in South Korea possess a vast amount of the country's wealth power and influence the thing is chbl and come from nowhere in fact South Korea was never meant to be rich it's destined to be poor just take a look at the map in South Korea only 22% of its land is arable and a rocked steep Teran doesn't make up for its lack of a agricultural resources through minimal wealth the country has limited coal and domestic oil reserves South Korea should be poor but it's not to understand this seemingly impossible rise of South Korea and how the Chapels reach such a point we have to di by the clock [Music] [Music] armies swept down out of the North determined to unify Korea under a communist Banner by Force of Arms the Republic of Korea could not defend itself against the sudden Fury of the red assault death and Devastation spread over a helpless people Korea had become a place of 24-hour Terror following the Korean War South Korea was devastated relying heavily on Imports but not producing or exporting many Goods at [Music] all singman re South Korea's first president began funneling International Aid to different business owners but as I dive deeper into this specific spefic bits of History I find out the true intention of roviding these speci owners with capital Aid was actually less about boosting Korea's economy but more about consolidating his own political power by asking them to provide a dirty money to wreck the election but after all South Korea was still poor the amount of exports was still far less than de of import it was still overwhelmingly Agricultural and underdeveloped president re has gone from the political scene Thrust out by the Revolt of the people riots on the scale of Revolution more was to follow but it already looked like the end of the road for president Sigman Ree and soon after in 1961 Rey was overthrown by a military leader that was soon turn a tide named PK Chun [Laughter] [Music] he n [Music] unlike re Park had a Crystal Clear Vision to make things better for his country but to do so he had to foster a new strategy while Park originally planned to crush these business owners for the involvement in corruption with re he gave up this plan eventually cuz he had another grand plan that might need the [Music] [Music] contribution both trained exports of crade products worldwide this was the first and also the most critical words of the plan that these business owners could see [Music] [Music] [Music] samung however the only way for the Chapels to get the capital they needed for expansion was to meet Park's expectations if they failed to satisfy him Park would just allow them to collapse and these family-owned golman fund control companies eventually came to be known as the Chapels [Music] by providing cheap sale plenty of subsidies linean loans and tax breaks Park made this family businesses expanded vertically and horizontally in 1960 South Korea's GDP was less than $4 billion fast forward 20 years later in 1979 the number skyrocketed to almost $17 billion [Music] nor Park safe South Korea but it just so happened in same year the Democracy movement forged the anti-dictatorship protest against Park chongi took place in Busan the second largest city in [Music] Korea at the same year in October a Miss movement Park was assassinated Park Chong who ruled the country for more than 18 years is dead the new government announced that President Park was killed by a shot fired at a dinner party Friday night in downtown soul what park had never thought about is that behind this prosperous cess qu there will be a heavy price to pay for the sou TRS in the near future major political upheaval tonight in South Korea calling for the resignation of President ban h by Reinventing the present it is my pleasure to introduce the gallops no 10 Samsung Electronics has been ranked by far South Korea's most valuable brand Samsung Electronics has broken another s faer boosted by Remains the country's richest stockholder the Samson group has been raided by prosecutors along with the officers of the country's National pension service it's said to be in connection with the influence pedling Scandal embroiling the country's president and theis some might argue South Korea is Samsung and Samsung is South Korea well I wouldn't disagree with that year after year about 20% of the entire nation's economy is made up by Samsung group alone the only single entity that can compete with it is the South Korean government whose spending typically makes up to 20% of GDP but perhaps the centrality could be attributed to how much Samsung has penetrate into South Korean life what you're looking at is the business structure of Samsung when you buy a smartphone you buy it from Samsung when you need life's Insurance you purchase a policy from Samsung when you take the ferry you step onto a ship built by Samsung when you go to the F Park you once again pay your money to Samsung but behind this scatter convolutive web offices owned by Samsung there's a question that you might felt just a simple Google search we found the entire Samsung group is worth around $400 billion meanwhile the net worth of its current president Lee J Yong is actually less than $10 billion Which is less than 2% of the entire group and this number already include his father's large amount of inheritance so how was he able to control the entire company then in my common sense if a person wants to take control of a company he he or she has to own 51% of the shares but in practice I'm completely wrong imagine you are running a conglomerate and that's called your very core business as company a this company a has a major shareholder Company B this company B has a major shareholder as well company C so on and so forth and finally here comes the company that you have direct control and majority shares the valuation of this company in this long chain is only worth 8800 million So eventually you only need 400 million to gain control of this company and also all other companies and for these companies they don't really need to have a business themselves but they only serve as de facto companies that control many more other Affiliated companies even more you might not even need this much cuz this is a combined amount between you and your Allied investor and this strategy has its own name throughout the decades the Le family use this exact strategy to create this complicated web of ownerships that can even confuse the safia's financial analyst but ultimately what matters most to the Lee family is the complete control of the entire Samsung [Music] Empire but this strategy is fragile especially when someone dies these Health complications has Samsung group on high alert the of Samsung Electronics has yet again emerged as a massive concern to the management of the sprawling Samsung group in 2014 the former president of Samsung Lee Kun he suffered a heart attack he barely survived and was hospitalized for months meanwhile his children started to become worried especially his Elder son samung is also expected to accelerate its corporate succession to Le three children Le son Samsung Electronics Vice chairman e is expected to eventually succeed him you see South Kore has one of the highest inheriting tax rate in the world 50% if their father pass away they will have to pay a huge amount of taxes to the government likely by selling most of his shares which would cause them to lose control over the Samsung Empire DJ Yong did a plan and he stared at a web of business that his father owned and suddenly he was clicked see if we remove most of the insignificant Affiliates of this Mega business Empire and keep the most crucial ones there will be only two left one the Samsung CNT two the chill Industries these two companies essentially act as the defao companies that were set up to serve the most crucial business Samsung Electronics but the problem is throughout the years the Le family's control over chill was much more stronger than CNT where still the control of CNT was fading as other hostel investors continued to buy in if we put ourselves in the shes of the Lee family perhaps the most sensible thing to do is to overvalue chill and under value CNT you will effectively end up with more control over the new combined defecto holding company and more control over the entire Empire without spending a scent ideally speaking it works but the thing is this murder will immediately dilute the shares of CNT and even though the Lee family knew this the proposed sadly that one CNT share convert to 0. 35 Shi industry shares and when a Le family announced this proposal they create a far reaching backlash the third largest stakeholder in Samsung CNT who had been trying to block the merger argu that it undervalues the construction unit say the proposed merger between Samsung CNT and jail Industries is unlawful and unfair and should be blocked to Lee J Yong perhaps the most perplexing problem is to get shareholders to agree on this unfair proposal and major decisions like mergers require approval from two3 of the shareholders Samsung CNT is pouring all of its efforts into getting shareholders to support its proposed merger with another Samsung group affiliate but while lie Jong was still scratching his head he noticed a name the biggest well amongst all shareholders with 11.