A Forensic Study of Daewoo’s Corporate Governance: Does Responsibility for the Meltdown Solely Lie with the Chaebol and Korea?

Kim, Joongi | January 1, 2008

At the end of 1999, one of the largest conglomerates in the world, the Daewoo Group, collapsed in a spectacular fashion. During its peak, Daewoo was a sprawling enterprise with over 320,000 employees with 590 subsidiaries overseas that operated in over 110 countries. Its management received widespread praise and academic recognition for its success. Yet, when the Asian financial crisis hit in 1997, it managed to commit a deception worth 22.9 trillion won ($15.3 billion) that was termed the “biggest accounting fraud in history, surpassing WorldCom and Enron . . . .” Years later, inner-workings of the conglomerate are finally coming to light. After hiding as a fugitive overseas for over six years, Daewoo’s chairman, Woo Choong Kim, returned to Korea in June 2005 to face criminal charges. In 2006, he was sentenced to eight and a half years in prison and disgorgement of a staggering 17.9 trillion won ($17.9 billion). In December 2007, he finally received a presidential pardon. This juncture serves as an opportune time to assess the ramifications of the Daewoo debacle.