Woo Choong Kim & Daewoo Corporation

LDR/531 – Organizational Leadership

June 18, 2011

Woo Choong Kim & Daewoo Corporation

This paper’s will provide the background of the Daewoo Corporation, its Chairman and founder Woo Choong Kim, and the business cultural environment for South Korea known as Chaebol. Secondly, the paper will describe the leadership results and styles of Woo Choong Kim and the results of his influence over the government and the organization. Finally the paper will conclude with a look at the managing style of Kim as he presided over one of the world’s largest companies. History of Daewoo Woo Choong Kim founded Daewoo Industrial in 1967. Daewoo was a multibillion-dollar enterprise evident in its name meaning “Great Universe” (Clifford, 2003, para. 2). Kim was an ambitious 30-year-old entrepreneur who mastered the ability to acquire troubled companies, mostly from the South Korean government, and turning them back to the profitable side. After many acquisitions, Kim’s organization embarked on its tragic foray into the automobile industry through a 50% acquisition of Saehan Motor in a joint venture with GM Korea. This merger became Daewoo Motor Company. Later purchasing the remaining 50% from General Motors, Daewoo acquired the Worthing Technical Centre in the United Kingdom, Fabryka Samochodow Osobowych, truck manufacturers in Poland and the Czech Republic, and merged with car plants in Uzbekistan, Ukraine, and India. By 1998, Daewoo had expanded to contain fourteen new vehicle plants in thirteen countries with culminated with the purchase of a 51.98% stake in Ssangyong Motor (Kim, p. 279). In 1999 the universe of Daewoo was one of the largest conglomerates in the world. It employed over 320,000 employees, held 590 subsidiaries and was operational in over 110 countries. However, after the investigation of the inner workings of Daewoo and the subsequent failure, chairman and founder Woo Choong Kim was a fugitive for over six years; eventually obtained, and sentenced to eight and a half years in prison in 2005. He was later pardoned in 2007 by President Roh Moo-hyun.

The Culture of the Chaebol To view the organizational behavior of Daewoo, we must first understand the business culture of industry in South Korea during the Daewoo growth era. The Daewoo organization is as a Chaebol (jay-BOL). A chaebol is a large, conglomerate, family controlled firm characterized by strong ties with government agencies. The chaebols were able to grow because of their access to special favors from the South Korean government, foreign loans and foreign technology. These organizations were so government favored; they were allowed special privileges which gave them the impression of economic success that wasn’t always accurate as the world learned about the Daewoo organization. The founder and chairman of Daewoo, Woo Choong Kim’s behavior, was a major factor for the failure of the conglomerate. Also contributing to the failure was the reluctance of the government to establish checks and balances to the Chaebols of South Korea.

Chairman Kim’s Leadership Failures Chairman Kim had always been a man of tremendous drive and ambition. From his humble beginnings he was an extraordinary leader. He was inspirational and epitomized the can-do spirit of the first quarter century of the South Korean economic development (Clifford, para. 9). A good leader is always a follower as much as he is a ruler (Russell, p. 77). Kim has never been a follower, but he was always a ruler of his businesses. Kim was able to use his leadership ability of persuading and convincing all government officials that everything was achievable. For several years of economic turmoil, Kim was able to keep the Daewoo conglomerate afloat by using his leadership skills to gain access to more foreign and South Korean government loans. His reputation for leadership and influence, notwithstanding his corporate dictatorship of the Chaebol, was powerful to lead accounting gatekeepers, public sector advocates, government officials, and stockholders from speaking out against all the signs of deception and foreseeable collapse. Kim was a highly effective leader, unfortunately for dishonest outcomes.

Chairman Kim’s Management Woo Choong Kim’s management style was derived from basic Chaebol principles. First and foremost, Chaebols maintained a patriarchic management style that revolved around the controlling shareholder’s domination (Kim, p. 284). With Daewoo, it was Chairman and majority stockholder Woo Chong Kim who held the power of the entire organization with the shareholders, employees, and consumers. Managers within the organization that questioned the process of Chairman Kim would face retribution, representing the dictator style of management Woo Choong Kim had over his empire. Woo Choong Kim only had to prove to the government that the organization was performing reasonably well and was being managed tightly, which he did by creating illusions that the company sales had increased and the footprint of Daewoo was growing larger, when in fact the company’s financial structure was built and relied upon debt. Kim managed the organization debt-to-equity ratio as high as 2000% in 1998 (Kim, p. 280).

Conclusion Kim’s management style never changed in the 30 years of Daewoo; seize market share first, quash competition, and seek collection later (Kim, p. 282). His spirit, tireless energy, and grand dreams of South Korea attracted legions of professionals. Kim was recognized as one of the world’s most successful businessmen. Kim’s amazing ability to lead, control and manage a corporation that South Korea determined too large to fail, has survived. Daewoo filed for bankruptcy when the South Korean economy collapsed, unveiling the accounting fraud Daewoo Corporation had been involved. Today Daewoo Corporation is still relevant, operating outside of the Chaebol environment. The individual companies have restructured their finances and are posting significant gains. Nevertheless, Woo Choong Kim was a highly gifted leader and manager who were able to accomplish so much in such a short amount of time. Kim also shows us how a powerful leader and manager can be used to distort business throughout the world economy.

References

Clifford, M. L. (2003). The Rise, Fall, and Spin of Citizen Kim. BusinessWeek Online, N.PAG. Retrieved from EBSCOhost.
Kim, J.. The rise and fall of Daewoo: The making and unmaking of the high-debt firm in Korea. Ph.D. dissertation, University of California, Berkeley, United States -- California. Retrieved January 9, 2011, from Dissertations & Theses: Full Text.(Publication No. AAT 3411222).
Russell, B. & Falkner, D. (2001). Russell Rules: 11 Lessons on Leadership From the Twentieth Century’s Greatest Winner. New York, NY: Penguin Group.