Let me tell you something about Koreans (I live here) and Korean companies, like Samsung:
Koreans will say "NO" or "NEVER" to any answer that they don't know the answer to. They will swear it's a fact, too.
The simple fact is, this person you talked to didn't know the answer. If they were a non-Korean, and contacted a Korean boss, and the boss didn't know the answer, then it would be: NO.
I face this on a weekly basis here in Korea.
And if you consider this back-stabbing, then you need to read this about doing business in Korea. It's very fascinating, and VERY true:
http://www.escapeartist.com/efam19/I..._in_Korea.html
That article says more than I ever could. Samsung is a "chaebol":
Quote:
So, how does a chaebel work? They are incorporated under Korean law. The majority stockholder is usually a senior family member. There are three sets of books. One set is reserved for the taxman, who gets paid under the table at tax time. The second set is reserved for the stockholders to view. The third set is the actual cash record. The senior family member and majority stockholder may be the only one who ever sees this record. There are several articles in "The Economist" that cover this territory.
Personal and corporate expenditures are most often mixed out of the same bank accounts. Any surplus is withdrawn and distributed among family members in a clandestine way. These cash transactions are frequently carried out under fictitious names. This makes tracing any of the money virtually impossible. It is not unusual to find large estates owned by people who do not exist.
There are no spreadsheets or financial documents that indicate the health of the business. If you were going to purchase the company, there is no convenient means to make a valuation of the company. The usual method of operation is depletion of the cash reserves into hidden accounts and assets, such as property. The company operates on cash flow until there is a downturn. A corporate president may become extremely upset over minor cash flow disruptions. He cannot reveal his hidden assets and cash, but must still pay bills and wages. Then, loans are sot from friendly bankers to make up for the deficit.
The bankers never qualify their clients. Most loans are made on the basis of friendship and family connections. The loans are rarely, if ever, secured loans. Occasionally, the corporate assets are used as security. Since the corporations are frequently in debt in excess of their value and the real wealth has been spirited away, these loans can never be repaid.
Since OEM (Original Equipment Manufacturer) deals with foreigners are the most common in Korea, we will start with one example of how things might work. Suppose that an American company has developed a technology and manufactures it. They become interested in a Korean company for production to reduce labor and other related costs. An interested Korean will open negotiations. The Korean government may give the Korean businessman a factory apartment, including utilities, for free for a limited time. Or, the Korean government may give the Korean businessman a loan that does not have to be repaid under a certain set of conditions. To the American, the Korean has an on going business in a small factory. It cost the Korean businessman nothing to set up. The American company gives the Korean businessman 40% of the price of the contract to purchase parts and materials.
Now, things start to get interesting. The contract may only be for two years, at which time it must be renewed. The Korean company completes delivery of the products. After one year, there is a large amount of money on the "investor" set of books. With this in hand, he gets his friends to invest. With the additional cash, he runs down to the bank and gets a large loan from his local banker family friend. All of the money just evaporates. Now, the cash flow from product shipments to the US is only covering wages and loan interest.
The second year ends and it is time for contract renewal. The Korean company is having financial problems at this point. So, they raise the price on the contract. The Americans agree. The same process repeats itself for the next two years to the immense enrichment of the company owner and his family. But the next time it happens, the Americans back away and take their business to China. Now, the company is bankrupt. The bank has a bad debt and the stockholders may have incurred some liability for the loans. Everyone loses except the company owner and his family. He may drink and cry in public, but he is only unhappy that the cycle did not repeat again. If you were a stockholder, you may be interested in where all of the money went. You will never find out. This is one reason why corporate bankruptcies are very common.
Another example is the medical company that bought a hospital in Korea. The deal was for cash. Once the transaction was completed, the party selling the hospital opens a new hospital across the street. All of the doctors and hospital staff move across the street. Since the Koreans are very loyal and respectful of their physicians, they move across the street as well. Now, the medical company has an empty building with no staff. One might think that new staff and physicians could be hired and the patronage of the old patients renewed. The patient's loyalty to their doctors will prevail. No new patients ever appeared. The entire investment was lost.
A Korean business man spent four years developing a relationship with a Malaysian. The Malaysian finally agrees to a joint venture in Malaysia. But, he wants a contract with guarantees in the event of breach. He also wants to use modern accounting methods and have a means to keep track of the money. The Korean backs away making lame excuses. The real reason is that he did not want anything in writing, especially a contract. His remark was, "You must understand the Korean way. This is how we do business in Korea. You don't trust me." He openly displayed insult over the Malaysian distrust. It was an affront to his honor and reputation. Actually, he would have disappeared all of the cash and the Malaysian was smart enough to know what the Korean was about. The deal never happened for good reason.
During the last economic crisis in Korea, Hyundai received a loan from the IMF. One of the conditions was that Hyundai use modern accounting methods and that the banks involved exercise modern loan qualifications. Hyundai agreed to all of the demands and conditions of the IMF loan. Then, it was business as usual. Hyundai is on the rocks again and one of the major American motor manufacturers withdrew. The pit is bigger and deeper than ever before, with the assistance of IMF money.
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