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SOUTH KOREA: Analysts fret over management ethics as Hyundai Motor Group chief's son appointed to head Kia

By just-auto.com editorial team | 25 February 2005

The son of Hyundai Motor Group chairman Chung Mong-koo was picked on Friday to head affiliate Kia Motors Corp., a move some analysts reportedly said was likely to deepen worries about management ethics in South Korea.

Citing a Hyundai Motor Group statement, Reuters said Chung Eui-sun, 36, was named president of South Korea's No.2 car maker after starting out at Hyundai Motor Co., South Korea's top car maker, in 1999 as a purchasing director.

He reportedly graduated from Korea University in 1994 and completed a two-year graduate course at the University of San Francisco in the United States, majoring in business management.

Reuters said the chairman's son-in-law, Shin Sung-jae, was also appointed vice president of steelmaker Hyundai Hysco Co., while his cousin Chung Il-sun was named as president of BNG Steel, both Hyundai Motor Group affiliates.

"The move to promote a number of executives, armed with rich experience and outstanding capability, is to help the companies overcome an unfavourable business environment at home and abroad and improve global competitiveness," Hyundai said in the statement, according to Reuters.

But the news agency noted that foreign investors and analysts say questionable management practices remain a key reason for the relatively low value of local stocks compared with other Asian markets, a factor known as the 'Korea Discount'.

Investors reportedly have demanded a discount for buying South Korean shares because of a perception of lax management ethics, despite rapid progress by Korean firms in becoming global brand names.

"The move may not look a positive one to foreign investors," an analyst at a foreign brokerage told Reuters, adding that while not out of the blue, the promotion came quicker than had been expected and that it won't have any immediate adverse impact on share prices.