Park Jin Won was responsible for the longest board meeting ever at Hyundai Heavy Industries Co. One day last July, this independent director turned Hyundai Heavy's posh headquarters conference room in Seoul into a scene of heated debate that lasted for 10 hours. Board meetings at South Korea's largest shipbuilder--which also serves as a cash cow for the troubled Hyundai Group--have never been the same. "I volunteered to be the black sheep," Park recalls.
Park, a 55-year-old lawyer, is introducing Korea Inc. to the discipline of having truly independent outside directors. At the July meeting, he helped block Chief Executive Cho Choong Hooy's request to spend $220 million of the shipyard's money on shares in a unit of the chaebol's financially shaky semiconductor affiliate, Hyundai Electronics Industries. The deal, critics alleged, was really a ploy by the Chung family, which controls the chaebol, to have cash-rich Hyundai Heavy repay one of the chip division's maturing loans.
As a result of the shareholder revolt, Hyundai Heavy struck a compromise: The shipyard repaid the debt to prevent a default, but forced Hyundai Electronics to legally commit to paying it back. The chip unit, now called Hynix Semiconductor, is being spun off, and Hyundai Heavy will sever its ties to the chaebol. The big winner in all this is the shareholders: Hyundai Heavy's stock has jumped 35%, to $21, since the decision.
Hurting shareholders by using healthy listed companies to bail out weak ones is something the chaebol have done for years--and a practice President Kim Dae Jung pledged to end when he took office in 1998. Since then, outside directors have become increasingly powerful checks on corporate abuse. And few are more effective than Park. "His role shows how much Korea's chronic corporate governance problem could be resolved by giving independent directors a boardroom voice," says Korea University finance professor Jang Ha Sung, who leads a shareholder activists' group.
Park is an unlikely revolutionary. After studying economics and law in the U.S. and practicing in New York, he returned home in 1995 and became a corporate lawyer. But when he was appointed to the board of another chaebol-linked company in 1998, Park was shocked to learn the company's founder kept the seals directors needed to sign documents. In fact, the company had not held a board meeting for decades. Little wonder the chaebol were such a mess, Park concluded.
Ironically, Hyundai Heavy invited Park to join its board because he was a friend of a Chung family member. Little did they know the trouble he would make. In the Hyundai Electronics fight, management gave directors no advance notice of the plan to pay the chip unit's debt. With Park leading the opposition, the meeting stretched over two days as Hyundai officials shuttled to another room to confer with officials from the Canadian bank that held the debt. They returned several times with "ridiculously insufficient proposals," recalls Park. Hyundai Heavy management finally relented, and some insiders now say they are relieved. "Pressure from other group affiliates to help them out has stopped since Park's case," says Kevin Chang, a deputy general manager at the shipyard. "Our profits won't be milked by weak affiliates anymore." With more outside directors like Park, Corporate Korea may be less likely to put the economy at risk again.