[THE INVESTOR] On the Monday after Christmas, Park Hyeon-joo took to the podium at the just-opened Four Seasons Hotel in Seoul, giving his first press conference in eight years.
Mirae Asset Financial Group, which he founded in 1997 with 10 billion won ($8.4 million), had just won the hotly contested race to acquire control of KDB Daewoo Securities, a much bigger rival with a long proud legacy but a checkered recent history.
With the 2.4 trillion-won buy, Park’s biggest bet so far, the man who was behind a mutual fund boom in Korea in the late 1990s and early 2000s rose to the top of the heap in Korea’s highly fragmented securities industry.
But the 58-year-old entrepreneur was far from finished.
“JP Morgan as we know it today is pieced together by 200 mergers and acquisitions,” he told the press conference.
“I have done only 20.”
Korea’s Warren Buffett
Since the Daewoo deal, completed in April, the charismatic, self-made founder of Mirae Asset has been under renewed spotlight for his cheery optimism about Korea’s economy and financial industry.
Amid the seemingly deepening economic gloom and a wave of corporate downsizing, Park is among only a few in Korea to put much faith, and money, in the future.
“Why can’t we have a Samsung Electronics in finance? It’s time to face up to the deep-rooted defeatism among ourselves and chase the impossible dream,” he is fond of saying.
In Park’s view, opportunities still abound in Korea and the emerging world. The securities industry, for one, has high growth potential in light of low interest rates, burgeoning retirement-age population and a boxed-in stock market.
This optimism is in stark contrast to the views of Goldman Sachs, Barclays, UBS and the likes, which have recently scaled back or completely withdrawn their securities operations here on the outlook of lower growth.
This forward-looking vision, which often goes against the prevailing wisdom, and a “can-do” attitude inspired by Korea’s first-generation business tycoons are what made Park who he is now, industry insiders, watchers and experts told The Korea Herald.
“Without such faith and self-conviction, a success like his wouldn’t have been possible,” said Chung Sun-sup, head of Chaebul.com, a firm devoted to researching corporate magnets in Korea.
In the conventional world of finance, where innovations are harder to make, the former stockbroker started out almost like a venture entrepreneur, introducing products that didn’t exist in the market.
Founded in June 1997, six months before the Asian financial crisis struck Korea, Mirae Asset pioneered the local asset management industry by releasing a series of first-to-Korea investment vehicles from the first equity mutual funds, regular savings plans, private equity funds to real estate investment funds.
The result was phenomenal.
In a country where equity investment was considered a sophisticated form of gambling, Mirae Asset popularized retail stock investment funds as alternatives to bank deposits and savings schemes for ordinary salaried workers.
Professor Mukti Khaire of Harvard Business School writes in her case study on Mirae Asset, published in 2009, that much of this success was “ascribed to Park’s insistence that the firm take a different perspective, be a first mover in its markets and stick to a long-term strategy.”
But more than a successful businessman, Park wanted to be a visionary, market educator and investment guru, just as Warren Buffett is for the Americans.
“What was very impressive about Park was that he had a strong passion for long-term investments, believing that they will bring more wealth to the Korean public. He was also a thinker himself on how asset managers should behave with investee companies,” said Sadayuki Horie, head of research at Nomura in Japan who interviewed the Mirae Asset chairman back in 2010.
A retired industry bigshot who once headed a major banking group put it simple: “He’s a guy with an intuitive knack for investing.”
Chaebol or anti-chaebol?
Park, although he was inspired by the rags-to-riches stories of the Korean chaebol, has been publicly critical of certain aspects of the country’s towering family-owned conglomerates. He criticizes the way the founding family passes on control to their offspring and their top-down command hierarchy which puts the group chairman at the peak of the power pyramid across subsidiaries and affiliates.
As Mirae Asset grew into a financial group with multiple subsidiaries, Park put much thought on how he wants his empire to be run. His conclusion was to create a new role of chief strategist for the group.
"I want to put the dots in the right places and the executives have to connect the dots. My role is to encourage people to communicate in this space,” Park was quoted as saying in the Harvard case study.
The group’s units are now being autonomously run by their respective managers, while Park focuses on drawing the big picture for the group that mostly involve hands off day-to-day management and investment decisions, Mirae Asset Global Investments’ spokesperson Lee Jong-gil explained.
Park, on multiple public occasions, has pledged not to pass on management control to his children.
Critics, however, say Mirae Asset is still at its core a one-man empire. It faces the same questions about corporate governance and shareholder rights that haunt groups like Samsung and Hyundai, they say.
“Mirae Asset seems to have the typical issues of chaebol. Power ultimately resides in one person whose decision, I bet, would be simply beyond question for others,” Chung of Chaebul.com said.
Daniel Yoon, a U.S. attorney at law and researcher at the Korea Corporate Governance Service in Seoul, said during its initial exponential growth, Mirae Asset certainly benefited from having a visionary, charismatic founder and CEO shaping strategies hands-on.
“But there is a downside to it -- a weak system of checks and balances against the owner,” he said.
Mirae Asset Securities, one of the only two companies within the group that are publicly traded, has a seven-member board of directors, chaired by its CEO. Its internal auditor who also sits on the board has been serving the role for nine years now. The board, whose majority -- four out of seven -- is filled by outside directors, has a record of 100 percent agenda endorsement, according to the company’s annual report on corporate governance.
Korea Investment & Securities’ analyst Lee Cheol-ho said Mirae Asset companies have a track record of taking shareholder-unfriendly steps, as evidenced by Mirae Asset Securities’ surprise decision in September last year to raise nearly 1 trillion won through a new stock issue.
The move, intended at securing ammunition for the acquisition of Daewoo Securities months before the bid actually opened, was a turnoff for general shareholders of Mirae Asset Securities, sending the stocks into a nosedive.
“Park wanted to buy Daewoo Securities and had shareholders pay for it,” said a disgruntled shareholder, who said he dumped his entire shareholding in the firm out of anger.
Park holds no equity stake in Mirae Asset Securities, but controls 36.5 percent of it via Mirae Asset Capital, the de facto holding firm of the group 48.7 percent owned by him.
“I don’t understand why stocks went down. It was an investment decision that will boost Mirae Asset’s value in the future,” he said.
As for corporate governance, the group has been defying calls to adopt a holding company structure, despite having a de facto holding firm -- Mirae Asset Capital -- already. The reason being that Mirae Asset, still young and having many strides to make, shouldn’t be hamstrung by complex regulations imposed on financial holding companies.
“Mirae Asset’s deliberate efforts in the past to keep Mirae Asset Capital from being legally recognized as the group’s holding company didn’t help convince people that Mirae Asset is different from chaebol as Park asserts,” Chung said.
By Lee Sun-young (firstname.lastname@example.org)