The Unlikely Revolutionary

• Author: Hyun-Sung Khang
• Position: a Senior Editor on the staff of Finance & Development.

JANG HASUNG’S crusade against the opaque accounting practices of Korean big business was almost derailed in its infancy by a fainthearted young lawyer. In 1998, Jang and his supporters filed a class action lawsuit against the Korean industrial powerhouse Samsung Electronics, accusing it of making illegal political donations and unlawful subsidies to a failing subsidiary. With limited funds, Jang was forced to use the services of a fellow activist—a recently minted young lawyer—to champion his cause. Samsung, for its part, had hired the best: “the king of litigation,” as he was known in local legal circles. So, in a strongly Confucian culture in which seniority automatically confers additional authority, the plaintiff’s young counsel faced the disadvantage of both youth and inexperience.

After the first hearing, the young lawyer approached Jang in despair and said, “This is an impossible game. The judges and other lawyers treat me like a child.” Jang, now dean of the business school at one of the country’s most prestigious education establishments, Korea University, laughs at the memory: “Such a huge imbalance!” he recalls, but then suddenly turns serious. Confronting defeatism before the case had even been heard, “I told him, ‘Look! You do it for the cause—justice. He does it for the money. That’s a huge difference. You have commitment. He just has incentive. So don’t worry.’”

Jang and his counsel went on to win that case: one of Korea’s first-ever lawsuits on behalf of minority shareholders against the directors of the industrial giant. The ruling marked a milestone in Korean corporate legal history. And the young attorney? “His name is in the law books now,” says Jang.

The same conviction and optimism Jang exhibited in 1998 have sustained him over more than a decade of campaigning for shareholder rights and better corporate governance when he faced threats to his safety, the loss of friends alienated by his activism, and accusations of selling out to foreigners.

The path to activism

Jang, 56, is an unlikely revolutionary, and his life could have been very different. After earning a Ph.D. in finance from the Wharton School of Business at the University of Pennsylvania, he could have disappeared into academic obscurity or a secure job for life at one of Korea’s leading industrial groups—the targets of his later activism. But on his return from the United States, he discovered a major lesson he had learned from his studies—that the primary aim of firms to increase value for their shareholders—did not, in his view, hold true for the giant industrial conglomerates that dominated Korea’s economy. Instead, these “chaebol” (see box) were run as personal fiefdoms by the company’s founders, without transparency or accountability.

“Everything was centered on one controlling person, whom they called ‘chairman’; sometimes they called him ‘owner.’ But if you look at the ownership structure, he is not the owner. He’s only a small, small minority shareholder, and that applied to most of the chaebol,” says Jang. “Where does his uncontested power come from? And why the abuse of this controlling power for his private benefit? [At the time] no one was raising the issue,” he recalls.

So Jang launched a crusade for greater accountability and transparency in the giant family-run conglomerates, which still dominate much of Korea’s economy. The action was organized under the auspices of a grassroots civic group Jang helped found—People’s Solidarity for Participatory Democracy (PSPD)—which is now one of the country’s leading nongovernmental organizations. Their weapon of choice: the class action minority shareholder lawsuit. The PSPD pushed for the appointment of outside directors, forced light onto opaque accounting practices, and demanded consideration for shareholders’ interests.

At the beginning of his activism, Jang describes himself as a “gadfly” on the elephantine body of the chaebol. The notion of shareholder rights barely existed in...