Chapter 8: A corporation belongs to its shareholders

“I’m going to buy Daeha Electronics stock.”

That was a bad move.

Investing in stocks during this period was not an efficient way to invest. Not to mention the fact that the stock exchange had not been running properly for long, the risks were high compared to the excessive volatility and complex method.

If you wanted to make money in this era, the best way was real estate speculation. The myth of the invincibility of real estate is a long-standing tradition in Korea.

But…

The important thing isn’t money. As I said over and over, money can be earned at any time.

The current market capitalization of Daeha Electronics is, at most, hundreds of billions. If I put all my money into it, I could easily get a 5% stake.

The market cap of Daeha Electronics was around 100 trillion won based on the year 2010, right? This is a valuable stake that I can never obtain if not now.

In the first place, my family members would not allow me to buy Daeha Electronics stock. Unless it is now, when they can’t even think about hostile mergers and acquisitions, I can’t open the floodgates to interfere with management rights.

“Stock? Why buy that?”

I saw Chairman Yu Seongpil frowning as he asked back. His face clearly showed that he was wondering why I was acting like this all of a sudden.

I calmly put on the same smile, like a mask.

“I’m still young. It seems difficult to do business with this money right now. However, I don’t want to do the stupid thing of depositing it in the bank….”

I paused and looked at the faces of my family members sitting at the table. I hadn’t noticed it before since I had been bowing my head, but looking at them like this…

It was quite doable.

‘Inheriting doesn’t suit my temper. I have to take it away.’

No matter how much of a genius I am, and no matter how talented I am, Yu Seongpil will never appoint me as the next chairman.

He will probably just give me a few affiliates, because it’s obvious there will be a conflict. Just like Daeha Group in my past life.

Then… I have to take it away. What else can I do?

Like I decided at Yu Jincheol’s funeral, I want to devour the entire Daeha Group.

Tsk. I wanted to buy Everland if possible.

“Hmm. Didn’t you say you were going to do business last time? Hayeon.”

That’s right. I’m going to do business, too.

“I’ll do it later. I think I’ll probably do it when I’m in middle or high school… There’s still a lot of time left, right? Until then, I’ll just help grandpa.”

“Why? Are you not confident?”

“No. That’s not it. It’s a matter of efficiency. Hmm. If I think about it that way, you could say that I’m not confident… I’m not confident that I can beat grandpa in the semiconductor industry. Not now, at least.”

I said that with a bright smile. Yu Seongpil’s face blossomed into a smile, as if he liked my words.

“Hahahaha! Yes, that’s right. Are you also certain that you’ll become a semiconductor person?”

“Yes. If I were a college student, I would have gathered people and received investment to develop memory semiconductors, but I’m still young, right? More than anything, my physical health is bad, ugh. I can’t help it now.”

Although I am an adult mentally, my body is still that of a soft and fragile child. I have to sleep for 10 hours a day.

I coughed a little.

“Actually, I was going to try it. Until I saw the news last month. They said they succeeded in developing 64K DRAM, right? I had a feeling after seeing that. That I wouldn’t be able to win, no matter how many other industries I do… that kind of feeling.”

Of course, it’s all lies. I’m just sucking up to Yu Seongpil so he can be happy.

“…?”

Yu Jinseok tilted his head for a moment as he heard my words, but Yu Seongpil was different.

His face was completely different from before as he laughed heartily with a wide smile.

“That’s right! This thing, this semiconductor is different! Just like how people die if they can’t eat, electronic devices need to eat semiconductors. If you can just pump it out from the factory, wouldn’t that be a gold mine?”

“Hehe. Yes, it seems like it was worth it to study hard since you like it, grandpa.”

Of course, I was the only one who reacted to that. My young grandchildren were too young to understand and Yu Jinseok and Yu Jinha did not fully understand its meaning.

During that time, the technological gap between Daeha Electronics and leading semiconductor companies was a whopping 10 years. In the high-tech industry, a gap of 10 years is hard to close, even if you were to be brought back from the dead.

Moreover, for a company in Korea, which was not even considered a developed country, the gap would only increase instead of decrease.

However… Daeha Group managed to reduce the technology gap to 3 years by developing 64K DRAM. And 7 years later, in 1990, they developed 16M DRAM, making the technology gap zero. It was natural for Daeha Electronics to become the best company in Korea.

“But, why stock? It’s not like investing in the semiconductor industry when you buy that. Investment funds are received from somewhere else and stock is completely different. You don’t know that, do you?”

Yu Seongpil asked me with suspicion. It was a valid question.

But I’m a child, and I had one invincible cheat code.

Just outright act ignorant.

“Oh… is it different? A stock company belongs to its shareholders, right? So, if I buy Daeha Electronics stock, I can exercise management rights and get involved in the business. Then, I’ll be doing business together.”

It was a statement that was both right and wrong. Firstly, a stock company does belong to its shareholders… but it’s a bit different in Korea.

Usually, the owners, who hold only a small portion of the stock, have most of the management rights. Therefore, every time they issue additional stock, or conduct a spin-off, they exercise their management rights to sweep up the shareholders’ money.

Then, some may ask, what can the shareholders do when the owners use their money to enrich themselves?

To put it bluntly, they can’t. That’s why the stock market failed.

…Normally, it is impossible in the US. No, it shouldn’t be possible in Korea in the first place.

Even if someone is the founder of a company, they are just a major shareholder who has a great influence on the company after it is listed. But the act of taking money away from the other owners of the company, that is, the shareholders, and giving it to the founder is obviously nonsense.

But, it happens in Korea. I don’t know why that is the case.

“Huh. Doing business together? With me?”

“Yes. I told you, I’ll never be able to beat you. Then what can I do? I’ll have to do it together. Or maybe I can take a subcontract in the foundry sector.”

Yeah.

Taiwan’s TSMC, which would soon be created, also went with a similar motto. They won’t compete with their customers.

Like that, I tried to subtly get involved in my grandfather’s semiconductor business, but Yu Seongpil pointed out the contradiction in my logic in an instant.

“You’ve done more research than I thought. But you missed out on the most important part.”

“Oh. What part is it? Honestly, even though I’m smart, I’m just a bookworm, so I don’t know much.”

“A girl with short legs who can’t even sit at a desk is a good talker. Why would I give you the management rights? And you’re still a minor, so even if it is listed, you can’t buy stocks without my permission.”

“Then what’s the right answer that you’re thinking about, grandpa?”

I looked at Yu Seongpil with a still innocent expression. Immediately after smoothly passing over the issue of succession to management rights, which is the most sensitive issue in a conglomerate family.

“Once you graduate from elementary school, do business then. For now, you can buy land in Gangnam, or if you have an eye for it, you can buy land in the Gyeonggi area, aiming for other new towns.”

I pouted as if I was annoyed and insisted.

“Then, let’s do both. Let’s buy land and stock.”

“Did you not listen to my words?”

As if it was absurd, Yu Seongpil laughed. He had just told me not to buy stocks, yet I ignored him. His granddaughter was suddenly acting like a child.

“I still want to buy stocks. They’re cool, stocks. I’ve wanted to have them since a long time ago…”

Looking at me with sparkling eyes as I said that, Yu Seongpil tilted his head as if puzzled, and then gave his permission.

“Well, go ahead. When I talk to you, I can’t tell whether you’re a 6-year-old kid or a veteran who has been through all sorts of things. But when I look at you like this, you’re just a kid…”

“Hehe. I love you, Grandpa!”

Yeah. That’s it.

After all, things like this are good when you’re young.

***

The plan I set up at my father’s funeral was simple.

To take over the management rights of Daeha Group through a hostile M&A. M&A stands for Mergers and Acquisitions, and usually, companies hand over or receive their company through appropriate agreements between both parties.

However, a hostile M&A is different. By using the fact that listed companies can buy and sell shares at any time, you forcefully seize management rights.

Because a stock company belongs to its shareholders.

The circular shareholding structure unique to conglomerate companies makes this possible. Originally, it was a magic-like method that allowed a company to be completely controlled with only a small number of shares, but conversely, from the perspective of someone who wants to take over a company, they can attempt a hostile M&A with only some shares.

Daeha Group’s circular shareholding is quite complicated, but basically, the core of circular shareholding is to make the affiliates the major shareholders of each other.

Companies can own stock, not just individuals, so they use company money to buy stock.

Let’s explain it with a simple example without making it complicated.

Let’s assume I am the major shareholder of Company A.

Company A is the major shareholder of Company B. Then, I, as the major shareholder of Company A, naturally become the major shareholder of Company B. Because Company B belongs to Company A.

Company B is the major shareholder of Company C. With the same logic, I have not only Company B but also Company C.

Of course, it doesn’t end at three affiliates. All of the dozens of affiliates that a conglomerate family has are intertwined in this way.

In other words, if you control just the core company A among the many affiliates, you become the major shareholder of the entire group!

Well, that’s fine. This structure is called a holding company and is a relatively healthy method.

But… If Company C becomes the major shareholder of Company A, then the story changes a bit. This is a circular shareholding.

A controls B, B controls C, and then C controls A again. In this strange structure, the number of shares needed for the owner to have management rights gradually decreases.

To put it extremely, the owner of the group can become the chairman of each affiliate with only 3% of the total shares, and wield the group like it is their own.

In other words…

If I own 3%, I can swallow Daeha Group.

All of it.