Mega-corporations' profits should be shared for economic revitalization: professor

In an era defined by "mega-corporations" like Samsung Electronics and SK Hynix, which achieve astronomical operating profits, the impact of inflation on low-income individuals is disproportionately severe, even if the inflation rate remains the same as before. Professor Lee Chang-min of Hanyang University's Business Administration department argues that in a South Korean economy increasingly dependent on these giants, leaving the distribution of their growth dividends solely to the market risks exacerbating societal polarization.

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In an era where 'mega-corporations' like Samsung Electronics and SK Hynix are achieving astronomical operating profits, the impact of inflation on low-income individuals is bound to be greater, even if the inflation rate is the same as before.

Lee proposes a "windfall profit sharing" system, drawing parallels to the U.S. CHIPS Act. Under this model, companies receiving significant government subsidies, such as over $150 million, would share a portion of their excess profits with the government. He believes this approach is necessary because the rapid pace of technological change, particularly in AI, means even dominant companies like Samsung and SK Hynix could be displaced. Therefore, the government should share the initial investment risks and, in return, recoup some of the excess profits during economic booms. Lee also pointed out the low effective corporate tax rate in South Korea, suggesting that addressing this could secure fiscal resources, and cautioned against relying on traditional industrial policies like tax credits for mega-corporations, which he believes only worsen the national fiscal health.

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As the South Korean economy is virtually dependent on the performance of these companies, leaving the distribution of their growth dividends solely to the market is tantamount to condoning societal polarization.

The professor also asserted that discussions on chaebol reform remain relevant in the age of mega-corporations. He cited the recent demand from SK Group Chairman Chey Tae-won for relaxed regulations on the separation of industrial capital and financial capital, citing large-scale investments in semiconductors and AI. Lee warned against chaebol groups using key industries of the AI era as leverage to circumvent government regulations and expand their influence. He noted that the argument of "lack of funds for investment" is no longer persuasive, as evidenced by SK Hynix's substantial profits last year. Lee concluded that decisions regarding the allocation of astronomical profits cannot be left solely to corporate boards, advocating for active participation from entities like activist funds and the National Pension Service to find a balance in capital allocation efficiency. He recalled Samsung Electronics' past missteps in developing High Bandwidth Memory (HBM) and stressed the need for broader discussions on the societal repercussions when mega-corporations make poor capital allocation decisions.

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The U.S. government's implementation of the 'windfall profit sharing' system through the CHIPS Act in 2023 is a concrete methodology.