What do you get when one Korean financial institution merges with another?
Well, apart from the inevitable strike by a workforce that is prone to downing its tools, judging by recent developments in Korea it seems that you can still end up with two totally separate institutions rather than one.
In the continuing saga of Korea’s banking consolidation, Shinhan Financial Group is finally about to take over Cho Hung Bank to create the country’s second-largest bank after Kookmin Bank.
Talks have lasted for a couple of years. But add a Korean union into last-minute negotiations and anything can happen.
At the end of June, Cho Hung’s union called a snap strike because it was unhappy about the conditions of the merger. Four days and a W7 trillion run on deposits at Cho Hung later, Shinhan caved in to the union’s demands. It agreed to delay the integration process for three years, not to lay off any Cho Hung workers over that period, to maintain the Cho Hung name and to choose a CEO from Cho Hung.
Understandably the share prices of both banks tanked as news of the non-merging merger reached domestic and foreign investors. However, not wanting to be left out of the headlines and seemingly as determined to tarnish Korea’s reputation, Shinhan’s union is threatening action if the Cho Hung name is kept and Cho Hung workers aren’t fired in the first three years.
Will Shinhan’s management roll over yet again?
Coincidentally, on the same day that Shinhan’s union declared its discontent the government released figures showing a 71% drop in investment into Korea by foreign firms. The government blames China and the war in Iraq. Perhaps it should look for the reasons a little closer to home.
