Hyundai's dynamic boss shattered the glass ceiling when she succeeded her husband at the South Korean conglomerate. Now she's helping to open up the even more chauvinist Northby Oliver August / September 28, 2008 / Leave a comment
Published in September 2008 issue of Prospect Magazine
On 3rd October 2007, North and South Korea held what was only their second summit meeting since splitting up in war almost 60 years ago. The most important person in attendance, the one who brought the two sides together, was neither the host Kim Jong-il—Pyongyang’s Stalin—nor Roh Moo-hyun, his democratically elected counterpart from Seoul. Instead, attention was focused on a 52-year-old South Korean woman dressed, as usual, in black and described to me by some people there as a “housewife.” Basking in her triumph during a break in the talks, she stood by the edge of the Taedong river, surrounded by television crews. She stared across the water to the far shore, where smokestacks puffed among Soviet-style housing blocks. “According to my husband, Pyongyang gets brighter with every visit,” she told the cameras, turning around with a girlish twirl, an extravagant gesture for her. “Now I know what he means.” Hyun Jeong-eun is a reserved mother of three children who says on her website that she likes to cook cheese fondue. She also happens to be the US-educated head of Hyundai, the vast conglomerate founded by her father-in-law as a car workshop in 1946. Hyundai went on to build supertankers, skyscrapers and computer chips, as well as operating department stores, hotels and banks. “Imagine a GM or Ford that offers almost every product or service imaginable,” says Donald Kirk, a US expert on chaebol—family-run conglomerates. Hyundai is the symbol of modern South Korea and its rise to 11th largest economy in the world. It’s no coincidence that the country’s current president, Lee Myung-bak, who came to office earlier this year, is a former chairman of Hyundai. Some refer to South Korea as the “republic of Hyundai,” given the company’s success and power. Or at least they used to. In the 1990s, Hyundai accounted for 16 per cent of South Korean GDP and 12 per cent of exports. Its low-cost cars became a household name in America. But then the Asian financial crisis struck. In 1998, revenues slumped, debts loomed, the founding family’s shareholding was diluted and divisions were sold off. Today Hyundai’s finances have stabilised, but the company is dwarfed by other Asian conglomerates. A return to glory may, however, be imminent. Chairwoman Hyun is placing a large bet on expanding into communist North Korea, the former heartland of Korean industry and the last great untapped market in Asia. It has the lowest wages in the region, perhaps a tenth of those in China. American worries about cheap Chinese imports could soon seem quaint. Situated at the dead centre of Asia’s three big economies—Japan, China and South Korea—the “hermit kingdom” is the focus of growing foreign investment, and could soon manufacture everything from GE fridges to GM cars at bargain prices. Hyun already has big concessions in the north, far ahead of the competition. She runs an industrial park expected to employ 8 per cent of the country’s workforce, and a tourist resort visited by half a million South Koreans every year. At last October’s summit she won the right to establish the first flight link between north and south since the war, starting this autumn, a breakthrough that is likely to accelerate change. Even the Bush administration, once implacably hostile to North Korea, has joined in. The American and the South Korean governments are planning to underwrite Pyongyang’s recovery. Last year Washington struck a deal to freeze Kim Jong-il’s nuclear programme in exchange for lifting sanctions. Since then, US government aid has started flowing, and the New York Philharmonic has played a symbolic concert in Pyongyang. In July, the secretary of state, Condoleezza Rice, met her North Korean counterpart for the first time, and the state department said it would remove North Korea from its list of state sponsors of terrorism. In a reciprocal move, Pyongyang blew up the cooling tower of its nuclear plant at Yongbyon. Few in the west have heard of Hyun, not least because she has never given an interview. But if North Korea does open up, it will be at least partly thanks to her. Hyun has been a tireless campaigner for engagement and change. She has done so by using the skills of a CEO and by investing in poverty-stricken North Korea. Her achievement is even more remarkable given that she lives in what is probably the most male-dominated market economy in the world. For a woman to become a senior executive is unheard of in South Korea. For her to then charm the male-only clique of North Korean generals has made her an icon for some, and a hate figure for others. Her detractors have called her “black widow” ever since she took over Hyundai from her late husband, saying she lacked business experience, something she has never disputed. *** Hyun Jeong-eun’s business career began on 3rd August 2003. According to Joo Chi-ho, her biographer, she went to dinner that night at an exclusive Seoul restaurant with her husband, Chung Mong-hun, and a visiting couple. Afterwards, the women went home while the men repaired to a bar where they drank two bottles of wine. The men parted at around eleven; Chung visited an all-night barber to have his hair cut and then went to his office. Not once that evening had he mentioned the severe pressure he faced at work. Like his wife, he wasn’t in the habit of talking much, according to Joo. Yet in previous weeks he had been repeatedly interrogated by investigators. He was a prime suspect in one of the biggest scandals ever to hit South Korea, and stood accused of illegally sending half a billion dollars to North Korea. A court hearing later found that the money—which was secretly channelled from the South Korean government through Hyundai to Pyongyang—was a bribe. Sitting in his office that night, the Hyundai chairman and son of the company founder faced a bleak future, possibly a jail sentence, certainly dishonour. According to a security guard I spoke with, Hyun was called to the office building around six the next morning. Police had already cordoned off the parking lot. She was led to nearby thorn bushes where, contorted and lifeless, her husband’s body lay. He had jumped from a 12th-floor window. His body had been found by a janitor, who told me he initially suspected a sleeping drunk. The corpse was taken by ambulance across the capital to the Asan Medical Centre, one of the country’s top hospitals, owned, like so many things in South Korea, by Hyundai. Nursing staff told me he was driven past the A&E ward to a funeral parlour at the back of the vast complex. Known for the vertical integration of its businesses, Hyundai had recently added to the hospital a separate wing for the dead. In wood-panelled rooms spread over four floors, up to three dozen corpses could be processed at the same time. Hyun took Room 30, the largest, and started receiving floral tributes and messages of condolence. But soon an argument flared up between her and Kim Yun-gyu, a senior company executive. Kim had been Chung’s closest aide, like a “brother”; the chairman had left him a handwritten letter on his desk, scrawled anxiously before he jumped. In the letter, of which I obtained a copy, he asked for his ashes to be scattered in North Korea, close to where his father was born. Kim Yun-gyu later told me in an interview that he wanted to honour this last wish, but Hyun objected. Eventually it was decided to bury Chung in Seoul. Only then did Hyun agree to play the role dictated to her by tradition—to stay in the background. Television pictures show her wordless at the funeral while Kim Yun-gyu gives a speech and leads Confucian rituals. Hyun was no more than an extra, as all widows are in Korea—not required to throw themselves on the pyre, perhaps, but at least to fade from view along with their husband. Mozart’s Requiem played over the PA system, and 2,000 mourners watched scenes from the late chairman’s life on a projection screen. Hyun was a pale mask, standing primly among her children. It suited her. Silence was her gift. “Hyun Jeong-eun doesn’t talk much,” Kim Hwa-joong, president of the Korean National Council of Women and a friend of Hyun’s, told me. “But she always thinks before she talks.” When Hyun woke up on the day after the funeral, she found her inheritance in free fall. The share prices of the various Hyundai entities were racing each other to the bottom of the stock market—with the exception of Hyundai Elevator. By a quirk of history, this was the holding company; whoever controlled Hyundai Elevator controlled the rest. A little-known fund was buying up shares, eventually accumulating about 15 per cent, with another 35 per cent of shares apparently pledged in support. The fund, Hyun was told, belonged to her late husband’s uncle Chung Sang-yung, the Hyundai founder’s brother, a man who had mourned with her at the funeral. Nonetheless, he was now trying to take management control away from her. A local stock analyst was quoted in the media as saying the uncle and his family, “could hardly accept a chairwoman for the Hyundai Group,” a sentiment that is common in South Korea. “Traditional Korean companies will fire a woman if they hear she’s engaged because that will lead inevitably to pregnancy,” said Tanya Van Soest, an American expat who works in Seoul. “And of course they can’t have working mothers.” Women are never promoted to top positions in South Korea—Hyun is the country’s only female industrialist. Executives’ wives are even discouraged from doing charity work. Hyun, however, defied convention early on. While her husband was still alive, she became a board member of the Korean Red Cross and director of the Girl Scouts of Korea, and earned a master’s degree at Fairleigh Dickinson University in New Jersey. This might have been a warning sign to her husband’s uncle that she was no pushover. But he didn’t see it. And by the time he did and Hyun went on the attack, it was too late. Ostensibly guided by tradition, she visited her husband’s grave on the 100th day after his funeral to pay her respects. In her trail she brought the national media and a speech prepared by advisers. As she walked through the dark metal gate of the walled cemetery and up the steps climbing a wooded hillside, she became the late-arriving general taking charge of the battlefield. Television pictures from that day show her presiding with natural authority. She laid flowers on the grave, then announced a plan to issue a large batch of new Hyundai Elevator shares to the public, diluting her uncle’s grip. “I came here to report to the former Hyundai Group chairman on the plan of making Hyundai Elevator a people’s company,” she was quoted in newspapers as saying. Photographs show her hands folded in front of her, firmly but with ease, like a boxer. She was cool and aloof, but her eyes were fixed on the cameras among the graves. She did not cry or appear nervous, attendants at the cemetery told me. Nor did she try to impress those present with newly learned knowledge. The details of the company would remain in the hands of lieutenants. She did not intend to count bullets herself. But she controlled 24 per cent of the Elevator shares, and she would win this battle. Hyun’s next move was to call a meeting of Hyundai’s 500 top managers: the colonels and drill sergeants of the empire. They filed into a Seoul convention centre, passing a golden statue of Chung Ju-yung, the austere-looking company founder. Inside they met a very different chief. In photographs of the event, Hyun can be seen in a skirt and thin-strapped black sandals, waving a vast company flag like a college cheerleader. She told the assembled managers that under her command they would match past glories. Rather than politely bow in response—as was the norm—the managers gave her a standing ovation. Afterwards, she told reporters, “I realised I had guts.” A few months later, she won the backing of shareholders at the company’s annual general meeting and the hostile takeover bid fell apart. “The uncle underestimated her,” Joo Chi-ho told me. Investors realised that they were in danger of destroying Hyundai if they turned against its largest, and most determined, shareholder. Hyun proved that in modern yet chauvinistic South Korea, legal rights ultimately trump patriarchal traditions. Just about. *** But Hyun’s problems were far from over. The best hope of leading Hyundai back to its former glory was to expand into North Korea—which was on a slow and faltering path to reform. Enterprise and markets had been partly legalised. Price controls were dropped and land ownership rules eased. Casinos opened, though for foreigners only. A cargo rail link across the border with South Korea was discussed, and consumer goods flooded in from China. The problem for Hyun was that the North Koreans did not know or trust her. Their leader, Kim Jong-il, refused to take her seriously, and without his approval no investment could be made. “He tried to push her out of business,” according to Kim Keun-sik, an analyst who has accompanied Hyun on business trips. “He didn’t want to deal with her and offered deals to rival companies.” Hyun was undeterred. Within six weeks of winning the takeover battle, she travelled from Seoul to Pyongyang, a journey of 180 miles. It might as well have been halfway round the world. South Korea is one of the most wired nations on earth, a trendsetter for film and fashion across Asia. Its modern steel and glass architecture is playful rather than bombastic, its government democratic, its press free. North Korea, by contrast, is a Stalinist relic. One would be forgiven for thinking that the clocks had stopped at six one morning 50 years ago and nothing has moved since. There are no dustbins because there is nothing to throw away. The roads are devoid of cars and bicycles. The people who survived a recent famine (by eating tree bark) are left to walk, passing endless pictures of Kim Jong-il, or his late father and predecessor Kim Il-sung, known as the “great leader.” Every building, every shop, every apartment, every jacket lapel, every television screen has one. Pyongyang is a city of ghosts. Over it all towers a windowless concrete pyramid as high as the World Trade Centre—a 106-floor hotel never finished. Going to Pyongyang as newly minted chairwoman, Hyun achieved little more than touring empty streets. Kim Jong-il refused to meet her, and after four days she returned home. She decided for the moment to bypass Pyongyang, her aides told me, but not to give up on North Korea. Instead, she focused on Kaesong, the North Korean city closest to Seoul. Here she was more welcome than in the capital, not least because investment was more desperately needed. (North Korea’s periphery suffered the most in the famine.) Her aides travelled repeatedly to Kaesong, offering to build factories. In December 2004, Hyun was invited to inaugurate North Korea’s first industrial zone, a cross between a capitalist experiment and a quarantine station. On a recent visit to Kaesong, I boarded a Hyundai bus in South Korea and drove on an elevated road across the tank traps and minefields of the demilitarised zone, described by Bill Clinton as “the scariest place on earth.” Beyond it, uniformed Hyundai employees were waiting in front of high-tech factories, watched by North Korean officials. In the distance, we could see the mud and straw homes of some of the 20,000 workers who, every morning, come through a barbed wire fence painted in Hyundai’s trademark green to this 25-square-mile camp. Guarded by armed men, they make kitchen utensils, sports equipment and clothing, all for export. They get paid $58 a month, most of which ends up in the regime’s pockets. While a pittance by southern standards, this makes them vastly better off than most of their fellow citizens. By 2012, the workforce here is expected to rise to 730,000. At the zone’s inauguration, Hyun spoke warmly of reuniting Korea. North Korean officials applauded. Her standing seemingly improved, she was able to return to Pyongyang half a year later. But Kim Jong-il once again rejected her request for a meeting. He waved briefly from a balcony, then disappeared. “He was carefully watching her,” Jang Whan-bin, one of Hyun’s advisers, told me. A month later, Hyun visited the company’s other North Korea project, Mount Kumgang tourist resort. It too sits just over the border. Every day more than a thousand South Koreans pay $100 to go across and see at least a tiny part of their isolated neighbour. I accompanied one group last December and found that curiosity was a strong draw. But so was natural beauty. The 20-square-mile fortified enclave is set in the sort of landscape shown in ancient scroll paintings: misty hills and lone pine trees on craggy bluffs, but no wildlife—it was all eaten during the famine—and no ordinary North Koreans. The regime keeps them well away. Visitors go hiking, play golf, and attend spas. (In July, an unarmed South Korean tourist was shot dead by North Korean soldiers, who claimed she had wandered into a military zone. South Korea immediately cancelled all tourist visits, and Hyundai withdrew most of its staff. The incident has temporarily upset the always delicate relations between north and south, but it is unlikely to have had a lasting impact.) *** On 15th July 2005, Hyun was spending time with her eldest daughter Chung Ji-yi in Mount Kumgang when she learned that Kim Jong-il wanted to meet her for lunch the next day in the nearby city of Wonsan. Her daughter in tow, Hyun set off. In a seaside villa in Wonsan, they were served vodka by Kim Jong-il, who told Ji-yi she looked like her father. Then he lectured Hyun on cooking, specifically how sunflower oil is best for frying. Hyun did not reply, as can be seen in television footage. They toasted their new relationship and took pictures together, published the next day. But something was wrong. Kim Yun-gyu, Hyun’s husband’s old aide, was given pride of place at the lunch table by the North Koreans and had his own photograph taken with the bouffant-haired Kim Jong-il. Kremlinologist signals matter in North Korea. Hyun was still not accepted as the sole head of Hyundai. Her reaction was quick and unambiguous. She sacked Kim Yun-gyu the following month, addressing the problem with Stalinist efficiency. Instead of taking this aping of their style as a compliment, the North Koreans flipped out, publicly demanding the reinstatement of their long-term contact Kim. Hyun refused, and then upped the ante. She wrote on her company website that she felt she was “now at a crossroads of whether to continue business with North Korea or not.” She effectively threatened to cut off the cash flow to the north. Eventually, Kim Jong-il backed down and accepted the dismissal. Hyun won respect for standing up to him. “Pyongyang should know that many South Koreans feel refreshed by Chairwoman Hyun’s resolute attitude,” wrote the mainstream Chosun Ilbo newspaper in Seoul. Hyun had come into her own. The gates to the north seemed open at last. Another crisis soon followed. On 9th October 2006, North Korea tested a nuclear weapon. Relations between north and south were frozen again, this time on orders from Washington, South Korea’s security guarantor. Tourist visits were to be banned. Nonetheless, Hyun soldiered on. She took her message to the South Korean president, Roh Moo-hyun, who faced heavy diplomatic pressure from the Bush White House. Over lunch, she told him in comments later published, “Tourism to Mount Kumgang will continue as long as there is even one tourist left.” Together with other business leaders, she lobbied Roh to talk to North Korea, even to go there for a summit. “Hyun had the lead role,” I was told by Lee Jung-myung, the chairman of Emerson Pacific, another South Korean company with investments in the north. She was one of the few allies North Korea had left. In the meantime, Roh stood firm against the White House, insisting on a negotiated settlement rather than a bombing run to destroy the north’s reactor. The White House eventually backed down, and so did Kim Jong-il. He agreed to shelve his nuclear programme. “Hyundai’s engagement was a decisive factor,” said Jung Chang-hyun, a respected analyst and editor of an academic journal. Hyun had perfected the art of dealing with North Korea—infinite patience matched by very sharp elbows. *** In October 2007, Hyun accompanied Roh to Pyongyang for the long awaited north-south summit. The delegation also included 14 CEOs from rival companies, among them the heads of Samsung, LG Group, Posco and Hana Financial. After meeting Kim Jong-il, they held talks with local factory managers, a secretive species. The CEOs were desperate to know who would be awarded new concessions to operate in North Korea. Late to the game, they feared Hyun had already sown up a deal. Asked in front of television cameras what she expected from the meeting as she walked through a marble-floored lobby, she laughed briefly but gave no reply. Neither did the factory managers. Not until the third and last day of the summit did the CEOs expect to get an indication who among them might win Kim Jong-il’s favour. Dressed in his trademark brown jumpsuit—half uniform, half workman’s overall—he treated the delegation to a farewell lunch. Hyun was the only business leader seated at the top table, and Kim Jong-il praised her non-stop as he drank one glass of burgundy after another. “I am giving you a great gift,” he told her. The CEOs listened intently. The North Koreans fell silent whenever their leader spoke, which was almost constantly. The atmosphere was tense. But then Kim suddenly left, leaving the CEOs none the wiser. The summit concluded with an agreement on closer economic ties between the two Koreas but no specific deals, not even for Hyundai. Buoyed by increasingly favourable treatment, however, Hyun returned to North Korea a month later, set on winning a concession for direct flights. She brought her daughter Ji-yi, as Kim Jong-il seemed to have taken a liking to her at Wonsan. The 28-year-old, who had just been made managing director of Hyundai’s IT division, is expected to succeed her mother one day. Together the two women inspected an airfield where planes from South Korea could land. It was snowing heavily and news pictures show them being led around by a female North Korean soldier. Afterwards they met Kim Jong-il, and at last he gave in. He agreed to let Hyundai operate the first commercial flights between north and south since the war. The flights will mainly transport visitors and Hyundai staff, but cargo could follow. The plan is for one flight a day, according to North Korean officials. If successful, it could be expanded to other cities, making foreign investment in the country’s interior more feasible. After their meeting, Hyun, Ji-yi and Kim Jong-il and his entourage posed for an official photograph. They sat on a line of chairs—the two Hyuns on either side of the “dear leader”—in the grand reception room of Pyongyang’s state guest house. The next day the picture dominated the front page of North Korea’s main newspaper, and regime mouthpiece, Rodong Sinmun. Hyun was in. Few allies, let alone visitors, are accorded such treatment. When Hyun returned to Seoul, she brandished a copy of the North Korean paper like the trophy that it was—one of the oddest triumphs in modern business history.