1-1) internship, 1-2)THAAD, 2-1) Amorepacific governance, 2-2) foreign investment in Korean property_July 19

[DDave]

1-1) Unpaid interns are getting a raw deal.(CNN)

On top of working for no pay, they're far less likely than paid interns to get a full-time job offer after the internship ends, according to a survey by the National Association of Colleges and Employers. Unpaid interns received full-time job offers about 44% of the time. Paid interns were offered jobs 72% of the time, the survey found. "Employers rightly look at a paid internship as more of a real job," says Ross Eisenbrey, vice president at the Economic Policy Institute, a Washington research group. "If you were paid for something, there was probably more valuable work done."

Even the unpaid interns who received full-time job offers were paid less out of the gate. At private companies, unpaid interns received a median job offer of about $34,400. Paid interns at private firms were offered jobs with a median salary of $53,521, NACE found.

"An unpaid internship signals that you have been willing to work for nothing, therefore you might be willing to accept a lower job offer than a paid intern would," says Eisenbrey. (Interns at EPI are paid, he says). There's been a lot of criticism about unpaid internships, including whether they violate labor laws. And some experts argue that only well-off students can afford to take advantage of unpaid internships, while lower income students must take summer jobs to earn money. The White House, for example, has been criticized for not paying its interns.

No official stats track the number of unpaid interns every year, but estimates vary from 500,000 to 1 million. The survey's findings are worrisome considering that there has been an overall hiring slowdown over the past several months. Fewer employers are also sending recruiters to college campuses and some, such as Goldman Sachs (GS), are beginning to conduct automated interviews. Employers say these interviews remove biases, such as mutual friends, and allow them to hear from a more diverse mix of candidates. Yet graduates argue that automation doesn't allow them to better understand the employer or display their people skills.

The job market for college graduates has improved since the Great Recession. The unemployment rate for young college graduates ages 21 to 24 peaked at 9.9% in 2011. Today, it's about 5.6%, according to EPI. The national unemployment rate is 4.7%. Despite better job prospects overall, college grads are still saddled with high underemployment -- working a part-time job or a job that doesn't provide enough hours. Before the recession, the underemployment rate for young college grads hovered around 9% in 2007. Today, it's about 12.6%, EPI reports. "The college job market has improved considerably since...the peak of the recession," says Ed Koc, head of research at NACE, the surveyor. "The problem is that there are indications that the economy is slowing and any kind of slowing is going to impact the college job market."

[Question] Why do college students try to do an intership? How is the Korean job market now? What will be your cheerful word of wisdom for job seekers?

1-2) THAAD deployment puts South Korea to test (koreaherald)

As expected, the decision to deploy a U.S. missile defense system in South Korea has many ramifications that pose hard challenges to the country -- specifically to President Park Geun-hye.  First of all, Park -- as the commander-in-chief -- needs to make sure the South Korean military prevents or deals properly with any provocations from North Korea, which is reacting fiercely to the planned deployment of the Terminal High Altitude Area Defense. In its first reaction to the announcement, the North’s military threatened a direct strike, using phrases like “sea of flames” and “heaps of ashes.”

The statement released by the North Korean army’s artillery command said it would take “physical” actions against South Korea and the U.S. “from the moment” the location for the THAAD system is fixed.  The statement, which came three days after the South Korea-U.S. announcement, also seemed geared toward keeping the Pyongyang government in tune with China and Russia, which have also been vehemently protesting the decision. It went on to say that South Korea and the U.S. are building an “Asian version of NATO” and trying to “check big countries in Northeast Asia.”

It is obvious that North Korea is taking advantage of the THAAD issue to strengthen its solidarity with Russia and China. This may cause cracks in the current international sanctions against the North and embolden the North to make military provocations against the South. Park and her military generals must be prepared for this. Another major challenge for Park is minimizing THAAD’s negative impacts on South Korea-China relations. China’s strong protests have largely been anticipated, but reactions from the Beijing government and some media do raise concerns. 

It is not legitimate for China to blame only South Korea and the U.S. for the current situation, which was caused by North Korea’s pursuit of nuclear bombs and missiles. Being the North’s former war ally and largest benefactor, China has done little to rein in the state, only calling for “calmness” whenever tension rises on the Korean Peninsula. Now is the time for the Beijing to stay calm and not damage relations with Seoul. There are already news reports – including those by the state-controlled Chinese media – speculating or urging action against the South Korean government and businesses in retaliation for the planned THAAD deployment.  

This requires immediate attention from the two countries’ leaders and diplomats. It is hoped that the series of multilateral meetings later this month, including the Asia-Europe Meeting, ASEAN Regional Forum and the G20 summit, will help Park and Chinese leaders, including President Xi Jinping, tackle the problem in a mutually beneficial way. On the domestic front, Park also faces the challenge of overcoming opposition to the deployment of the U.S. missile defense system. Opposition parties and politicians are currently not united on the issue, with some expressing tacit approval and others even demanding parliamentary endorsement or a national referendum. 

Protests by residents of the places where the THAAD battery might be positioned will not be easy to overcome either. The worse-case scenario would be a revival of the anti-American movement. There are also signs that liberals might use the issue to get ahead in the next presidential election. All this gives Park no room for the negligence and blunders that have often been made since she became the chief executive.

[Question] Do you agree to THAAD in Korea? If THAAD has to be placed in your city, how would you react? What effects can it have in social and economic aspects?

2-1) Flip side to Suh Kyung-bae’s tight grip on AmorePacific

When it comes to share ownership, AmorePacific chairman Suh Kyung-bae keeps it simple. He holds a majority of stocks in AmorePacific Group, the cosmetics-focused group’s holding company. The firm then directly controls 10 subsidiaries with a vast majority of shares. The affiliate companies hold no equity stakes in each other. The only exception is AmorePacific, the group’s crown jewel that sells the premium brand Sulwhasoo and one of the group’s only two publicly traded firms. 

The parent firm’s stake in the unit is smallest -- but enough to secure management control -- at 32.2 percent, supplemented by the chairman’s personal holding of 9 percent. “AmorePacific stands out among the pack of Korea’s chaebol family firms for its straightforward ownership structure, securely built on chairman Suh’s large shareholdings,” said Park Ju-gun, the head of corporate research service CEO Score. 

The only exception is AmorePacific, the group’s crown jewel that sells the premium brand Sulwhasoo and one of the group’s only two publicly traded firms. The parent firm’s stake in the unit is smallest -- but enough to secure management control -- at 32.2 percent, supplemented by the chairman’s personal holding of 9 percent. “AmorePacific stands out among the pack of Korea’s chaebol family firms for its straightforward ownership structure, securely built on chairman Suh’s large shareholdings,” said Park Ju-gun, the head of corporate research service CEO Score. 

The tycoons of the country’s top 10 family-run conglomerates, including Lee Kun-hee of Samsung and Chung Mong-koo of Hyundai Motor, control their empire with an average equity stake of just 0.9 percent, the Fair Trade Commission recently revealed. Suh also earns praise for never having strayed from his strategic focus on the cosmetics business, while most of his chaebol peers gave in to the lure of empire building, expanding their business into a vast spectrum of seemingly irrelevant industries. 

This clear and unyielding focus on cosmetics -- which traces back to the company’s roots in 1932 when Suh’s grandmother opened a small cosmetics shop --is what made him and his AmorePacific so successful, experts say. “A key characteristic of the AmorePacific Group is that its key cosmetics brands such as Etude and Innisfree are incorporated as subsidiary companies,” noted Regina Hahm, an analyst at Mirae Asset Daewoo Securities. Subsidiaries Etude, Innisfree, eSpoir and Cosvision are all cosmetics makers, while Amos Professional produces hair products. Pacificglas and Pacific Package engage in cosmetics packaging and design, while Aestura focuses on medical skincare. Osulloc is a green tea brand that AmorePacific has cherished as part of its history since 1979. 

Even with the tidy ownership setup and a streamlined business portfolio, the group is not without its problems, say corporate governance experts.  In fact, corporate governance scores given to the group’s two listed firms are not any better than other chaebol groups. 

The Korea Corporate Governance Service gives AmorePacific Group a rating of “C,” the second lowest on its seven-level ratings scale. It places AmorePacific a notch up at “B.” It refused to disclose the reasons behind the appraisals. The Institutional Investor Services, a global proxy advisor, placed AmorePacific Group at the very bottom of its one to 10 scale, citing poor scores in the quality of its board, shareholder rights and audit-and-risk oversight.

AmorePacific is rated higher at level seven, but its weakness is in the same areas -- its board quality and shareholder rights. Local governance activists also take issue with the two firms’ board. They question whether the boards, whose independent directors do not look quite independent, are able to serve their role of checks and balances of the management and protect the rights of shareholders. The AmorePacific Group’s six-member board has three independent directors. Two are former executives of affiliate companies, while the remaining one -- an economics professor at Yonsei University, Suh’s alma mater -- attended the same school with the chairman at the same time. The three form the company’s audit committee. 

“The independence of ‘independent directors’ is very questionable,” said a spokesperson for the Center for Good Corporate Governance. Other alumni of Suh’s Yonsei University can also be found on the AmorePacific board. Its eight seats are currently filled by three inside directors -- including Suh and the company’s CEO -- and five independent directors. One of the five attended Yonsei at the same time as Suh. Another independent member has held the position since 2009. Critics say directors serving on boards for long periods of time may lack independence.  

“When the controlling shareholders have substantially large stakes, as is the case with AmorePacific group, the rights of minority shareholders are considered to be at risk of being abused,” said Ahn Sang-hee, a corporate governance expert at Daishin Economic Research Institute. It is ever more important for such companies to have independent directors who are really independent and free to differ from a decision of the majority, he said. At AmorePacific Group’s general shareholder meeting last year, six institutional shareholders, including the National Pension Service, had opposed the appointments of the questionable directors. Nevertheless, the company pushed ahead, saying they were legally eligible. 

Korean law stipulates that those who currently work, or at any time during the previous two years of their appointment worked at a company, are not eligible to serve as its independent directors. A weak system of checks and balances to keep Suh in check does not seem to be a major turn-off for investors, as long as the company turns in stellar results like it has in the past year, a stock analyst said on condition of anonymity. Also, it is a known risk to them that AmorePacific is entirely under Suh’s control. “The company is registering spectacular growth, which is proof the chairman is doing it right at least at this point of time. Any corporate governance risk seems to be dwarfed by its growth prospects,” he said.

[Question] What are good things about Amorepacific as a company you can work for? What products of Amore have you used and how was the quality? What bad things have you heard about Amore?

2-2) Overview of Real Estate Activity (법무법인 세종)

i Ownership of real estate

The Korean legal system is based on the civil (codified) law similar to that of Germany, France and Japan, with some influence from the American legal system in certain areas, such as the Korean bankruptcy and rehabilitation laws. Ownership under Korean law is

based on complete ownership (similar to fee simple absolute under common law), which entitles the owner to do whatever he or she wishes to do with the property, including right to exclusive possession, use, encumber and transfer. Korean law does not recognise

any other possessory real property interests such as a defeasible fee simple estate, fee tail, life estate or future interest in land. 

Real estate can also be owned by one or more parties in Korea. Generally, co-ownerships are held under the form of a gong-yu, hap-yu, or chong-yu, and in the case of any purchase of property held under a co-ownership, the purchaser should ensure that the seller has, or has otherwise secured, authority to dispose of the property or his or her interest therein.

Under Korean law, real property consists of land and buildings, which are considered separate real property. The relevant units used to measure ownership of land and buildings are pil-gee and dong (which is equivalent to one building structure), respectively. In principle, potential buyers are not allowed to acquire interests that are smaller than one pil-gee or one dong unless a building is deemed an aggregate building and the dong has been divided into several sections that are subject to independent use or ownership.

i Real estate funds 

In 2004, real estate funds (‘REFs’) were introduced in Korea after certain amendments were made to the Indirect Investment Asset Management Business Act. Many investors embraced the concept of REFs and began widely using them as investment vehicles for real estate transactions. Private REFs are especially popular since only one or more persons are required for the formation of the REF. However, the simplicity of forming a private REF is currently under review as proposed amendments to the Financial Investment Services and Capital Markets Act will require two or more persons for establishment if passed by the legislature. The chart below shows that the number of REFs has been steadily increasing for the past five years mostly because of the increase in private REFs.

ii Real estate investment trusts 

Real estate investment trusts (‘REITs’)5 have become one of the more widely used real estate investment vehicles, as shown in the chart below. Recently, REITs have become particularly popular in projects involving the development of ‘officetels’ (which is a multipurpose building with residential and commercial units), developments, hotels, supermarkets, department stores and discount stores. One of the more notable trends in 2012 was the use of REITs for the development of hotels for accommodation of Asian tourists (notably Chinese and Japanese visitors).

iv Foreigner real estate transactions

Following the 1997 Asian financial crisis, there has been a steady increase in foreign investment in Korean real estate owing to, among other things, changes in laws that permitted foreigners to directly own property in Korea and the increase in the amount of real estate for sale; the global financial distress of 2008, however, saw foreign investment slow down. While the impact of the economic crisis has been limited in Korea, it affected the traditional foreign real estate investors, including many of the American and European financial institutions and real estate funds. However, as shown below, the level of foreign investment has recovered from its low point in 2009.

[Question] How do you expect Korean real estate market will go? Will you buy a house now or wait? Would you invest in a Korean REIT?

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