Story of a Big Player from Gangnam

Gun-Ho and CEO Park were talking inside CEO Park’s car. Gun-Ho said to CEO Park, “Yes, GH Mobile’s sales revenue has substantially increased recently. The company made 187.4 billion won this year. And, I do appreciate your help for it.”

“In fact, Party Leader Jin-Woo Lee put a lot of effort in helping GH Mobile behind the scene. He talked to H Group’s chairman himself, so H Group could start a business with GH Mobile. Moreover, Party Leader Jin-Woo Lee’s wife—Mrs. Lee—also talked to A Electronics’ president, so they could continue to have a business with GH Mobile on favorable terms for GH Mobile.”

“I appreciate it.”

“Even with all these efforts, GH Mobile hasn’t reached 200 billion won of sales revenue this year. I know that a parts manufacturing company in the auto industry or electronics industry doesn’t usually make a high-profit rate. If such a company makes over 6% of profit rate after taxes, that company would be deemed having done a very good job that year.”

“We actually made 7% this year. Our net earnings after taxes this year is 13.3 billion won.”

“Hmm. Are you going to distribute those net earnings among the shareholders as dividends? Or, are you planning to pay for the company’s debt with the money?”

“I am leaning toward distributing those earnings as dividends. In fact, GH Mobile hasn’t distributed its dividends to its shareholders for the past 3 years. We had to use all of our earnings to pay for the company’s debt and also to expand our business. So, I want to distribute dividends this year.”

“After setting aside the legally required reserve, I believe that you can distribute about 10 billion won out of 13.3 billion won to the shareholders.”

“That’s the plan.”

“If that happens, Mr. Beom-Sik Lee, who owns 15% of the ownership interest, would be able to receive 1.5 billion won.”

“That sounds correct.”

“And, he will have to pay taxes out of that 1.5 billion won.”

“That’s right.”

Silence filled the air for a moment until CEO Park started speaking again.

“I’m going to tell you something now, and I want you to be open-minded, and try not to misunderstand what I’m going to say.”

“Sure. Please go on.”

“I need you to give a big help to Party Leader Jin-Woo Lee this time.”

“What are you suggesting?”

“If he runs for President, he will need a massive amount of money. This is different from running for Congressman or some other positions. He will have to cover the entire nation, not just a certain district. That’s why he hasn’t actually started his campaign yet.”

“Hmm.”

“Many people believe that Party Leader Jin-Woo Lee wouldn’t have any money problems just because his father-in-law is the owner of a conglomerate company. But, that is simply not true. As you probably know already, A Group’s chairman is a very stubborn man. And, he hates politics.”

“I think that I heard about it.”

“So, we really need your support, a big one. I want you to distribute the fund that you received from selling the ownership interest in Dyeon Korea, among the shareholders as dividends.”

“What?”

“The money that you received from W Chemicals for the ownership portion in Dyeon Korea. I want you to distribute that amount to GH Mobile’s shareholders.”

“A company has to reserve some cash out of its profits or earnings in preparing for the future. Also, we need to pay for the company’s debt, and if necessary, we have to use that fund to acquire another company through M&A. That’s how it works for a business. We can’t just distribute all of the money that we have to the shareholders as dividends.”

“I understand what you mean, Mr. Chairman Goo. But, we are in a special situation right now. The opportunity to run for President is not given to everyone, and it is a lifetime opportunity. That’s why we are asking for your help.”

“You are putting me in a very difficult position.”

“Do you have any idea who was behind that W Chemicals’ acquisition of Dyeon Korea?”

“I have a good guess, so you don’t have to tell me.”

“GH Mobile received 272 billion won by selling its ownership interest in Dyeon Korea to W Chemicals. Of course, it will have to pay for transfer tax which will be high since the period of possession for the ownership interest was short. But even so, you can still use at least 200 billion won to distribute among the shareholders.”

Gun-Ho’s voice was raised a little bit when he responded to CEO Park’s request.

“You can’t just tell me that I should distribute that fund to the shareholders as dividends, and expect me to follow it. It’s the decision that I have to make.”

“Of course. It should be decided by GH Mobile’s board of directors. And, since you are the major shareholder, it would be your decision. I understand that no one can interfere with your management right here. That’s why I said that we needed your help.”

At that moment, CEO Park grabbed Gun-Ho’s hand.

“Mr. Chairman Goo, please help us. This kind of opportunity doesn’t come to you every day. This can be one opportunity in your lifetime.”

“I’m aware that Party Leader Jin-Woo Lee and you—Mr. CEO Park—had helped me a lot with my business. And, of course, I want to help you. But, to be honest with you, the amount that you are requesting is way too much.”

“If you distribute 200 billion won to the shareholders, Mr. Bom-Sik Lee will receive 30 billion won as his dividend. I’m not sure how much money is needed in politics, but I believe that 30 billion won would be good enough to start his campaign.”

Gun-Ho leaned back in his seat and thought about it for quite a while. Silence filled the air in the car for a while. Gun-Ho kept thinking with his eyes closed.

‘We have 272 billion won that we received from selling Dyeon Korea. And, GH Mobile made a profit of 13.3 billion won this year. If I combine them together, it will be 285.3 billion won… 272 billion won will be classified as an extraordinary gain, and the corporate tax rate would be 22% then… We have to pay transfer tax and also corporate tax, which would be a lot…

If we distribute 200 billion won to the shareholders, Party Leader Jin-Woo Lee’s father—Mr. Beom-Sik Lee—would receive 30 billion won. And, I, with my 82% ownership interest, will take 164 billion won. President Song will also get a good amount. With his 3% ownership interest, he will receive 6 billion won. President Song didn’t really contribute to selling Dyeon Korea, and most of this fund is from investment profits. Would he still insist on getting the full 6 billion won? Well, that should be his rightly portion anyway.

What CEO Park said is absolutely right. It’s not like anybody could run for President. And, a political party’s leader is not randomly selected either. This could be my lifetime opportunity too. This is one-time help. Maybe I should help him big this time.’

After a while, Gun-Ho opened his eyes and looked straight at CEO Park and said, “If I decide to use 200 billion won in distributing dividends among GH Mobile’s shareholders, Mr. Beom-Sik Lee will take 30 billion won. If that happens, what would you do for me? What’s in it for me?”

As Gun-Ho asked what he would gain from it, CEO Park grinned.

“You shouldn’t underestimate the power that a presidential candidate would have. Gongmyeong Party is a powerful political party, and its Party Leader Jin-Woo Lee will run for President with that party’s support. Regardless of the fact that he would actually win the election or not, while he is a presidential candidate, he will have great power.”

“I know that.”

“We will give you the presidential candidate’s mouth.”

Gun-Ho laughed out loud. He then extended his hand to CEO Park for a handshake, and said, “I will distribute that money among the shareholders as dividends.”