A chaebol can own 51% of a company to get voting rights. That company can own 51% of another company, and 51% of another company, and so on. Multiply it all the way through a chain of companies, and you can get many companies near the bottom of the chain where the chaebol actually owns a small minority of the companies and yet controls those companies nonetheless. This leads to extreme agency-principal problems where many companies end up doing things not in the shareholder's interest.
The difficulty is that these ownership chains are not clear because accounting regulations don't require that level of transparency. So it's difficult to know if you're buying stock in a company that is in a position to actually care about your interests as a shareholder. It's safer to assume that you're going to get screwed as a shareholder. The ability of startups to grow up and become real success stories like the Facebooks and Amazons of the world are extremely rare.
So the chaebols get to reap all the benefits of raiding these smaller companies and never have to worry about their own positions being disrupted. A small company at the bottom of one of these chains can be forced to sell all their intellectual property at dirt cheap prices to a chaebol, and there's nothing other shareholders can do about it. The professor said in the US, securities laws make it easy for shareholders to sue a CEO from doing such stupid things. Not effective in South Korea. Heck, they apparently even have these temp CEO gigs where a guy off the street is hired to be a CEO and is paid handsomely to take the fall and spend some time in jail when legal troubles like that ensue.
Corruption is big in South Korea, and it's no wonder why there are so few new Korean startups that actually become household names. It's not for lack of effort or chance. Further evidence that corruption is big in South Korea, look at how often those big-time chaebol executives get thrown in jail and then they get to walk out free again to pursue their normal life because they're too important to the Korean economy. As a Korean Canadian, it boggles my mind why Korean people accept this status quo. There is admittedly a deep reverence for these companies that brought South Korea out of poverty creating economic growth the likes of which is rarely seen. But even so, I don't see a nice future if people don't stand up more for themselves, including the labourers who get exploited by these companies because they're the only viable employer in town.