This research analyses the history of Daewoo a major conglomerate, focusing on the implications of its vast corporate governance meltdown. Daewoo’s success ultimately led to devastation not only because of its huge amount of debts but there had been many other factors. The organizational theories can explain the reasons of the failure of a large organization like Daewoo. Maslow’s theory clearly emphasizes upon the needs of employees and motivation level that decreases as the size of the business expands.
Whereas Herzberg’s two factor theory focuses on the job satisfaction level of employees that could either bring success or failure for the company. Thirdly, Elton Mayo theory puts great emphasis on the goals of the organization that are achieved by allowing employees to take part in it. Finally, the leading, management, and organizational structure of a large organization can clearly determining the future of the business. Korea’s largest transnational conglomerate, Daewoo was founded by Woo Choong Kim in 1967 with 5 employees and $10000.
Within the next 5 years Daewoo expanded so rapidly that it became the second largest exporter and a leading player in the economic success of Korea. Daewoo received extensive government support as it became an important asset for the government. The tale of Daewoo signifies the earliest warning signs of the corporate governance breakdowns that later affected world leading companies. It predated Enron, WorldCom, Tyco, Ahold and Parmalat, scandals that devastated confidence in global markets . Daewoo scandal was the largest in the world history committing $15. 3 billion accounting fraud.
Reasons of Company Failure Leadership: The Company maintained an autocratic management/leadership style. This concentration of power led the firm into facing many corporate governance problems. The motivation levels in the organization were low as the staff was all dependent on the chairman’s instructions. This style of leadership did not allow the organizational staff to feel a part of the company as they did not get a chance to participate in the decision-making process. Daewoo, Tyco, Enron, World Com collapsed as a result this leadership style as well (Colquitt, Wesson & LePine, 2008). Management:
It plays a vital role in the success of a business. The five functions of management like planning where we set objectives and make right strategies and policies to achieve them. Also, organizing the resources of the business so that large organizations like Daewoo can become efficient and effective in their business activities. Commanding, coordinating and controlling are three more aspects that play a major role to decide success or failure of a business. If the stakeholders have complete trust on the management of the business, then it can flourish easily (Colquitt, Wesson & LePine, 2008).