The Shareholders' Celebration
Super Synergy Effect. December 29th. Thursday evening, 6 PM. Yoo Jae-won stood at the entrance of the building, dressed impeccably alongside his parents, greeting the arriving guests. He had rented out Ganghuije, the finest traditional Chinese restaurant in Yeoju, for the day to host them. This was no ordinary opening celebration for the new office. With two offices already in operation, any such event should have taken place long ago. Even if Yoo Jae-won were to open a much larger headquarters in the future, he had no intention of holding any formal opening ceremonies. The guests he and his parents welcomed were none other than the shareholders of ID Technology. Everyone listed in the shareholder registry lived near Deokjin-ri or Yeoju, making the journey easy. Attendance exceeded 100 percent. The reason was simple: the invitation had explicitly welcomed family members. Not only the shareholders themselves but anyone accompanying them as family had been invited, and many had come.
Yoo Jae-won had no desire for ID Technology's shareholders' meeting to feel like the stiff, formal affairs common at other companies. With so few shareholders at present, turning the gathering into a festive occasion like Berkshire Hathaway's annual meeting in the United States was not difficult. This event was meant to report ID Technology's 1988 business performance, announce the business plan for the following year, present the audit results commissioned through the accounting firm, and declare the dividend. Of course, because the meeting would also reveal ID Technology's most critical secrets, the financial statements and dividend announcements had been scheduled to take place separately in a smaller room reserved only for the shareholders.
With food and drink flowing freely and dividends to be received, the festive atmosphere came naturally. At the entrance, Yoo Jae-won's parents could not have looked more proud. They had already learned of ID Technology's achievements through television and newspapers, and just days earlier they had been invited to the Blue House. The tea set and presidential watch were the first such honors the Yoo family had ever received. Having the most famous elementary school student in the nation as their son filled them with pride.
Just then, a Pony 2 pulled into the Ganghuije parking lot. It was the principal and his wife, Yoo Jae-won's greatest supporters. "Principal, you've arrived! Thank you for coming!" "Thank me? This is exactly where I should be. You've done far better than I ever expected, so I'm the one who should be grateful." The principal patted Yoo Jae-won's head affectionately as he spoke. Since they were the final invited guests, Yoo Jae-won and his family entered the hall alongside the principal and his wife. The food had already been arranged on tables throughout the hall. With their arrival, the lively feast began in earnest.
Yoo Jae-won felt deeply satisfied. Thanks to Lee Yong-kwon, vice president of Sambo Computer, he had first visited this place, and now he had kept his promise to return with his family before 1988 ended—on a far grander scale. "ID Technology's financial health surpasses that of most major corporations. Total revenue for 1988 reached 585 million won. After deducting personnel costs, maintenance expenses, advertising, and other operating costs, net profit stood at 530 million won—an extraordinary 90 percent margin relative to revenue." While the lively celebration continued in the main hall, a more substantive shareholders' meeting unfolded in the smaller private room. The speaker was Kim Jae-woo, the tax accountant from Daeyang Tax Corporation whom Yoo Jae-won had entrusted with the financial closing. Although the firm had received the commission through its Seoul office, the actual work required traveling down to ID Technology's headquarters in Yeoju. Kim Jae-woo had initially assumed the small company was making an unnecessary fuss. A firm with so few employees could have used a local independent tax office near the district tax office or even handled the bookkeeping internally. Yet once he began the work, he realized this was no ordinary small business. Though it was still only beginning to stretch its wings in the information and communications sector, achieving a 90 percent net profit margin was astonishing enough to make one's eyes widen. The scale of the capital made the achievement even more remarkable. Generating nearly 600 million won in revenue within just two or three months on capital of less than 50 million won defied Kim Jae-woo's understanding of normal business.
Instinctively, Kim Jae-woo calculated the company's value and market capitalization. The simplest metric was the price-to-earnings ratio. ID Technology's capital stood at 32.55 million won, with 1988 net profit of 530 million won, producing a PER of 0.06—an astonishing figure. In Korea's currently overheated stock market, finding a stock with a PER below 10 was like searching for a needle in a haystack. Investors were snapping up anything with a PER of 15 or 16. Valued at the market average, ID Technology would be worth two hundred times its current figure—6.51 billion won. Even that amount was an understatement. The 1988 financials had not included profits generated in the United States. Once those American earnings were factored in, the company's value would multiply not by hundreds but by thousands. Within a few years, it could reach ten thousand times its present worth. Kim Jae-woo could scarcely believe such a monstrous company existed in the countryside. Yet when he finally met the president, everything made sense. Yoo Jae-won—the prodigious elementary school student who had set the entire nation abuzz—could indeed achieve this. His appearance at the Blue House, standing shoulder to shoulder with the president and chaebol chairmen for a commemorative photograph, had been broadcast nationwide just the day before.
The shareholders of the company filled Kim Jae-woo with envy. If he could, he would liquidate everything he owned to buy ID Technology stock. Unfortunately, the company was not listed, and the shareholders had no intention of selling. "One hundred million won of the net profit has been allocated as dividends. Based on each shareholder's ownership ratio, the amounts will be deposited into the accounts you registered by the end of today." The shareholders, already stunned by the revelation of over 500 million won in net profit, were now on the verge of fainting at the mention of a 100 million won dividend for 1988. Although Yoo Jae-won held the largest share, the principal, vice principal, the president of Hyeonmiyu, and close relatives each owned 10 percent. That meant a minimum of 10 million won would be credited to their accounts tomorrow—an amount that made composure impossible. After all, the principal's total income for 1988 had barely exceeded 8 million won. A single simple investment had generated more income than his regular salary. Park Sang-kwon, president of the Hyeonmiyu factory, who was accustomed to handling large sums, maintained his usual calm expression. Outwardly, at least. Inwardly, he was deeply impressed. As a seasoned businessman, Park Sang-kwon understood that Yoo Jae-won had only begun proper sales activities two months earlier. Achieving these results in just two months meant the performance figures once full-scale operations began next year would be staggering.
"One thing to note is that because the dividend is substantial, dividend income tax will apply. Including the 10 percent dividend income tax plus education tax and defense tax, the total rate comes to 16.75 percent. Please remember to pay it so there are no issues later. Daeyang Tax Corporation specializes in these matters. If you entrust us, we will find the optimal tax-saving method tailored to each shareholder's situation!" Though envious, Kim Jae-woo remained diligent in his sales pitch. The shareholders' income currently stood at tens of millions of won, but next year it would easily surpass hundreds of millions. At that scale, a tax accountant's assistance would become essential. "Consultations are free, and actual services will be offered at a reasonable rate, so please don't hesitate!" Of course, ID Technology itself was the largest client. Securing that single account would make transforming a mid-sized tax firm into a major one a trivial matter. "Next year, sales activities in the United States will begin in earnest, and we plan to launch a new product that surpasses the typewriter training machine. You may look forward to it!" This time Yoo Jae-won stepped forward to briefly explain the 1989 business plan. The atmosphere among the shareholders gathered in the small room could not have been better. The company they had invested in based solely on Yoo Jae-won was not merely succeeding—it was exploding in growth. On top of that, an unexpected dividend had been paid at a level that imposed no burden. It was as though they held a winning lottery ticket that paid out every year.
The sole exception was Park Sang-kwon of the Hyeonmiyu factory. Even while listening to the presentation, he had been carefully examining a document bearing the clear verification stamp of Daeyang Tax Corporation—the financial closing report distributed to each shareholder, meticulously recording all revenues and expenditures. After studying the papers for some time, Park Sang-kwon raised his hand to request the floor. Having finished his remarks, Yoo Jae-won immediately recognized him. "First, I offer my highest praise to President Yoo Jae-won, who has achieved in a short period results that even experienced executives find difficult." Though the shareholders' meeting was being held in a small room attached to the traditional Chinese restaurant Ganghuije, Park Sang-kwon observed proper formality. He treated Yoo Jae-won not as an elementary school student but with the full respect due a company president. His next words, however, were sharp. "However, while reviewing the financial statements, one issue caught my attention." At the mention of a question in the financial statements, tax accountant Kim Jae-woo grew more tense than Yoo Jae-won himself.