Cracking Down on Korea's Chaebol

Once a laughingstock for its poorly made cars, Hyundai Motors has in recent years boosted quality and won fans in key markets such as the U.S. and China. But the fast-growing South Korean automaker—the world's seventh-largest when combined with its affiliate Kia Motors—was blindsided last week from an unexpected quarter: its 68-year-old chairman, Chung Mong Koo, was arrested on charges of embezzling $100 million and breach of trust relating to $300 million in company losses.

The arrest of one of Korea's most prominent tycoons sent tremors through the boardrooms of the country's chaebol, the powerful, family-run conglomerates...