South Korean President Park Geun-hye denounced fugitive members of the ship-owning family linked to last month's ferry disaster on Tuesday, calling them the "root cause" of the tragedy that claimed 300 lives.

The government has offered a half-million dollar reward for information leading to the arrest of Yoo Byung-eun, patriarch of the family behind Chonghaejin Marine Co.

Chonghaejin owned and operated the 6,825-ton Sewol ferry that capsized and sank on April 16 with hundreds of high school students on board.

Yoo and his eldest son have become the targets of a massive manhunt after they ignored a summons from prosecutors to surrender themselves for questioning.

Initial investigations suggest that lax safety standards and negligent business practices may have been a major contributor to the disaster.

"The Yoo Byung-eun family, the root cause of the tragedy, is flouting the law and causing public fury at a time when it should repent in front of people and reveal the truth," Park told a Cabinet meeting.

"This is an absolutely unpardonable criminal act," she said.

Yoo has no direct stake in Chonghaejin, but his children and close aides control it through a complex web of holding companies.

Prosecutors had offered an initial reward of $50,000 for information on Yoo's whereabouts, but upped the figure to $500,000 on Monday after days of fruitless searching.

A $100,000 reward was offered for his eldest son, Yoo Dae-kyun.

In the wake of the Sewol tragedy, Park has had to contend with widespread public criticism of the rescue effort and lax regulatory oversight.

In a tearful address to the nation last week, she accepted personal responsibility and announced she would dismantle the coast guard in an overhaul of the national emergency response system.

Park has been very outspoken in her own criticism of the ferry's captain and surviving crew members, saying their decision to abandon ship while hundreds were still trapped was "tantamount to murder".

Divers are still searching for the bodies of 16 people who remain missing and will begin preparations to cut through the hull of the sunken ferry near the stern, where many of the missing are believed to be, the coast guard said on Tuesday.

The prosecution said the ferry was structurally defective after a remodeling to add capacity and was massively overloaded with cargo. Making a sharp turn, it failed to restore its balance and capsized.

Strong currents in the area have made search and recovery operations extremely difficult.

AFP-Reuters