MAIN PAGE | SPEECHES & EDITORIALS | 2000 | KOREAN CORPORATE EFFORTS
PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | SPEECHES & EDITORIALS | 2000 | KOREAN CORPORATE EFFORTS
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Korean Corporate Efforts for an Anti-Corruption Corporate Culture
Dr. Zusun Rhee GOVERNMENT-LED ECONOMIC DEVELOPMENT POLICY in the past few decades has been instrumental to the rapid development of the Korean economy, Various approval and authorization rules and regulations were indispensable tools to effectively carry out policy during that era. While these regulatory measures were effective, they also gave rise to increased opportunities for corruption between government and businesses. In this politico-economic environment, it was customary for government to award special privileges to certain companies or individuals in turn for special favors, thereby encouraging illegal political funds or bribes to influential politicians and civil servants. In addition, authoritarian practices, strong regional and academic connections, sectarianism, and paternalism seriously affected the proliferation of corruption throughout the whole society. As a result, the Korean government only sporadically monitored and punished corrupt government officials and politicians in the past. However, this sporadic anti-corruption measure has not been effective. Because of the rapid integration of international markets through transportation and digital revolution, the interdependency between Korea and the world market is rapidly deepening. This swift environmental change has caused Korean businesses to face fierce and unlimited competition in the domestic as well as international markets. As a result, Korea's previous development strategy, which was based on politico-economic collusive-structures, has become increasing less viable- However, the existing collusive structure backed by illegal abuse of authority and bribery still continues due to the lack of fundamental change in institutional and incentive structures. Korean Efforts on Anti-Corruption Many Koreans do not hesitate to indicate that corruption is one of the main causes of the recent economic crisis. The Korean government and businesses have also begun to recognize that collusive structures backed by corruption are harmful to the competitiveness of the 'government and businesses. Although these efforts are at the beginning stage, this common recognition about corruption in recent years has resulted in the systematic institutionalization of government anti-corruption measures as well as businesses' voluntary practice of business ethics. In order to promote anti-corruption policy, the Korean government ratified the OECD convention on Combating Bribery of Foreign Public Officials in International Business Transactions in 1998, The Korean government also enacted the Act of Preventing Bribery of Foreign Public Officials at the end of the same year. In October 1999, the government established the Presidential Committee on Anti-Corruption (PCAC) and its secretariat as an infrastructure for combating corruption. The National Assembly is now discussing the legislation of the Basic Act on Anti-Corruption suggested in 1999. In addition. since 1998, the Korean government has been driving administrative and institutional reform with anti-corruption consideration to get rid of the fundamental sources of corruption. Korean business associations such as Federation of Korean Industries (FKI) have also started to adopt their own codes of business ethics and are encouraging their members to comply with them. FKI, a leading trade association in Korea, declared the Charter of Business Ethics in 1999. It also established the Committee on Business Ethics in order to promote the adoption of business ethics management and to strengthen the education and publicity about business ethics to member firms. Moreover, FKI has created the Manual for Business Ethics Practice June 2000. FKI together with four other leading trade associations and PCAC held joint seminars in Seoul and Pusan in July and September 2000 in order to encourage the adoption of business ethics management to member firms. Leading Korean businesses such as POSCO, LG. Samsung, and Hyundai began to create codes of business ethics in the mid-1990s. However, most of these codes were too abstract to put into practice. This year, a small number of large companies such as Korean Air and Shinsegae started to reinforce their business ethics codes and to introduce guidelines for business conduct implementing these codes. They have also established intra-firm bureaus for business ethics as the driving engine for business ethics management In general, however, businesses' effort for the business ethics management is still at a beginning stage. FKI Manual for Business Ethics Practice FKI published the Manual for Business Ethics Practice in June 2000. The objective of this manual is to help member firms practice codes of business ethics and to help establish business ethics management systems. The manual is composed of the following five chapters:
The first chapter addresses procedural recommendations, contents and details of the codes of business ethics. The manual. emphasizes that any company introducing the code for the first time should hear feedback from its employees, including top management. It also recommends that the codes should contain the following; basic targets or goals to achieve, attitudes towards interested parties related to the company, concrete guidelines for compliance with the code, and a compliance pledge from all members in the company. The code should especially reflect a fair, sincere, and transparent relationship between the company and. related parties such as shareholders, managers, employees, customers, neighborhoods, input suppliers, competitors, media, governments, foreign governments, and businesses. The concrete guidelines for the relationship between interest parties should be arranged in the code. The second chapter explains how businesses may establish their institutions in order to practice business ethics management. It recommends an independent bureau for business ethics, such as the committee for business ethics, and suggests details such as the committee's function, composition of members, operating principles and procedures, inquiry and punishment mechanisms. In addition. it also sets forth the protection mechanism for an inner accuser and the institutional reform of related areas in the company. The third chapter discusses a company's operation and management of its institutional arrangement. For successful compliance, it urges that top management must have a firm belief about business ethics and should publicize its will through official documents such as a charter of business ethics and guidelines for business ethics. Also, the top management should determine the direction for operating the committee, promoting education and assessing the program for business ethics in order to induce voluntary participation of employees. The fourth chapter explains how to educate employees about business ethics. For compliance with the codes or the guidelines, each employee should recognize the required business ethics in his particular job. Therefore, ethics education should be tailored according to each employee's job requirements, The manual also suggests that the company prepare the education program according to a hierarchy structure because the role of each m ember belonging to different hierarchical stage is different. It also ranks the concrete subjects of the education. The fifth chapter addresses assessment of business ethics programs, This chapter recommends that the businesses with ethics programs should evaluate the performance and effectiveness of their programs regularly and reflect the evaluation to their programs. It also exemplifies a checklist for the assessment of the programs, This manual will be a comprehensive reference for businesses to establish business ethics management systems. Currently, many member businesses of FKI are independently and voluntarily committing to business ethics management. Conclusion As discussed above, efforts by the Korean corporate sector to develop an anti-corruption management culture is still at a beginning stage. Thus, we cannot as yet properly evaluate the performance of the business ethics management systems. However, we can observe progress in the establishment of legal and institutional arrangements such as laws, charters, codes, guidelines, committees, and secretariats. The Manual for Business Ethics Practice by FKI provides member firms with an excellent reference for the establishment of practical business ethics management systems. These corporate efforts are supported by PCAC, the governmental body for anti-corruption, PCAC has been -continuously supporting seminars and conferences related to anti-corruption and business ethics. It also supports the establishment of anti-corruption programs for government officials and strongly .supports public sector reform, including regulatory reform, We believe that these cooperative efforts for anti-corruption by the government. - trade associations and businesses will eventually be very fruitful. Executive Summary Facing unlimited competition, Koreans have recognized that politicoeconomic collusive-structures backed by corruption are harmful to the Korea's competitiveness. This recognition has resulted in the systematic institutionalization of government anti-corruption measures as well as businesses' voluntary practice of business ethics. The Korean government ratified the OECD convention and enacted the APBFPO in 1998. In 1999, the government established PCAC and its secretariat. The National Assembly is now discussing the legislation of the Basic Act on Anti-Corruption. The Korean government has also been driving administrative reform to remove fundamental sources of corruption. Korean business associations such as FKl have started to adopt their own codes of business ethics and are encouraging their members to comply with them. FKI declared the Charter of Business Ethics in 1999. 'It also established the Committee on Business Ethics and created the Manual for Business Ethics Practice to promote business ethics management. FKI, four other trade associations and PCAC also held joint seminars on business ethics management twice. Companies such as Korean Air and Shinsegae have this year started to reinforce codes and introduce guidelines. They have also established bureaus for business ethics- In general, however, businesses' efforts to strengthen business ethics management is still at a beginning stage. |