[VIEWPOINT]Ethics must also be modernized

The United States, which has been acknowledged to be the most transparent economy in corporate management and accounting, is now struggling to deal with the scandal-tinged collapse of a Houston corporation.

Enron, the largest energy-related firm in America, recently went bankrupt after reporting vastly overstated earnings for nearly four years. The firm's massive political contributions, the apparent involvement of its auditor and the circumstances surrounding the loss of pension funds by many of its employees have made the scandal the worst in many years.

The image of Korean political authorities has also been battered by the so-called "four gates," the four scandals involving Chung Hyun-joon, Chin Seung-hyun, Lee Yong-ho and Yoon Tae-shik. They hitched their illegal securities moves to the boom in start-up companies that has swept Korea in recent years. And the implication of leading politicians, presidential aides and even first-family relatives in these scandals attack the center of power.

Watergate was originally one of the eight gates of Jerusalem. According to the Old Testament, the Israelites repented of their sins at a square in front of the Watergate, listening to the preaching of Ezra, the chief priest, about the Law of Moses. But contrary to its origin in the Old Testament, Watergate has become the symbol of lies and corruption in the present age, especially so because of the notorious bugging incident by CIA agents of a Democratic Party office at the Watergate Hotel in Washington, D.C. in June 1972.

The Daewoo Group, which had been a symbol and a leader of Korea's economic development, collapsed with losses of 22.9 trillion won ($17.4 billion), a shameful world record.

According to Transparency International's 1998 report, Korea ranked 43d among 85 countries in overall transparency and clean business practices. The level of Korea's corruption index was similar to that of Zimbabwe and was the lowest among the members of the Organization for Economic Development and Cooperation except for Mexico, which ranked 55th. Korea dropped to 50th among 99 countries in the 1999 survey and rose slightly to 48th among 90 countries in 2000.

Koreans tend to attach greater importance to results than to process and give priority to custom over law. The country has inadequate social rules and developed before social practices caught up to the new realities. In our society, selfish behavior prevails, and the ruling class lacks a sense of responsibility.

Koreans are hardly shocked at corruption scandals; the prevailing corruption has made us insensitive. In our society, it is difficult to distinguish gifts from bribes.

The political and administrative factors that resulted in Korean society's corruption are ineffective anti-corruption policies, an inability to carry out the policies that do exist and the light punishment for corruption. The government's excessive restrictions and tinkering in business affairs and irrational administrative practices also play a role in fostering corruption.

The economic factors that caused Korean society's corruption are government-led economic development and the low level of wages paid to public officials.

The social factors that led our society into corruption are ambiguous concepts of corruption, a confused sense of values and imitative consumption. Relations between the government and the business sector are not transparent, but arbitrary. When a company faces a problem, it looks for someone in government to pay to fix it. So entertainment expenses of Korean companies were 10 trillion won annually in the years when the recent economic crisis hit.

As criticism about Korean companies' lack of transparency and ethics in management grew, the Chief Executive Forum adopted a code of ethics binding on its members. Leaders in the high-tech start-up sector are making similar moves. But unless lightning strikes, a transparent society still looks far away, given continued political meddling in corporate restructuring, shady stock dealings and the expected heavy demand for political funds before the two elections scheduled this year.

Social demand for black money should be removed. Supply will meet demand in the market for corruption as well as the aboveboard market.

Public attention to corruption should be increased. We need strong protections for whistleblowers.

Internal controls on public officials should be strengthened and auditors and the courts should apply stricter standards and harsher punishments.

Existing policies to improve the transparency of corporate management should be beefed up: The regulation of insider stock trading, more corporate disclosure, strict walls between firms and outside auditors and better-trained auditors are all necessary steps.

But the prerequisite for a transparent society is a sense of responsibility by political leaders and their will to reform.

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The writer is the chairman of the Korea Accounting Institute.

by Kim Il-sup