Reinforcing corporate ethics

Corruption is widespread in Samsung Group, its chairman, Lee Kun-hee, proclaimed. The country’s largest conglomerate carried out a sweeping internal audit on its affiliates and uncovered a handful of irregularities at precision machinery unit Samsung Techwin, which led to the resignation of its CEO Oh Chang-suk.

Chairman Lee told reporters later that the events were the result of corporate complacency because of good business over the last decade. He delivered a strong reprimand during an executive meeting to those who tarnished the group’s clean corporate image.

Corruption in Korea usually occurs in the public sector. But private industry is really no different. There are shady deals between large companies and smaller subcontractors. Large companies are bribed and entertained by their existing or aspiring suppliers.

Samsung Group did not disclose the details of the wrongdoings at Samsung Techwin, but added that the managers were found guilty of improper conduct, though it was not illegal. At the meeting, Lee had roared: “Graft and bribes are part of the corruption here. But what’s worse is managers forcing their subordinates to do the dirty work.”

Samsung Group regularly carries out internal investigations on its affiliates and executives as a part of its efforts to maintain its corporate image. But if malpractice persists in the company despite routine oversight, the situation may well be worse in other companies.

It is not difficult to locate where the seeds of corporate corruption sprout. Keeping up with important dates and the personal affairs of executives of large companies are part of the regular business of the CEOs of small and midsize parts suppliers and subcontractors.

This customary practice, however, is rarely found in the corporate culture of advanced societies. It is a unique Korean corporate culture that values personal contact and personal relationships. But cozy relationships such as these more often than not lead to unnecessary entertainment and graft as well as other forms of corruption. As long as such oddities exist in the corporate sector, we cannot expect symbiotic and equal growth to blossom there.

High productivity cannot be expected of a rotten organization. If executives embezzle corporate funds to enrich themselves, the organization is heading for a fall. Such an ugly practice is indisputably a crime. The corporate sector should use the Samsung case to build momentum for reinforcing corporate ethics and discipline.