Teaching the chaebol

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Teaching the chaebol

The Seoul Central District Court yesterday sentenced Chey Tae-won - chairman of SK Group, Korea’s third-largest conglomerate - to four years in prison for embezzlement and breach of duty. The court accepted the prosecution’s demand for a four-year sentence and said Chey deserved stern instead of generous treatment.

Kim Seung-youn, chairman of Hanwha Group, and Lee Ho-jin, chairman of Taekwang Group, went to prison for mismanagement and corruption. As the demand for so-called economic democratization got stronger after the general election last year and particularly during the presidential election campaign, the judiciary has turned tougher. Chey’s conviction signifies the end of lenient sentences for chaebol heads. Gone are the days of three-year jail sentences suspended for five years.

Anyone who commits a crime should receive the due punishment regardless of their political, social or economic status. President-elect Park Geun-hye has expressed a stern will to penalize owners of conglomerates for wrongdoings by encouraging punishment without probation and by refraining from granting presidential pardons. Large conglomerates will probably regard such owner-bashing as unfair because they think they deserve praise for their outstanding business performances amid a global economic slowdown. But the big companies must face up to the fact that they have to assure the public that they follow the law, just as the public does. From now on, conglomerates should be more prudent in deciding management policies - no matter efficient they are - and take the possibility of a strong social backlash into account.

At the same time, however, the authorities must be careful about excessive punishments. Business management is intrinsically not free from the temptations of embezzlement. If the owners’ new investments are successful, it won’t cause much of a problem. If not, they should be ready for legal punishment. When top executives become too passive, new investments and jobs will shrink.

We must understand why Germany and Japan, which introduced the crimes of embezzlement and breach of duty much earlier than us, abolished them. That’s because they respect the difficulties of business judgments. We need to acknowledge the trickiness of business decisions. Above all, the incoming government should establish standards to minimize the blurriness between embezzlement and business judgments. Corporation bashing without manifest legal standards will only backfire.
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