HHI chief vows to right the company’s ethics ship

Korea’s big three shipbuilders said they are committed to making a fresh start with regard to ethics in 2014 after getting hit with bribery scandals last year.

Hyundai Heavy Industries, the nation’s largest ship manufacturer, held an “ethics management resolution” event on Saturday at its headquarters in Ulsan during a management strategy seminar. HHI Chairman Lee Jae-sung and more than 150 high-ranking executives, including CEOs from affiliates, signed a pledge to pursue ethical management.

“We have to make an environment where corruption will not occur, and we need to be reborn through major reform,” said Lee. “For corruption and illegal activity, we will tighten discipline and strengthen punishment.”

Last week, the Ulsan District Prosecutors’ Office announced it detained 12 former employees of HHI for taking bribes from suppliers, while three employees of HHI suppliers were also arrested.

The Ulsan prosecutors said the HHI employees received about 3.6 billion won ($3.3 million) from suppliers since 2007. Some employees received bribes through family members’ bank accounts and even through the account of a bar waitress, according to prosecutors.

Last July, five other former HHI employees were taken into custody for giving bribes to Korea Hydro and Nuclear Power employees to use equipment in nuclear power plants, and the company’s office was raided by prosecutors.

The shipbuilder said that since the scandal last year, it has added emphasis on law-abiding management, appointing a president-level executive to oversee ethics and creating an ethics “compliance unit” last month.

The compliance unit will pursue programs to prevent illegal actions and educate employees, as well as institute a system to monitor business procedures. HHI is also known to be hiring more staff for its internal audit team.

“Most employees involved in corruption were fired even before the prosecutors’ investigation as a result of internal audits,” said an HHI spokesman. “However, we are strengthening our efforts to establish a clean corporate culture.”

Industry insiders said bribery is always possible because of the shipbuilding process of procuring parts from various companies and the fierce competition to win contracts.

Daewoo Shipbuilding and Marine Engineering already restructured its management ethics. The company in November separated its audit and ethics management teams and doubled the number of auditors. The shipbuilder also accepted the resignation of 10 executives.

In October, more than 30 employees from DSME and its suppliers were indicted for bribery by Ulsan prosecutors, while 20 others were indicted by Changwon prosecutors last month.

Samsung Heavy Industries also has not been untainted, as one of its employees was taken into custody for bribery by Ulsan prosecutors last year. Park Dae-young, president and CEO, emphasized in his New Year’s message that establishing a clean corporate culture will be a priority

Meanwhile, analysts say that despite these scandals, the big three shipbuilders are aiming high in their target goals for this year. According to a report from Woori Investment and Securities, the three major shipbuilders are likely to set their 2014 order targets 10 percent higher than last year. The securities firm speculated that the three shipbuilders will aim for a total of $45 billion in revenue.

HHI said its goal is $29.6 billion this year, while Samsung Heavy Industries and DSME have not revealed their goals.

BY JOO KYUNG-DON [kjoo@joongang.co.kr]