Beyond corruptionIs Korea an advanced society? How high are Korea’s social productivity standards? We’ve posed this question for a long time. Korea sufficiently meets the standards of a developed nation in terms of economic and military might as well as cultural and artistic caliber. It has long been an active member of the Organization for Economic Cooperation and Development’s developed nations club. But we still cannot confidently consider ourselves a developed society and somehow feel lacking in various areas to meet the measurement. Such self-consciousness and sense of defeatism is deeply and widely fixated in our culture and precludes us from making a leap to the ranks of matured societies.
Commitments to law and order and transparency remain low and the power of policymakers prevails over the system so that the society is not entirely predictable and reliable. Connections, a fixed culture of contacts and rigid collaborative network are a norm, and Koreans are accustomed to stubbornly whining and protesting to get things done. All of these practices have eaten up the productivity of our society and kept it from climbing over the threshold that separates the developing from the developed.
The Improper Solicitation and Graft Act, known as Kim Young-ran Law after the former head of the Anti-corruption and Civil Rights Commission who first drafted the law that went into effect Wednesday, would help to enhance transparency in the society and make it more predictable to ultimately push the nation out of the developing nation bottleneck. The expansive law would bring positive repercussions at home to relieve society from various fallouts from overreliance on connections and relationships. The new ways of doing business could help elevate social productivity.
Of course there could be setbacks. The new law could weaken social unity and restrict chemistry. If the bureaucratic society loses life, and the rigidity triggers negative backlashes in many areas, the unique Korean culture based on jeong, or piety, could be undermined to make people distrust one another so that social productivity could worsen. Politicians and government authorities should therefore closely watch how the new system seeps into the society and come up with supplementary actions to eliminate any negative impact.
The law could bring about much confusion, conflict and awkwardness in the early stages. We must remember what the society went through when the real-name financial system was introduced 23 years ago. There was much confusion and unrest when the system was enforced through a presidential decree that even called for scrutiny under the Constitutional Court. The law, for instance, challenged whether celebrity or well-known figures going by pseudonyms should be punished for having financial accounts in those names. Reasonable flexibility was employed so as to make realistic exceptions.
Any customs that have long been part of everyday lives cannot be easily constrained and suddenly changed with new regulations. The law should be enforced, but nevertheless administered with reason so that the changes are natural and sustainable.
Along with the real-name financial system and antigraft law, our society needs another landmark reform to make this society transparent. The corporate accounting system requires a systematic makeover.
Korea joined the International Financial Reporting Standards (IFRS) in 2010 to make local companies’ accounts comprehensible and transparent according to international norms. But domestic accounting irregularities have become bolder and extensive.
Since the 1997 financial crisis, the accounting system of Korean companies came under scrutiny, but the 2011 window-dressing by mutual savings companies and an accounting scam by Daewoo Shipbuilding & Marine Engineering are just two examples that proved corporate mishaps and wrongdoings have been condoned and even aided by accounting firms.
Fraudulent accounting practices by companies and collaborative assistance by accountants are serious crimes. We no longer should tolerate such corporate accounting irregularities. The accounting industry demands reform. The government and legislature should join forces and draw cooperation from the society to make it an agenda.
To make some suggestions on the key areas for reform, the legal system first needs to be realigned to toughen punishment and its administration against account schemers. Second, the relationship between a listed enterprise and its auditing supervisor must be redefined so that the auditor could make objective judgment on the corporation’s financial state. Third, large nonprofits and public fund organizers also should come under outside audit to ensure their public creditworthiness. Fourth, an independent accounting watchdog group must be formed to supervise the reforms and accounting behavior so that transparent practices could be led by the civilian sector.
It is a pity that forcible laws are required to upgrade the social standards to the levels of advanced nations. Even with excellent laws and system, it would be of no use unless the public is willing to accept it and keep watch so that the changes fit in well. It is up to every person to make this society transparent and just.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, Sept. 29, Page 28
*The author, former minister of commerce, industry and energy, is the chairman of the North East Asian Research Foundation.