The FKI at a crossroadsThe Federation of Korean Industries (FKI), the once-mighty lobbying group for the chaebol, is at a crossroads after Samsung Group and other heavyweight corporate members announced they would leave the organization amid criticisms about its shady middleman’s role in collecting funds for President Park Geun-hye and her friend Choi Soon-sil. Politicians have joined the chorus to call for a dismantling of the entity. Others propose turning it into a private think tank akin to the Heritage Foundation in Washington D.C.
That conservative think tank was set up in 1973 with a mission to “formulate and promote conservative public polices based on the principles of free enterprise, limited government, individual freedom, traditional American values, and strong national defense.” Its policy study publication “Mandate for Leadership” became a reference for the policies of President Ronald Reagan. It stayed one of the most influential research bodies in the United States. The Heritage Foundation is run on corporate and individual donations and has about 700,000 members.
The FKI, with 400 large companies as its members, cannot be expected to take up the kind of role played by the Heritage Foundation. An organization that dedicated itself to the interests of large companies wouldn’t be able to attract donations from thousands of ordinary people. There would be a limit to the FKI advocating conservative political policies as it won’t be welcome in a society with a rigid divide between the right and left. I personally advise it to benchmark the British organization Business in the Community (BITC).
Founded in 1982, BITC is a business-community outreach group aimed at promoting corporate social responsibility and is one of the Prince’s charities of Charles, Prince of Wales. As in the FKI, heads of large enterprises in the UK make up a leadership team to oversee projects for the organization. It was set up to address various community issues, has a secretariat for the leadership team and a headquarters and branches employing 400.
BITC has a fund of about $30 million pounds ($37 million) as of 2016 to help with the environment, employment of the underprivileged, gender and ethnic problems, and regional small and mid-sized enterprises. In 2015, it was instrumental in creating 3,500 jobs, conducted joint projects with 500 schools and arranged jobs for 100,000 ex-convicts.
The FKI, which was founded in 1961 on principles of promoting free enterprise and global competitiveness, played an important role in the country’s fast industrialization, which was led by large companies. But a growth model oriented towards large enterprises began to wear out its welcome from the late 1970s and especially following the 1997 Asian financial crisis.
The government role in industrial policy was scaled down and the balance sheets of large companies improved through the restructuring of weak units. Amid changes in domestic and external conditions, the FKI failed to find a new role and its fate is now hanging in the balance because its usefulness remained limited to the chaebol.
Corporate social responsibility, a concept requiring companies to worry about the environment and society, is a term coined by Howard Bowen in 1954. It has now become an international norm after it was defined in the ISO 26000 as a guideline by the International Organization for Standardization (ISO) in 2010. In 2011, Michael Porter, a professor at Harvard Business School, expanded the concept as “Creating Shared Value (CSV)” to enhance shared value for companies and communities. CSR and CSV theories have become a must for companies around the world.
We are witnessing drastic changes in the political and economic scenes at home and abroad. The British, who pioneered industrialization and free enterprise and trade, have decided to leave the European Union. Tycoon-turned-politician Donald J. Trump won the U.S. presidential election by championing America First protectionist policies. The neo-liberalism movement led by the U.S. and UK since 1980s has come to an end. We are entering a new era that calls for a sustainable capitalism model and corporate social responsibility.
Korea is in a political transition after the impeachment of President Park Geun-hye. It should elect a new president ahead of schedule if the impeachment is endorsed by the Constitutional Court — at a time when a prolonged economic slowdown has worsened income polarization. Large companies’ social role should become more pivotal. The FKI must reinvent itself and pursue common values that are in the interest of society.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, Dec. 27, Page 3
*The author is a chair professor at Dong-A University and chairman of the Sustainable Management Foundation.