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Risky business

Dec 16,2017
In early November, the American Chamber of Commerce in Korea hosted a seminar on CEO risk reduction for the heads of foreign companies. CEO risk refers to a rise in management uncertainty connected to a CEO or specific shareholder. As inspection agencies have become stricter and the standard for corporate ethics is higher under the Moon Jae-in administration, CEO risk has increased. The seminar was organized as foreign companies were no exception here.

Attorney Jeffrey Jones at Kim and Chang said at the seminar that prosecutors, the National Tax Service and the Fair Trade Commission are making more dawn raids, and CEOs are the main targets, as they are the prime decision makers.

Just like Korean companies, foreign companies are concerned about damaged company reputation from CEO risk and failure to establish strategies in leadership vacuum. However, some CEO risks are unfamiliar to foreign companies, especially how personal wrongdoings are amplified as company issues. There seems to be cultural differences in separating company management and personal life.

A presenter said that there is a “court of public opinion” in Korea as well as the court of law. Foreign CEOs are not accustomed to having their private lives exposed, including sensitive emails, when one is investigated by the inspection authority. One foreign CEO was close to tears while discussing a personal experience. The attendees said that the atmosphere reminds them of the United States in the 1960s and 1970s.

As big corporations’ influence grew, the U.S. Congress poured out regulations and the judiciary made unfavorable rulings against corporations. Then, companies spent more time enhancing lobbying efforts and training lawyers than improving competitiveness. This is when Japanese companies began to infiltrate the U.S. economy.

In fact, the purpose of the seminar was to discuss ways to respond to CEO risk. But I was told that some were more concerned with investigations that often lead to harsh public criticism.

A Korean attendee said that some foreigners were dubious about how corporate tax is raised and minimum wage is increased. It could mean that foreign businessmen could interpret the series of events as challenges to Korea’s corporate environment.

Korea is less attractive due to various regulations, militant trade unions, high labor costs and high tax rates. If CEO risk also goes up, companies doing business in Korea may leave.

JoongAng Ilbo, Dec. 14, Page 37

*The author is a business news reporter of the JoongAng Ilbo.