[Editorial] Corporate corruption

Lee Kun-hee, chairman of Samsung Electronics, said Thursday that corruption seemed to permeate all subsidiaries of Samsung Group.

“Corruption can take the form of receiving lavish entertainment and taking money. But the worst type is a manager forcing his subordinates to engage in corrupt practices,” the tycoon said.

What led Lee to chastise the executives and employees of Korea’s largest business group were alleged irregularities discovered at Samsung Techwin, an affiliate that produces a wide diversity of goods, including arms.

On Wednesday, Lee expressed his anger and frustration to the CEOs of the group’s subsidiaries through Kim Soo-taek, head of the group’s Strategic Planning Office. Kim delivered Lee’s message: “Samsung’s clean corporate culture has been impaired. We need to beef up auditing to root out corruption at Samsung companies.”

Following Lee’s strong reprimand, Samsung Techwin’s CEO, Oh Chang-suk, tendered his resignation. Group officials said Oh was not directly involved, but he offered to step down to take responsibility for his failure to preempt the problem.

The group discovered the irregularities through a recent internal audit, which was prompted by the malfunctioning of the K-9 self-propelling artillery guns that were on Yeonpyeong Island when North Korea shelled it in November. The guns were manufactured by Samsung Techwin.

Lee’s stern response to corruption at Samsung leads us to wonder how serious the situation would be at other business groups and public corporations. A clue to the answer was provided by some of the 600 CEOs of small and medium-sized companies who gathered on Jeju Island for a seminar.

One CEO who does business with Samsung, LG and Hyundai Motor groups was quoted as saying that if a small company wants to do business with large corporations, its CEO should not wait until company officials demand kickbacks. He also said other basic things he must do included entertaining them at hostess bars and playing golf with them.

Another CEO was quoted as saying that he had to spend tens of million won on purchasing wine because the executive of the company he does business with was fond of wine. A CEO from a local region said he normally offers 10 million won as a cash gift every time the children of the executives he has to deal with get married.

We hope Lee’s resolute action inspires other big business groups to take steps to crack down on these corrupt practices. Unless they punish officials who demand kickbacks or lavish entertainment from their small suppliers, we would not be able to make Korea a fair society. Business groups should enhance their corporate ethics.