Speaker. Tuesday, 23 May pm 5.00pm Mochtar Riady Building, NUS Business School BIZ 1, Room #02-03, Innovation-2

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1 Tuesday, 23 May pm 5.00pm Mochtar Riady Building, NUS Business School BIZ 1, Room #02-03, Innovation-2 Speaker Katharine (Kathy) H.S. Moon, Ph.D. is a Professor of Political Science and Wasserman Chair of Asian Studies at Wellesley College, nonresident Senior Fellow at the Brookings Institution, and affiliated faculty at Harvard University s Korea Institute.

2 Future of Korean Governance Challenges for Business and Politics KATHARINE H.S. MOON, Ph.D. Professor of Political Science Wellesley College & Nonresident Senior Fellow Brookings Institution USA

3 Park Geun-Hye Scandal

4 People Power Anti-Park Resign Pro-Park 2016 Oct March 11 Oh Choong-young

5 New President Moon Jae-In May 2017

6 Recent Corporate Pardons 2014 Lee Jay-hyun, CJ Group chairman (JY Lee s cousin): Breach of fiduciary duty and tax evasion (4-yr prison term). Pardoned by PGH Chey Tae-won, SK Group chairman. Embezzled $61 mil to cover up losses personal inv (4-yr prison term; served 2½ ). Pardoned by PGH Chey sentenced for accounting fraud of US$1.3 billion. (3-yr prison term; served 7 mos). Pardoned by LMB 2008, slate wiped clean

7 Recent Corporate Pardons 2012 Kim Seung-youn, Hanwha Group chairman: Embezzlement, illegally diverted funds from healthy affiliates to weaker companies (4-yr prison term). Suspended by Seoul HighCt 2007 Kim sentenced 18-months for assault. Pardoned by LMB 2008 Lee Kun-hee, Samsung Group Chairman:Tax evasion, embezzlement (3-yr suspended sentence). Pardoned by LMB Chief legal counsel = whistleblower Bribed politicians: (2-yr prison term, overturned).pard by KYS 2007 Chung Mong-koo, Hyundai Motor Group chairman: Embezzlement & breach of duty (3-yr suspended prison term). Pardoned by LMB

8 Government as Source of Corruption National Pension Service (~$450 billion) largest investor in prominent companies Shares in at least 12 Samsung affiliates (voted over 90% with management in 2014, Bloomberg 6/10/15. Key vote for merger of C&T & Cheil Fund chairman, Moon Hyung-pyo, arrested in December 2016 Ministry of National Defense 2015, preferential treatment to Samyang Comtech for 300,000 units of faulty body armour against DPRK bullet. Candidate Moon promised to stop military corruption: a traitorous act aiding the enemy which ought to be punished severely. Inbred Procurement practices

9 Interlocking ownership

10 Cheil Samsung - C&T Merger Samsung Group agreed to sell 8.99 million treasury shares to KCC Corp. Elliott Associates (hedge fund) filed injunctions and led movement to block the merger. Said that Samsung undervalued its shares for the sake of buying support from KCC % vote passed merger (need 2/3rd) KCC Corp uses 5.8% stake to support Samsung s plan to have Cheil Industries take over C&T

11 Corruption = Money + Politics +

12 Interlocking Marriages

13 Anti-Corruption Efforts 1991 Special Division of Public Officials & Social Leaders Corruption in SPO & RPOs 2001 Anti-Corruption Act (for public employees) 2002 Korea Independent Commission Against Corruption 2008 KICAC folded into Anti-Corruption & Civil Rights Commission (ACRC) Obstacles to Effectiveness Weak institutionalization Org overlap & incoherence Political use Under-staffed & resourced

14 Protection for Whistleblowers 2001 Anti-Corruption Act (for public employees) 2011 Act on the Protection of Public Interest Whistleblowers Covers public & private sectors Effectiveness Poor (2013 survey of 42 whistleblowers by the Horuragi Fnd) BUT Recent successes (Hyundai Motors Kim Gwang-ho) Community support = major determinant in whistleblowing Colleague support & organizational support over perceived protection against retaliation Protect anonymity (ACRC requires whistleblowers to give full name)

15 Current Reform Efforts Electronic Voting: Allow minority shareholders to vote remotely Legal Liability: Allow shareholders of a parent company to hold executives at affiliates liable for losses Corporate Governance: independence of directors and auditors Prevent large shareholders from installing friendly auditor mandatory to have a director that represents employees Treasury Shares: Restrict companies from using treasury shares in mergers to consolidate power of majority shareholder Source: Bloomberg 4/27/17

16 Fresh faces & practices Try Foreign National CEOs & other top execs In U.S. racial and ethnic diversity o 73 foreign-born CEOs in 2016 up from 71 in 2015 (Fortune, June 2016) In Europe trend to have CEOs with int l experience. belief that not necessary to have a native-born CEO.

17 Fresh faces & practices Women as % of Labor Force South Korea: 41.67% in 2016 Japan: 42.92% in 2016 (World Bank, 17 May/17) Women in Senior Leadership Roles South Korea: 2.1% in 2016 (Economist, 11 June/16) Japan: 2.4% in 2014 (Catalyst, 2017) EU:15% of execs & 5% of CEOs in largest public companies in 2016 (Catalyst, 2017)

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