In March I wrote that a change in the way business is conducted in South Korea was inevitable after the president was ousted from power and placed on trial for corruption. Real public anger has given the new government, led by the democrat Moon Jae-in, the mandate to introduce changes to the family-run conglomerate system of business known as chaebol, after the country’s most powerful chaebol, Samsung, was directly involved in the in former president’s impeachment.
The ongoing bribery trial against de facto Samsung chief Jay Y Lee has exposed the paternalistic, complicated, often arcane – and, the prosecution contends, outright unlawful – practices that chaebol employ to get ahead. Welcome though the prosecution of Lee is, the reality is that Samsung as an organisation posted record profit this year, somewhat skewering the adage that bribery is bad for business.
This prompts the heretical question: is the reputational damage that Samsung has incurred a burden worth shouldering when the money is stacking up?
Historically, such has been bribery’s global ubiquity that Forbes was forced to concede in 2013 that ‘giving in to bribery might be completely advantageous’. Despite such resignation, since then the climate has been decidedly hostile to bribery over the last half-decade.
This was particularly apparent in 2014, inspired in part by the unrest that occurred in Ukraine. Widely acknowledged as one of the most corrupt countries in Europe, Ukraine’s descent into civil strife and infighting was a vivid illustration to governments of the consequences of failing to adequately tackle systemic bribery and corruption.
On a smaller scale, a year later, Fifa’s notoriously corrupt internal system of governance received international condemnation. Both these examples, amongst others, sparked an upsurge in anti-bribery sentiment on the international stage; last year’s anti-corruption summit in London was indicative of the kind of political response.
Regulatory bodies, too, stepped up their anti-bribery efforts, with a swathe of fines and penalties (see the £681 million settlement reached between Rolls-Royce and the Serious Fraud Office). Admittedly, these regulatory fines are imposed by agencies in the US and UK, but the introduction in France of a new anti-corruption law (Sapin II) in December 2016 is a big step in the right direction.
Then there’s Samsung. Ostensibly, the case against the CEO aside, things are rosy. But consider one of the hurdles that Samsung tripped over last year: the exploding Galaxy Note 7. Bloomberg has reported that a culture of being unable to talk frankly with senior management meant the device was rushed through production, causing malfunctions. The estimated cost to the company is $5 billion.
When you add to the mix the fact that Jay Y Lee’s alleged bribe to the former president was meant to grease the wheels of a merger aimed at consolidating control of Samsung Electronics (the subsidiary that makes the Note 7), then the pernicious, disastrous consequences of bribery are laid bare. Profits may be breaking records, but Mr Lee will struggle to reap the benefits if prosecutors are successful in their bid for a 12-year sentence. Bribery does indeed pay – and it’s a very heavy price.