Litigation Haunts CEOs

As in any sector of society, with power and authority come strong responsibilities. This has never been truer in the Korean corporate world.

Day after day, there are media reports of former top executives being arrested on criminal charges for mishandling management, and not just for embezzlement or misappropriation.

"Increasingly, there are enormous risks involved in assuming top executive positions because many Korean corporations cloak their financial problems," said one business analyst.

In the past, young executives moving rapidly up the corporate ladder were admired and envied by their peers and competitors alike, but these days they are no longer so quick to take on the CEO position.

There are instances when CEOs have to be held accountable for losses and more and more investors are opting to take the top executives to court, which sometimes lands them in jail.

"It is not just a matter of losing everything that you have worked for all your life. There is the real possibility of being convicted of criminal charges," said one executive of a large Korean company.

In fact, there was a case in which a vice president of a subsidiary of a leading conglomerate committed suicide after he was forced to honor a financial guarantee he provided to his company.

Reports have it that he approached the chairman of the conglomerate for help in resolving the issue, since he was basically forced to provide the guarantee as a company executive, but his request was turned down.

"In Korean corporate society, one person sitting at the very top usually calls the important shots and even CEOs are reduced to taking orders," the business analyst said.

Consequently, there are instances when the CEOs can hardly take responsibility for wrong management decisions but the reality is that their signatures are on the dotted line.

In the case of Daewoo, a string of former CEOs at its subsidiaries, including Daewoo Electronics and Daewoo Heavy Industries, were recently arrested for knowingly doctoring their account books to the tune of several trillion won for securing additional loans.

However, insiders point out that decisions carrying such implications and of such magnitude could not have been made without direct orders from the man at the very top, the disgraced Kim Woo-choong.

"It remains to be seen what the extent of their responsibility will be but they certainly would not have seen it coming, particularly when decades-old practices are taken into consideration," the analyst said.

In the past, the worst that could happen to ill-performing CEOs was that they have to resign and leave the company. Now, a CEO could very well face the prospect of losing his job and even his family.

"I think there needs to be a case of checks and balances but some Korean CEOs are facing situations where they really have no say in the decision-making process but have to take the blame," the analyst said.

Said Jwa Seung-hee, president of the Korea Economic Research Institute, "The responsibility has to come side by side with the right to make independent decisions."

"As long as this is not the case, CEOs are going to have a hard time coping with their responsibility and accountability. There has to be room to make the strategically right decisions."

As part of steps to protect themselves from litigation, many CEOs are buying insurance policies.

The government unveiled a plan to take punitive actions against heads of the troubled banks that received taxpayer funds. Executives at such banks as Hanvit and Seoul were worried that they might lose everything.


NCC Widens Smoking Ban to Entire Ilsan Facility

Following the government? recent move to regulate cigarette smoking, a medical facility has announced that smoking will be prohibited in its entire indoor and outdoor area.

"We decided to issue the smoking ban to lead the national campaign against smoking," said an official of the National Cancer Center (NCC) Feb. 4.

Located in Ilsan on about 13,000 pyong of land, the NCC was built to provide high-tech medical care to cancer patients as well as increase the treatment rate of Koreans suffering from the disease. One pyong equals 3.3 square meters.


USFK Denies Alleged Protest Over Mt. Kumgang Project

The U.S. Forces Korea (USFK) Feb. 4 flatly denied a Japanese media report that the USFK registered its protest to Hyundai group over the latter? financial aid to North Korea in November last year.

The Sankei Shimbun of Japan said on Feb. 2 that the U.S. is concerned that the massive cash payment by Hyundai group to North Korea contributed to the enhancement of North Kore? military capability.

The paper also claimed that the USFK command expressed its opposition to the cash payment in a meeting with Hyundai officials in November last year.