By Rosa Chun
Harvard Business Review, 17 May 2017

For the past several months, South Korea has been roiled by accusations of corruption in its government and major businesses. The role of the country’s family-run businesses, and whether or how they are held to account for wrongdoing, is under intense scrutiny.

In February Samsung’s de facto leader Lee Jae-yong was arrested on bribery charges. Lee is accused of donating $36 million to nonprofit foundations operated by a friend of the former president in return for political favors. Lee has denied the charges. Then, in March, South Korea’s president, Park Geun-hye, was removed from office, in part because of accusations that she helped a friend, Choi Soon-sil, pressure companies into making donations to nonprofits controlled by Choi and gave her access to secret government documents. The outrage at these and similar scandals helped propel liberal candidate Moon Jae-in to the presidency; he campaigned on promises to clamp down on the country’s family-controlled business dynasties in the wake of Park’s cronyism and corruption scandal.

Many South Koreans feel envy and resentment toward family-run conglomerates such as Samsung, SK, LG, and Hyundai. Known as chaebol, these businesses make up more than half the value of the companies traded on South Korea’s stock exchange. However, their contribution to the world’s 11th-largest economy is overshadowed by repeated cases of bribery, weak corporate governance, and complicated shareholding plans that help the families accumulate wealth and inherit management. (Most of the chaebol are in their third generation of family control.) Moon has vowed to stop families from using such methods to keep control of these ostensibly public companies.

The political scandal and ensuing election rekindled the public’s anger at the chaebol for previous misdeeds; many people feel they never properly sought redemption. But to rectify that and repair their reputations, Samsung and others need to chart a different path than their Western corporate peers. The hidden rules of atonement differ greatly across cultures.

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