Politicians can be in no doubt that reforming the role of chaebols is at the heart of public pressure for more sustainable corporate governance

This South Korea briefing started by explaining the historical importance of the chaebols since the country’s creation in 1953. Since they first became important national playersin the 1960s the chaebolshave transformed, in terms of their organisation, the sectors they operate in and theirglobal reach. Arguably what is changing only slowly is their political influence in South Koreaand within the Seoul government.

However, Korean expert Peter Beck, of the Council on Foreign Relations, believes that successive South Korean governments, particularly since the Asian financial crisis, have tightened up the legislation governing chaebols. This has been in response to voter demands to crack down on chaebol excess and secretiveness.

As a result, theconglomeratesare no longer able to operate as almost independent entities as they used to.

However, scandals keep on coming. In recent years Samsung, LG, SK Group, Hyundai, Hyundai Motor and Hyundai Heavy Industries, among others, have all been in trouble over allegedly illegal intra-group transactions.

Successive South Korean governments, including under current president Lee Myung-bak,have continued to try to rein in the worst practices of chaebols – or at least be seen to be trying.

Poll after poll in South Korea reveals that those most angry at chaebol excesses are the young voters, the ones the politicians most need to appeal to. And so chaebol reform will stay firmly on the political agenda for the time being.

While organisations such as Sustainable Asset Management have hailed South Korea as a corporate responsibility leader internationally, others have raised doubts.

The UN Habitat Best Practices Report for 2010 notes that many South Korean companies, even the larger listed ones (ie the chaebols), do not publish corporate responsibility or sustainability reports. The UN report says: “It is hard to find any reporting within the financial service sector and amongst holding companies.”

UN Habitat also notes that disclosure on human rights is mostly non-existent or superficial.

Workplace conditions

Many commentators also find a worrying imbalance between the treatment of workers in  South Korea and the treatment of the company’s employees in overseas subsidiaries.

Workers’ rights breaches have occurred in a variety of places, including China, and notably at the Kaesong industrial plant, a conglomeration of South Korean manufacturing facilities just across the border in North Korea that employs cheap workers from the north.

Overall, despite reforms, the rather shady and longstanding links between large companies and the political system and parties in South Korea remain murky. Few Korean companies reveal data on political “donations”. In the South Korean context these are invariably what would be known in the west as “facilitation payments” – or bribes.

While there has been a slight rise in disclosure and discussion of bribery in South Korea, political donations remain secret, by and large.

But while the political system and its links to the chaebols remain largely opaque, the environment has become a far more open and discussed subject in South Korea.

The UN Habitat report on Korea notes that for those companies that are reporting, “environmental disclosure is strong”. Reports include details of environmental policies, management systems, global coverage, board-level responsibility for environmental issues, quantitative emission data and quantitative reduction targets.

So, there is an open and active debate in South Korea about its environmental future and sustainability after four decades of rampant and unrestrained growth. Corporate responsibility activists, NGOs, trade unions and progressive politicians hope this can help reform the longstanding close and secretive links between government and corporations.

These remain a stumbling block to more credible corporate responsibility in South Korea. Better corporate transparency and improved governance all round will help the country maintain its position as one of the world’s major economic powerhouses of manufacturing and innovation.