The cultural aspects of corporate governance reform in South Korea

South Korea is today emerging fast onto the global scene. Not only is it a major exporter of consumer electronic goods, it also enjoys a vibrant market in shipbuilding and in the manufacture of heavy machinery, power generation equipment and diesel engines. Its rapid growth has been driven by high rates of savings and investment and a traditionally strong emphasis placed on education and hard work. After several years of political turmoil, in the early 1960s the Korean Government adopted a series of economic reforms designed to put in place strong and stable legal and political infrastructures. Despite starting with very limited natural resources, a weak agricultural industry and virtually no experience in economic development, it is today the 11th largest economy in the world. It has progressed from being a government-led to a market-oriented economy. It is a member of the Organisation for Economic Cooperation andDevelopment and was joint founder of the Asia Pacific Economic Cooperation (APEC), which promotes free trade and liberal economic policies along the Pacific Rim. The government led reform programme in the 1960s began with a series of five-year economic development plans to pave the way for industrialisation, continue the expansion of a labour intensive export industry (food and beverage, textiles, chemicals, metal products and machinery) and enable favoured companies in important industries to grow through the provision of credit at low interest rates. These companies developed into the chaebols that we know today. The Government officially ended its strategy for a planned economy in 1994 when it realised that protectionist policies would not ensure long-term growth in a globalised economy. Inward investment, competition and the importation of foreign goods and services were encouraged. The 1997 Asian financial crisis dealt a severe blow to the Korean economy, exposing excessive levels of debt in its corporations, inadequate checks and balances and a lack of effective oversight over their management. In an attempt to overhaul the existing legal and regulatory framework to tighten up governance practices, the Government adopted reform initiatives modelled on what are essentially Anglo-American governance measures