Scandals are plentiful in South Korea of late. Earlier in the year, it was Korean Airlines, Hyundai, and Samsung. Last month, Hanjin and Lotte. Now, President Park Geun-hye herself. For foreign observers, it can sometimes be hard to understand the underlying causes. Why so many? Why all of a sudden? As a Korean-American professor living in Busan, I am often asked if there is a unifying element to help explain them all. There is: the Korean preference for loyalty, something that undermines the very fabric of South Korean executive culture.
For most people in the West, there is an understood separation between family or friendship ties and business. Although Americans and most Europeans are no less likely to recommend a friend for a job, there are certain things they wouldn't do. If elected mayor, for example, they wouldn't suddenly replace all senior staff with friends and family. In South Korea, this is exactly what has happened for decades, if not centuries. Even U.N. Secretary-General Ban Ki-moon was roundly criticized at the start of his tenure for replacing an inordinate number of U.N. staffers with hand-picked Koreans. One of the new hires was his former boss.
The South Korean corporations recently suffering scandals — Hanjin, Lotte, Korean Airlines — are built as tight oligarchies, with virtually all key positions held by the friends, relatives or classmates of a single family. In South Korea, this is an "open secret," something everyone knows but no one really talks about. American companies, of course, are not immune to such structures, but South Korean ones are unique for the frequency and depth of such connections.