Chaebols, corporate social responsibility and corruption

South Korea's chaebols are constantly under pressure from the public and the government to devote more resources to projects that benefit society and the environment.

The practice of corporate social responsibility (CSR) was introduced to the East Asian country in the 1980s, with pioneer Yuhan-Kimberly, which sells sanitary products, starting a campaign to plant trees in 1984 to restore forests.

However, there has been criticism that some chaebols have set up non-profit foundations not to spend on CSR, but for their owners to hold stakes in key affiliates to gain voting rights, and to enjoy tax breaks.

Concern has also arisen over how the government exerts undue pressure on chaebols to donate huge sums to public interest projects, and how this could lead to abuse - as seen in the scandal that triggered President Park Geun Hye's impeachment.

Ms Park allegedly colluded with her confidante, Choi Soon Sil, to extort money from conglomerates for two non-profit foundations started by Choi, allegedly for the latter's own gain.

 

Samsung Group vice-chairman Lee Jae Yong has been arrested on allegations that he paid US$36 million (S$50.5 million) in bribes to Choi under the guise of CSR donations, in return for government support for a merger of two Samsung affiliates in 2015 to pave the way for his succession.

Dr You Jeehye, a CSR expert from India's Galgotias University, said chaebols which grew with massive support from the government have been "suffering and benefiting" from the government's demands for funding under the guise of CSR.

"Chaebols came to be vulnerable to the ruler's demand. They tend to contribute their fund to the government - officially or not - in order to secure the family's control of the company or transfer the wealth of the owner to their younger generation," Dr You told The Straits Times.

"The recent corruption scandal of President Park is emblematic of what has been happening in Korea," she added.

The scandal could just be the wake-up call for chaebols to return to the original purpose of CSR: contribute to sustainable development under applicable laws.

A version of this article appeared in the print edition of The Straits Times on February 25, 2017, with the headline 'Chaebols, corporate social responsibility and corruption'. Print Edition | Subscribe