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Curbing Corruption in the Workplace: A look into the Samsung Corruption Scandal

July 3, 2017

As the corruption scandal in South Korea continues to erupt, it takes new dimensions with each revelation; pulling down the reputation of the government and one of the world’s largest conglomerates.

 

The prevalence of corruption in any government or corporation demonstrates a serious lack of integrity to citizens who appoint the government in question and for corporations, its shareholders. More and more citizens across the globe are taking a firm stance against these behaviours and malpractices.

 

In March 2017, South Korea’s national assembly voted a remarkable 234 to 56, in favour of impeaching President Park Guen Hye for her role and misconduct in the corruption scandal. A strong message resonates through this scandal; citizens are no longer willing to turn a blind eye to blatant wrong doing. As the world evolves in to a global village, the international community also looks on to see how South Korea deals with this matter. Guen Hye's impeachment was subsequently upheld by the Consitutional Court in Seoul.

 

From a corporate standpoint, the allegations also take a toll on technological giant, Samsung’s reputation. It reflected in the fall of its share price around the time the allegations emerged, an indication that investor confidence in the company had dropped. Secondly, where public outrage had led to the impeachment of the country’s president, it is inevitable that if Samsung’s Lee Jae-Yong is found guilty for the bribery and embezzlement charges against him, the consequences will be weighty.

 

Apart from the fact that Lee Jae-Yong would personally face criminal prosecution for accepting bribe under section 2 of the Act and supposing he is found guilty, the organisation could have been prosecuted under section 7 of the Act for failing to prevent bribery. Unless of course the organisation can prove they had ‘Adequate Procedures’ in place to prevent bribery – which we outline further below. This offence can only be committed by a ‘Relevant Commercial Organisation’ which the act refers to as, (a) companies or partnerships that are either incorporated in the UK, and partnerships that are formed in the UK or (b) a company or partnership incorporated outside the UK, but carry on business or a part of their business in the UK.

 

The corruption allegations that has rocked the tech giant in recent times should serve as a reminder to organisations conducting business in the UK to implement adequate procedures to prevent bribery. Where adequate procedures are believed to be in place, review these periodically. The Ministry of Justice published the Bribery Act 2010 guidance which outlines the procedures relevant commercial organisations must have in place to avoid being prosecuted under section 7 of the Bribery Act.

The list of principles are as follows:

  1. Demonstrate your organisation has Proportionate Procedures in place

  2. Demonstrate Top Level Commitment from the board or owners of the organisation to curb bribery and corruption

  3. Carry out Periodic and Documented Risk Assessments

  4. Perform Due Diligence on persons in the organisation and associated persons

  5. Ensure policies and procedures are understood by employees and all associated persons through effective Communication and Training

  6. Monitor and Review procedures designed to prevent bribery.

 

With less than two weeks for South Korea’s special prosecutor to wrap up investigations in to these bribery allegations, the world looks on in anticipation for a verdict. Whether the verdict finds Lee Jae-Yong guilty of the charges or not, one thing this scandal has already affected is its reputation. If he is found guilty of bribery charges, we can expect a whirlwind of lawsuits from regulators to follow.

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