In 2007, Koreans were shocked by the allegations that Samsung Group Chairman Kun Hee Lee had overseen a multimillion-dollar slush fund to regularly bribe Korean politicians, prosecutors, and government officials.¹ All related charges, however, were ultimately dropped for lack of evidence by prosecutors.² In the intervening time, the chairman was also accused of issuing illegal convertible bonds at below market prices and manipulating evidence and testimony,³ but the Korean Supreme Court acquitted Lee of all criminal charges in 2009.⁴ The convertible bonds deal had allegedly sought to transfer group control from the chairman to his son, and some analysts asserted that the court’s ruling had essentially legalized the move.⁵ This decision further inflamed critics of Korean corporate excess as they accused the court of upending the country’s decade-long struggle following the Asian financial crisis to dilute family control over large corporations.⁶ To many observers, the catalog of charges hinted at a systematic effort by a powerful corporation to influence the government, the judiciary, the media, and, indeed, the entire nation.

Confrontations arising from corporate malfeasance are not a unique Korean phenomenon. For decades, Americans have struggled to mitigate the wages of corporate abuse , from the Enron ⁷ and WorldCom ⁸ accounting scandals in 2000 to present-day financial fraud on Wall Street . The subprime mortgage crisis of the late 2000s saw financial institutions compromising the residential housing sector which in turn compromised the entire United States and then global economy. Although public funds rescued a number of Wall Street institutions, those corporations failed to exert their best efforts to rebuild their stability, even as American taxpayers bailed them out of a debacle of their own making. This event was, in some ways, doubly traumatic since Americans had already been bloodied by corporate accounting scandals comprising “massive accounting frauds involving many billions of dollars of fabricated and inflated profits, assets, and revenues through which these corporations with the help of their accountants … maintained share prices far above those justified by their true financial status, to increase the wealth of existing shareholders and to attract new investors.”⁹

Although Korea, like the United States, has trudged through its own share of corporate fraud scandals, the two countries’ responses to such fiascos are a study in contrasts. In particular, in the United States, “the fraud scandals also contributed to fundamental changes in public attitudes about corporations and their executives.”¹⁰ This shift in attitude elicited swift action by the US regulatory authorities. For example, in the aftermath of the Enron and WorldCom scandals, the United States reinforced regulations against corporations through the establishment of the “Corporate Fraud Task Force ”¹¹ and the “Enron Task Force ”¹² within the Justice Department, the enactment of the “Sarbanes–Oxley Act ,”¹³ and amendments to the “United States Sentencing Guidelines .”^{14 15}

The governmental and judicial responses to corporate scandals in Korea, meanwhile, differ markedly from the US experience. Historically, assertive and unflagging support from the government to conglomerates has been justified as the most efficient means for spurring on economic development in Korea. Economic growth notwithstanding this public support has greatly enlarged the scope and magnitude of corporate power in Korean society. This increased power, however, has not necessarily elicited a corresponding level of accountability from corporations. Even worse, fears of potential fallout on the country’s economy motivated Korean courts to exonerate those powerful conglomerates of their misconduct.¹⁶ Indeed, some observers asserted that the courts’ consistent leniency in high-profile corporate cases comprised a judicial failure that effectively devalued corporate societal responsibility.¹⁷ One may even argue that some legal scholars have tacitly endorsed such leniency by sidestepping the soul-searching that a comprehensive analysis of corporate governance would entail.¹⁸ Such “selective oversight” perpetrated by certain judicial and academic parties has all but allowed corporate malfeasance to remain one of the most serious social abuses in Korea. The country now faces increasing demand for systematic legal reform that would elicit more positive behavior from corporations and regulate their abuse of power.

The concept of “corporate social responsibility ” (CSR) developed in response to the risk that corporate wrongdoing poses to society. Generally, CSR implies that corporations should not only pursue their owners’ profits but should also consider the wealth of other constituencies , including those espousing environmental protection , labor security , human rights , community involvement, business standards , marketplace, and health promotion . For example, the European Commission defines CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”¹⁹ In other words, CSR refers to the idea that corporations bear a responsibility to society beyond their duties to their shareholders.

CSR, in essence, demands that corporations play a clear-cut role in society. Should a corporation strive only for the maximization of its shareholders’ wealth? Or should it contribute to other constituencies as well—such as its creditors, customers, suppliers, employees, and communities? Extreme maximization of shareholders’ profit can breed severe social problems, and executive mismanagement can damage not only corporations and shareholders but also nations and the entire world, as the 2007 Wall Street implosion so aptly demonstrated. Hence, corporate law should aim not only to guarantee the prosperous development of corporations but also to mitigate their social harms. In this respect, CSR activism thus becomes an effort to first curb and then replace the mechanics of corporate abuse with virtues.

As part of the efforts to overcome corporate abuse through the promulgation of virtues, various constituents of society, from governments and corporations to nongovernmental organizations and individual investors, have enshrined CSR in official statements and legislation. International organizations , including the United Nations, World Bank, and Organization of Economic Co-operation and Development, have endorsed the notion of CSR and further established the guidelines and departments to implement it. As European countries have strengthened their CSR regulations,²⁰ the United States has incorporated CSR into case law²¹ and enacted constituency statutes ²² that allow managerial decisions to consider stakeholders’ interests.

Reflecting global change, the movement to enhance CSR has surged throughout the entire sector of Korean society. However, the field of law has apparently been slower to catch onto the trend. Korean corporate law remains comparatively silent on the matter, providing no explicit provision for CSR . Enactment of the principle remains unmapped legal territory, as the law fails to define CSR as either a legal responsibility or as a mere voluntary activity. Moreover, Korean corporate scholars exhibit vast differences on how or even whether to address this “lack of legislation.” This book aims to help fill that legislative gap. Accordingly, one of the primary questions it poses is “whether the law should require social responsibilities of corporations under the Korean legal system.”