Recently, President Park, announced her plans to expand the Korean economy through her “Creative Economy ” policy. Basically, she called upon the IT industry, knowledge industry and venture capital side of the Korean economy to share knowledge, resources and expertise to increase Korea’s hi-tech sectors and help reinvigorate the “Miracle on the Han”. But she also announced as a key component the “Creative Economy” another policy- called “Economic Democratization”. Under Economic Democratization, the large companies and multinationals in Korea ( called Chaebols) were to be punished for excesses, prevented from expanding into sectors that the SMEs should be involved in and prevented from growing in certain sectors. The thought was that in order to create the Creative Economy, SMEs had to play a vital role which would be compromised by the Chaebols or large companies that would want a piece of the “growth” pie as well.
Though President Park’s intentions were good- ie to grow the Korean economy, the results were bad. Over 100 laws and regulations were passed that would penalize Korea’s largest business sector- the Chaebols. The Korean FTC began increasing antitrust investigations, tax audits and other audits of major Korean conglomerates ( as well as foreign companies too) making the business environment in Korea very difficult to deal with. It got to such a point, that foreign companies ( as well as the American Chamber of Commerce) started to complain about the anti foreign investment atmosphere. Now President Park supports foreign investment and wants to make Korea a more foreign investment friendlier place. However, the gift that was promised to Korea- an increased economy, came with one caveat- anti business legislation, designed to punish Korea’s most successful companies.
Korea is just a typical example of what is happening around the globe. Governments, claiming they are for the common person, are instituting anti business laws, rules and regulations, hoping somehow that will right perceived wrongs. Consider Obamacare. Governments are constantly bearing gifts to allegedly help the common citizen- but at the expense of business, which will hurt the country, economy and common citizen in the long run. What is really happening is that governments, whether on a federal, state or local level, are strapped for cash and will do anything to find money including auditing, investigating, suing or penalizing companies. The only way for companies to protect themselves is to risk proof themselves. How do you do this? Conduct detailed risk audits which should including compliance audits. Are your compliance training programs up to date? Has anyone looked at your antitrust policy and procedures lately? What about customer complaints? What about a FCPA audit? The more reasons you give a government to investigate or sue you the more the government will. In today’s anti business environment, it pays to be as careful as you can.
Beware of the government that bears gifts and remember to implement a risk management system before it is too late. Are your legal risk management processes up to date?