Monday, 29 December 2014

Korean Air "Nutrage" and Nepotism in Korea

The recent Korean Air scandal in which Heather Cho, a vice-president of the airline and daughter of its chairman, lambasted a crew member for incorrectly serving macadamia nuts not according to manual and then had the crew member removed from the flight has put the spotlight back on nepotism in Corporate South Korea.

The farce has come under heavy scrutiny and public outcry in Korea. Since news first broke the young Vice President has rightly stepped down from her position –  there really was no other option. The scandal has now progressed and a arrest warrant is being sought by prosecutors after Korean Air executives and Heather Cho allegedly sought to intimidate staff and delete evidence regarding the incident. With this all in hindsight the question must be asked – should she (or her other siblings) have even been in a position of such power within the company  in the first place?

The simple answer is no.

Regardless of the title it is likely that as the daughter of the Chairman she would have untouchable status within the company. There are no such things as outrageous demands when concerning the offspring of the Chairman. One can only speculate as to what Korean Air staff had encountered before the Macadamia incident. The argument could be made that despite the publicity stunt of resigning it will not affect her ‘power’ to influence staff in the future. After all, the title of Vice President could have been anything – from Staff or Senior Manager to simply just a passenger; she would still have the power to have made the exact same decisions.

Korean Chaebols dominate the local corporate landscape and account for a large slice of the country’s GDP pie. These major Chaebols, despite being 'publicly' listed companies are largely family controlled. Samsung, the most well-known and largest of these Chaebols is currently preparing for the transfer of power to the 45 year old son of current Chairman Lee Kun-Hee as he battles health issues.

My former company was also a family controlled medium sized Chaebol, although publicly listed the majority shareholders were all family members. I was privy to experience nepotism directly during my time at the company as I worked on the same floor and next to the team run by the 30 something, American educated son of the chairman. At the time he was in the midst of a promotion from Team Leader (BuJang) to a VP position in which he would be given responsibility of an overseas subsidiary (New Zealand). This process and quick promotion is quite extraordinary to me given the very rigid way in which Korean corporations usually promote staff and control salary.

The majority of Korean companies use a years of service / age based remuneration and promotion system. Workers start out in their late 20s as ‘Sawon’ (Staff) and are slowly but surely promoted up the chain, after around 12 to 15 years they can expect to be in a position of Team Leader, there is no climbing or ‘hopping’ up the corporate ladder in Korea, simply put if you do the time you get the reward.

I was surprised not only by the openly unfair process and selection regarding the Chairman’s son but that Korean staff seemed relatively content with the selection. It soon became apparent that nepotism was an accepted (albeit begrudgingly) part of Korean corporate culture

The Chairman’s son in my former company was promoted to team leader roughly 10 years ahead of his peers and a further 15 years ahead of his peers in the position of VP. This type of corporate ladder climbing might be somewhat comprehensible under a role-based remuneration system common in western societies in which outstanding performers are promoted or plucky entrepreneurs run start-ups but is not achievable for the average white collar Korean worker.

His appointment to a VP position of the New Zealand subsidiary was particularly uncomfortable for the workers and management of that particular company. At the time I was responsible for liaising with their office on all HR matters. Staff in New Zealand were naturally concerned - suddenly their new Company Director was the 30 something son of a Chairman, what process did he go through to attain such a position? What experience does he have? What does this mean for our company? Was it a sign of how important the chairmen felt about the New Zealand business or was he giving his son a play thing to experiment on as he is being groomed for the big job?

Upon his appointment the new VP began making changes to management and retrenching staff. Regardless of whether these decisions or any future actions were good or bad for business would be irrelevant for non-Korean staff because of the unethical way in which the position was appointed. For Korean Chaebols operating in foreign markets and dealing with foreign talent the issue of nepotism will continue to create conflict with staff, foreign shareholders and non-Korean company directors. The New Zealand managing director who formerly reported to a Korean director who was of a similar age and had over 20 years’ experience was now being forced to work under the young and untested son of the owner.

In some respects as a family run business they are of course entitled to do as they please and appoint their family members to positions of power to ensure their families grip on the immense wealth that it brings but the Korean Air saga has exposed how nepotism can hurt the reputation of the company and of Korea in international markets and media.

If top management is chosen not by merit but from Family connections then International consumers will rightly begin to question the service, safety and standards of Korean companies and by extension that of Korea,

1 comment:

  1. The name "Team Leader" always strikes me as a complete misnomer, since "teams" and "leaders" are two things I never see in Korea. Oh, they have groups of people that work in the same department and are called a "team." And some manager at the top is called the "leader." But any modern ideas of teamwork and leadership are completely absent in Korean corporations.