JPRI Working Paper No. 104 (February 2005)
Korea’s Unrecognized Corporate Scandal: The Absence of Women Managers
by Jean R. Renshaw and Joohee Lee


Korea is justifiably proud of its resurgence from the 1997-1998 Asian financial crisis during which it was forced to conform to requirements set by external international bodies in order to arrange a bailout. Koreans call it the “IMF (International Monetary Fund) crisis” because of the stringent directives on finance and credit that organization imposed. As the global economy struggled to return to its pre-crisis levels, Korea’s hard work and sacrifices from everyone paid off. Unfortunately, further problems were on the way. The rate of growth of the economy did reach 7% in 2002, but in 2003 it decreased to 3%, disappointing government, domestic and foreign investors, and international economists. Although there were modest increases to five percent (5%) in the rate of growth in 2004, Korea’s central bank governor Park Seoung predicts that unless the country radically restructures its economy, it faces a new era of low growth or even a protracted Japan-style recession. Corporations, government, and the nation now must confront an uncertain market, raising difficult questions and decisions.

Corruption and a lack of confidence in the business sector and its relationship to government are ongoing topics in the Korean media. Traditional secretive corporate policies and decision making that were deemed useful for rapid economic development in the 1960s and 1970s are now under fire. One symptom of this problem is the low prices for the stocks of Korean corporations in relation to their earnings, referred to as the “Korea discount.” Stock prices do not reflect the earnings of corporations and this discount, estimated at 20%, increases the cost of borrowing capital. For the four major conglomerates or chaebol (Samsung, LG, Hyundai–Kia, and SK) that account for 49% of the market capitalization on the exchange, this is a large amount. Accountability to shareholders has not been an established concept in the Korean market and the lack of transparency, coupled with a well-deserved reputation for corrupt corporate governance, contribute to distrust. Foreign and Korean investors, many of the latter having lost their life savings in the 1997 financial crisis, are reluctant to invest again without fuller knowledge of a company’s finances, structure, and operations.

Consumer and citizen groups generally supported increased transparency and knowledge about corporate governance as scandals of corruption and political influence made the front pages of Korean newspapers. These citizen groups have made their voices heard in the political process, in elections, and now in the voices of their representatives. Recognizing the effect of corporate reputation and governance on the entire economy, the present government passed legislation in December 2004 aimed at increasing transparency and improving corporate governance.

One new law limits the amount conglomerates may loan or invest in their affiliate companies to prevent instances such as Samsung Life’s lending 5,000 billion won to Samsung Card to avert a liquidity crisis without the knowledge of significant stakeholders, many of whom were incensed when it became public. The legislation is designed not only to increase transparency of corporate governance, but also to decrease tightly held decision-making by owners and family members of the largest chaebol by requiring disclosure of the shares held by members of the top executive’s family. Another new law allows the Bank of Korea for the next three years to investigate the assets of owners’ family members in order to prevent concealment of assets or transfer to avoid taxes or governance issues. This legislation has been greeted with widely differing and emotional views about its necessity and efficacy. Industry and its representatives, such as the Federation of Korean Industries, lobbied in opposition to the legislation contending it would decrease Korean competitiveness in the international markets, constrain decision making, and discourage corporate investment in innovation and research. The fact is that even without the legislation, Korea’s ranking on the World Economic Forum’s Global Competitiveness Index dropped from a rank of 18 of 104 countries in 2003 to 29 of 104 in 2004. [1]

In the days of the economic boom, many economists considered that reaching $20,000 annual per capita income was not only possible but likely. The dream of that goal has receded, however, and per capita GNI has remained stuck around $10,000 for a decade.

There are two other areas in which the inability of the Korean economy to reach desired goals is creating negative effects. One is the birth rate, which has fallen below 1.2, well below replacement levels. Women are choosing to marry later or not at all. Many young women say they will not assume the role of wife and mother lauded in folklore and tradition, but want more equal sharing of both income generating and family nurturing between men and women. The second is the aging of society. Life expectancy has increased, so that by 2050, according to the 2004 McKinsey Report on Aging [2] there will be only two working adults for each person over 65. Demographics and a slowing growth rate are detrimental to a strong economy. These problems facing Korea are not amenable to solution without women’s perspectives and contributions.

The role of women in the Korean economy is a crucial issue struggling to be recognized. All the economic woes described previously, such as lack of transparency in organizations, the tightly held “old boy network,” and hierarchical male-dominated structures, are linked to economic growth and to the difficulties women face as they strive to use their talents. Women comprise 41% of Korea’s workforce, but less than 5% of management. While women are essential to the operation of the economy, businesses, and the nation, their voices have not been heard proportionately in policy and decision making. An international comparison reveals an embarrassing paucity of Korean women in management. [3]

While the percent of women managers in many countries increased, the percentage of women managers in Korea remained at a very low level, less than 5%, since 1985. Forty eight percent of managers in the United States are women; Scandinavian countries average 30%; Spain has increased to 31%; and New Zealand to 38%. Even in Japan, where the barriers are high, the number has increased to 9%. [4] The countries where the percentage of women managers increased had to make concerted efforts, work at developing awareness and change policies and behavior to bring women into management. In Korea, juxtaposing the terms “women” and “manager” is still considered humorous by many men.

The title of this article, “Unrecognized Scandal of Korean Corporations”, refers to an even more startling fact. In a sample of 1,443 Korean companies, 64% had no women managers. This compares with 53% of companies in Australia and 14% of companies in the United States with no women managers. Ninety-six percent of Korea’s major companies had less than two (2) women managers. It is difficult to imagine, but unfortunately true, that only 4% of Korean companies have two or more women managers.

The lack of representation of women in top management perpetuates gender inequality throughout work organizations. Female role models do not exist and male managers tend to use male sex-based ascription in job assignments. The gender gap in management has received less attention than the gender gap in earnings that remains at a low 50% compared to the United States female/male income ratio of 76%. Data on power relations at work are more difficult to quantify. As a result, this problem has not been systematically explored in Korea. This paper uses the results of two recent research projects investigating the gender management gap. [5]

The first was a survey of 1,000 male and female employees during the fall of 1999. Firms with less than 10 employees were excluded. There was a substantial gender gap at all levels of management with women having fewer opportunities for promotion and when promoted having fewer subordinates. Thirty three percent (32.5%) of male respondents had supervisory power, compared to less than six percent (5.9%) of the women. Male managers supervised 17.6 persons versus female managers supervising 3.8 persons. This power differential persisted after controlling for independent variables such as personal attributes and employment settings. Logistic regression coefficients revealed that schooling and tenure slightly affected respondents’ chances of acquiring authority, but the power gap between men and women was largely attributable to direct discrimination.

The second research project was based on the Korea Labor Institute’s 2002 National Establishment Survey, with a total sample size of 1,443 personnel managers, summarized in the table.


Compared to firms without a single woman manager, firms employing at least two women managers had better performance in terms of market share and profits, and they had more innovative business strategies that aggressively utilize new product and market opportunities. Firms implementing successful gender-sensitive human resource strategies tended to employ personnel managers who had more equitable attitudes toward women workers. Recruitment methods and performance evaluations in these firms were also more open and objective. Individual merit was more important in promotion decisions than sex, age, and tenure. Despite the fact that institutionalized gender discrimination is illegal at Korean firms, women managers still perceived the male-dominated organizational culture as the most difficult barrier. The very character of organizations, with its emphasis on male bonding, often discouraged women from developing networks critical to future promotion prospects.

Such a flagrant waste of human resources is strange in a country known for its wise and often frugal shepherding of resources. Korean women are competent, articulate, and well educated. They have one of the highest levels of education in the world, but they are notably absent from leadership and decision making roles in business and government bureaucracies. Even in many service industries where women comprise the majority of the workforce, they have not been promoted into management. Korean college-educated women have the highest level of unemployment. Non-college graduate women are preferred by Korean companies because they are believed to be expendable, less demanding, and eager to serve.

As statistical measures disaggregating gender in employment, health, and wellbeing have been published over the last decade, international comparisons that reveal the status of women proved embarrassing to Korea. Korea has the eleventh largest economy in the world, and ranks twenty-ninth on the United Nations Human Development Index measuring productivity, education, and health. However, on the "gender empowerment index," which measures the well being and status of women, Korea ranked sixty-eighth out of seventy- eight nations in 2004. This rank is below Ukraine, Paraguay, and the nation of Georgia. Korea's ranking fell from sixty-three of seventy countries ranked in 2003 to sixty-eight of seventy-eight in 2004. Either the situation of Korean women has deteriorated or that of women in other nations has considerably improved. [6]

The closed “old boy networks” of Korean corporate governance not only discourage investors but also exclude women and divergent voices from management. Fresh, creative new ideas and innovations have not balanced the efficiency associated with having a single, familiar male voice for management that has been lauded in Korea. Some consumer products companies have belatedly realized that their major customers are women and have begun to place women in influential marketing, technical, or professional roles, bur rarely in management. The pace of change is far too slow for many motivated women aspiring to management. In the face of societal pressures against women expressing independent views, they have now joined the growing chorus asking for economic reforms to improve transparency and encourage diversity in management.

Although Korean women are having great difficulties encouraging changes in the field of management, the recent election for members of parliament was a positive sign for them in the field of political leadership. After years of work and lobbying, changes were made in the electoral system and thirty-two women were elected to the National Assembly in 2004. With the seven continuing women members, the total of thirty nine women brought the percent of females in the assembly from 6% to 13.3%, comparable to the United States percentages, an amazing achievement in one election cycle.  In January 2005 another woman replaced a male legislator bringing the total to forty women and the percentage to 13.4%.

Added to the concern over the stagnant economy and lagging foreign investment, the nation worries about a declining birth rate that has dropped precipitously from 2.7 in 1960 to under 1.2 in 2003, while Korean society ages at an alarming rate. Suggestions for remedying this situation have ranged from forcing women to return full-time to the home to providing incentives for those having more than one child, more and better childcare, improved housing, and support for education. Most of the proposals have been brought forward by male leaders, but now that women have a greater voice in the National Assembly, they are asking different questions and proposing a more systemic look at the impact of the falling birth rate and the aging population for society. Some women are even bringing forth the revolutionary idea that men should take more responsibility for home, family, and children.

Since women compose half of the society and the economy depends on their contributions, they must have a strong voice if solutions are to be found. Women are not only requesting but demanding a greater voice in the governance of the economy and the nation. The recent assembly session debating legislation to abolish the current hojuje, or male-headed family registry system, was supported by all thirty-nine women and attracted sufficient male members to make passage seem possible. It would seem that women assembly members have reached a critical mass, even though a slight one.

Given the dismal picture of Korean women in management, what difference would it make after all if women were managers? Why are women managers important?

The waste of human resources when women -- half of the brightest, most competent, creative Korean -- are not being fully utilized is costly. The value of this lost talent is difficult to calculate, but a Japanese economist estimated in 2002 [7] that at least $70 million was the cost of lost women’s talent in the workplace in Japan. Research by Catalyst in the United States and Canada has demonstrated that companies with women in upper levels of management were in the top quadrant of performance and profitability. [8] Korean companies with two or more women managers achieved better performance than the companies with less than two women managers. It will be difficult, if not impossible, for Korea to reach its goal of $20,000 per capita income without women’s work and the input of women managers and decision-makers. When Korean companies do not utilize Korean women managers, other nation’s companies will. Korean women are highly sought after in foreign companies; for example, the president of Volvo Korea, Hyanglim Jennifer Lee, is a woman, as is Kwon Sun Jue, CEO of the Korean unit of Stiefel laboratories, a German company.

Talented women are starting their own businesses, like Sung-Joo Kim, whose Sung-Joo International is respected in many foreign countries. Others are leaving Korea and making a name for themselves in the United Nations and other international organizations. Some have emmigrated to other countries and succeeded in establishing successful careers and families. A poll conducted by Shizuoka University recently found that 42% of 803 Seoul residents stated they would not want to be born in Korea if they had a choice, but whereas only 35% of men answered this way, nearly 50% of women did so. The more educated, younger, and higher income professionals would prefer not to be Korean-born citizens. Another survey found 70% of Koreans wanted to leave Korea. [9]

Why then are not more women included in management? In interviews many women contended that the reason for women’s absence from management is purely and simply “men.” They blame male attitudes and behavior for the problems facing women in the workplace, saying men are afraid of losing their power, losing their female support systems, or simply were spoiled from birth and resist change. While this answer is a simplistic one for a complex problem, it reflects how the situation is seen by many women struggling to succeed. But the barriers facing women on the road to success are both structural and attitudinal. Structural barriers include a hierarchical corporate structure with “glass walls and glass ceilings” that prohibit women from moving either laterally or upward. Another problem women found particularly difficult was the lack of transparency in job descriptions or recruitment and promotion criteria. The benefits given men for their compulsory military service also discriminate against women and, although no longer required by law, are often accepted in practice. Women believe this leads to a military-type business culture in which only a decade ago, women were required to meet height requirements of 5 feet 2 inches and weight requirements of 100 pounds in order to be hired.

The norms and practice of very long working hours are particularly difficult for women who have families, combined with a lack of flexibility in hours and work. The old boys’ power network was often cited as detrimental to women. Men’s networks based on school and military ties exclude women. Women are developing networks, but they do not have the same power networks as men. Women have difficulty finding a sponsor or mentor to guide them through the maze of company norms. A sunbae, or mentor for a hubae, the newly arrived, is traditional in Korean companies but is easier for men to acquire since some male managers are uncomfortable working so closely with a woman.

The attitudinal barriers that women meet included the corporate culture, with strong attitudes of male preference, privilege, and dominance. Men often view women in supportive roles rather than as principals. They request and expect services from women that they don’t expect from men, from serving drinks to doing the laundry of the boss on trips. The “good mother, wise wife” syndrome also means that women have been trained to think of themselves exclusively in terms of these roles, so it is easy to stimulate their guilt and feelings of being neglectful when they work long hours and try to balance work and family.

The late hours of after-work meetings and expected drinking are added burdens for many women. Sexual harassment, defined as unwanted sexual attention or touching referred to as “skin slip” as well as an environment of sexual innuendo, is a difficult and often hidden issue. Harassment may be obvious or subtle. When women are invited after work, they feel compelled to accompany colleagues (male) to “room salons” for long hours and many “business” drinks with entertainment and service by other women. Most women find this degrading both for themselves and the servers, and the servers often resent the businesswomen who they believe do not tip as well as the men.

CEO attitudes are crucial to this culture in a corporation as they influence the attitudes and behavior of the entire organization, but mere public statements about equity without concurrent actions by top management do not lead to greater equity for women. CEO’s are not the only determining factor, however. Inertia and resistance to change are powerful forces at all levels of an organization.

What changes are needed for Korea’s corporations, government and families so that its women can contribute more fully to the nation’s wellbeing?

Women Assembly members have supported the push for greater transparency in corporate governance. The possibilities for affirmative action legislation have increased as women assembly members, supported by women in the Ministry of Justice and in the courts, work for the abolition of the hojuje, or patriarchal family laws. Women hope that this might point the way to a similar transformation in business. While laws are a necessary first step, they are only the beginning. Enforcement of the laws is essential. Women cite the lack of penalties for violating the laws as an important factor inhibiting change. If they were enforced, the laws would then provide a framework for changing behavior and attitudes and support for people working to make the necessary changes. Mitsubishi of Japan, Boeing, and other United States corporations only made the necessary changes after being fined millions of dollars for sexual and racial discrimination.

Like most countries, Korea has adopted sexual discrimination legislation, the Equal Employment Act of 1987. However, the enforcement power of existing institutions, such as the Ministry of Gender Equality’s Committee on Gender Equality Promotion and the Ministry of Labor’s Equal Employment Committee, is limited. The National Human Rights Commission of Korea has more enforcement power, but lacks expertise in workplace dispute resolution. In addition, employers have introduced evaluation criteria that seem neutral but in fact exert a “disparate impact” on women workers. Anti-discrimination laws cannot prevent employers’ subjective personnel decisions.

Therefore, the Korean government plans to introduce an “employment equity promotion program,” which is similar to the U.S. federal contract compliance program. The Employment Equity Promotion Program would require employers to submit detailed reports on employment patterns and explicit plans to remedy inequality and would have to demonstrate good faith efforts to comply by presenting all relevant personnel records and information. The laws would provide a framework for changing behavior and attitudes, and support people working to make the necessary changes.

Not all women’s groups supported the legislation. Some groups, such as the Korea Women’s Association United (KWAU) and the Korean National Counsel of Women (KNCW), demanded that a quota system be introduced in the fields of politics and the public sector. They never expected the government to introduce a contract compliance program to require government contractors in the private sector to draft and plan hiring goals and timetables for women workers. Women’s movement groups for lower level women workers, such as Women Workers Association (WWA), believed it was more urgent to improve the wages and working conditions of women nonstandard workers rather than introducing affirmative action that they felt would primarily benefit relatively well-educated middle class women.

Affirmative action procedures, including formal job postings, interview rules, formal evaluations, and other practices help managers to choose candidates objectively and contribute to formalizing and rationalizing personnel decisions. It is hoped that implementing this program will also eliminate the practice of paying the family wage to male workers which has been an important patriarchal strategy for ensuring that women receive lower wages in the market, remain dependent upon their husbands, and stay at home.

Korean women may receive some support from young Korean men, who do not wish to follow in their fathers’ footsteps feeling totally owned by a company. Young men experience some of the problems in corporations that are described by women, but as one woman said, “the men expect them.” One woman manager described her boss inviting her to have dinner with him after she had already eaten with friends. She thanked him and declined politely saying she had already eaten, angering her boss. Later a male colleague, who had already eaten lunch, went for lunch with the boss. To her inquiry he said, “Of course I ate again even though it was uncomfortable. The boss expects it.” At some point men experiencing such difficulties may be willing to join with women who desire change.

Young people generally support changes in business culture and operations that will enhance the quality of life for all, including changes in gender roles. But both more mature and younger people believe the traditional rigid education system is out of touch with a changing world and some are organizing for changes. Leadership development programs for both men and women are now being offered in universities and corporations. Such programs are essential to prepare women for leadership and aid men in expanding their view of the role of leader.

In addition, innovative economists may incorporate the latest theories of innovation and creativity with the more traditional thought and discipline of economics to support changes in the economic structure. Korean women look forward to the day when all Korean companies have at least two women managers. Although the changes required might seem risky to some, most Koreans seem eager to do whatever is necessary to improve the quality of life for themselves and the nation. Korea has shown itself capable of rapid change when the need arises and is then acknowledged. The costs of not heeding the need for change are too high to ignore.


ENDNOTES

1. World Economic Forum, Global Competitiveness Index 2004-2005, Geneva Switzerland, 2004. [Return to Text]

2. McKinsey and Company, Report on Aging, Seoul Korea, 2004. [Return to Text]

3. International Labour Organization, Women, Gender, and Work, ILO Press, Geneva Switzerland, 2001; Korean data: Survey on Economically Active Population, Seoul Korea, 2002. [Return to Text]

4. Renshaw Jean R., Kimono in the Boardroom: The Invisible Evolution of Japanese Women Managers, Oxford University Press, 1999. [Return to Text]

5. Lee, Joohee, Byung Yoo Chun, and Jane Lee, Shattering the Glass Ceiling: Women in Management, Hanul Books, Korea 2004. [Return to Text]

6. UNDP, United Nations Human Development Report 2004, Oxford University Press. [Return to Text]

7. Association of Japanese Business Studies paper, Stockholm Sweden 2004 --Personal conversation. [Return to Text]

8. Catalyst, The Bottom Line: Connecting Corporate Performance and Gender Diversity, 2004. [Return to Text]

9. Herald Kyoungej (Economy):Seoul,Korea. Oct. 1, 2004. [Return to Text]


JEAN R. RENSHAW is a management consultant, a professor of management, author of Kimono in the Boardroom: The Invisible Evolution of Japanese Women Managers (New York: Oxford University Press, 1999), and a forthcoming book on Korean women managers, of which this article is a chapter. She is the author of JPRI Critique, Vol. III, No. 5 (Jun 1996), “A Future for Japanese Women Managers?”

JOOHEE LEE is a research fellow at the Korea Labor Institute, a professor of sociology, and co-author of Shattering the Glass Ceiling? Women in Management (in Korean).


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