Finance and Corporate Governance for New Decade in Korea Considering 2000/2003 World Bank/IMF Reports

Abstract

Immediately after the Asian financial crisis in 1997, Korea signed MOUs with the IMF. In the context of the MOUs, World Bank asked Korean government to spend part of the financial resources available for the financial and corporate restructuring assistance project. On May 15, 2000, the final project report and legal recommendations were delivered to the Korean Ministry of Justice. In line with such report, for the first decade of a new millennium, Korea has taken various radical legal measures to improve finance and corporate governance. This article is to review the trajectory of this exercise from the beginning to the current status of financial and corporate governance in Korea to find the right policy directions for the next decade. From the history of Korean jurisprudence, this attempt can be characterized as the rule of law by transparency. In the 1960s, 70s, 80s and even early 90s, law was nothing more than one of many tools for control. Based on imperfect law, the executive branch was to exercise uncontrolled discretion in making rules. Law was most fearful because nobody knew what it was or what it would be. In 1993, when the military autocratic rule was receded, but first civilian presidency was established, law was a means for reformation. By changing law, changes did occur. They, however, were not totally free from administrative conveniences. Since the 1997 financial crisis, true meaning of rule of law started to formulate itself in the minds of Koreans as it is for expectation and no fear. As the transparency of corporate governance was needed, law should become transparent likewise. After a decade-long experience, Korea is now wobbling between business-friendly law and fair society. Without any ideological dent, rule of law based on transparency and expectation should continue to prosper in Korea, which would lead to a more competitive corporate community. Furthermore, Korean government policies based on rule of law should be fostered for development of active market for corporate control and professional management.