Sunday, March 05, 2006

Legal Concerns for Korean Expatiate Executives (and HR, PR, and Legal teams) in America

Most foreign based firms send management and workers to host countries. We call these workers and executives expatriates. In addition to demands for achieving company and project goals, adjusting to a new culture is challenging. I call this adjustment Culture Shock, which is localization to a new geographic region and its unique business culture, norms and practices, not to mention the stresses to the expats family.

Adding to stresses inherent to working abroad, recent arrests and convictions of Korean expat executives are causing addition concerns.

Essentially, Korean companies need to be very careful, not only in the semiconductor industry but also in the LCD, TV, shipbuilding and auto industries, where they have growing market shares.

An American lawyer familiar with the case notes, "They'’re making a big mistake if they think they will never go to jail in the U.S. for price fixing [ or other illegal practice] just because they're not a resident there."

I see that adding to the issue is the complex world of recent American business regulations such as Sarbanes-Oxley. ( A topic all American business executives should be knowledgeable).

An example of the concerns in Korea is reported in Chosun Il Bo,

Anxiety has gripped staff of Korean companies abroad after four Hynix executives agreed to serve prison terms of between five and eight months in the U.S. for price fixing. The practice is unlikely to be limited to the memory chip industry, and while some Korean firms remain behind global standards when doing business overseas, regulators in advanced nations are further tightening the noose on less-than-satisfactory corporate practice.

Antitrust authorities in the U.S. and Europe will investigate cartel cases even when they lack direct and solid evidence. Rival companies that happen to offer the same price may come under suspicion, and e-mails and phone conversations among their employees are regarded as important circumstantial evidence. Any informal meeting between staff of rival companies and careless talk can be a reason for regulators to hold those involved responsible, and that means the individuals as well as the firm.

This is why some large U.S. companies forbid their staff to meet their counterparts working for competitors. If such meetings happen, there is protocol staff are contractually obliged to follow, including reporting to corporate lawyers in advance when and where the meeting takes place and briefing them on what was discussed afterwards. Korean firms, by contrast, take it for granted that staff will drink and play golf with employees of rival businesses.

The punishment of individual Hynix executives after the company already paid a huge fine has caught many Koreans working abroad off guard. They gather frequently, for instance in regular meetings with interest groups such as in the U.S., the Korean Chamber of Commerce and Industry and trade associations in New York and Los Angeles, where Korean companies are concentrated. Apart from such formal occasions, they also meet informally whenever there are issues to discuss. There they share information with competitors and work together to solve problems. Korean companies abroad also share internal documents or e-mail such information to each other. “t is absolutely necessary for Korean expatriate staff to share information to succeed in such big foreign markets, because there are so few of them, a staffer with a large Korean corporation in New York says.

Sometimes, public organizations like legations or the Korea International Trade Association even provide venues for such gatherings. Public organizations very frequently organize trade-related meetings, which could make local companies suspicious of their intentions, says an expatriate working in New York for a Korean electronics company.

The government does not seem worried. In the recent Hynix price-fixing case, other semiconductor manufacturers around the world were also involved, and in the industry a small number of suppliers have a lot of influence over the market as a whole, a high-ranking official with the Ministry of Commerce, Industry and Energy said. But it's unlikely that the case will be repeated in other industries, because there are not many companies that have enough power to attempt to fix prices.

[Contrary to this last statement by the Korean government agency a New York based lawyer working with Korean firms noted]
Korean companies need to be very careful, not only in the semiconductor industry but also in the LCD, TV, shipbuilding and auto industries, where they have large market shares. They're making a big mistake if they think they will never go to jail in the U.S. for price fixing just because theyÂ’re not resident there...

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