CEOs: Know Your Company
By Kim Mi-hui
Korea Herald
June 21, 2001

A foreign businessman sits face to face with the CEO of a Korean company he is interested in working with. The former asks, "Sir, how many branch offices do you have?"

Simple enough a question, one would probably say. Not in Korea.

Usually, a question like this triggers a chain reaction where the CEO asks the man sitting next to him (most likely the second highest man in the company) the same question, and he the next, until about the tenth man down answers the question.

This is just one example of the difference between Korean and Western business cultures, says Marc Poirier, chief executive officer of SG Securities in Seoul.

"In America, managers are very well informed about their companies. This is because they are always trying to advance their knowledge, by reading books or whatever. They are not managers because they're old enough, well connected or because they were able to wait all those years - they're managers because they know.

"But, in Korea, the top managers seem very separated from the company. And one's knowledge seems to decrease after he or she graduates from university," Poirier said.

While chairmen of corporate giants like IBM or GE know all about their firms - sales, sectors, profit by sector, etc. - Korea's hands-off managing system makes for a big difference in doing international business, he said.

Yet another major gap between the two business cultures is in the regulations. Although the basic laws in the United States, Korea and Japan may be the same, how they are interpreted varies widely between the markets, he said. "The reader of the law gives his own interpretation and, sometimes, the concept of the law is lost in the process," he said.

While these two common issues can be traced back to cultural differences, which often can't be helped, Korea also needs improvement in more basic business environments, Poirier said.

One of them is the unusually strong role the lobbyists and the government still play in Korean business, he pointed out, observing that while lobbyists are also very important in the West, they don't have the power to impose unnecessary regulations like they do here.

"As for the government, certain bodies seem to feel that it is still their responsibility to negotiate on behalf of certain companies," he said, adding, "Such heavy involvement may have been needed after the Korean War, but now, the economy is moving in the international environment and it should be left to move as it wants."

The labor union system here is, of course, another very obvious area that needs betterment, he said, referring to the recent case of the pilot strike. In his opinion, the unions are needed to protect the workers - when they are abused or underpaid, for instance - but Korean labor unions are at the point where they're destroying values. "The pilots were fighting for increase in pay when inflation is very low and they are extremely well paid," he said.

In fact, the union in Korea now is very similar to the union in France in the 1980s, when they were very powerful, he said. France paid for that, though, when foreign investors avoided investing in France, which was very bad for the economy, he recalled. "Plus, each day of strike costs a lot of money and jeopardizes the credibility of a country."

Therefore, one of the biggest challenges the Korean government now has, is to change the labor market rules in Korea, Poirier said.

Making such improvements in the Korean market now is very important considering that foreign investors see the country as a very attractive market, especially in the information technology sector, he said.

"Korea is a very technology-driven country, compared to 20 years ago when Korea was more industrial. The market penetration for Internet is 60 percent of the population. Technology is something that is definitely going to boom in Korea," he said.

In this respect, one piece of advice he offers is for Korean business students to get trained abroad. Studying in America or Europe will help the Korean workforce become more multinational in mind, which will help them adapt to the globalization of the Korean market, he said.

"For instance, look at how many securities firms are employing Korean-Americans, Korean-Australians or Korean-Canadians. It's because they have the double understanding of the Korean culture as well as the foreign business model," he said.

Poirier also pointed out a couple of weaknesses in the current market that may be slowing down the Korean economy.

One of them is the slow circulation of capital here as regulations make it difficult for investors to transfer their money from one company to another easily. But versatility of money is very important in creating an efficient economy, he said, pointing out that, in America, money moves from sector to sector very quickly, creating jobs and value.

Another weakness is the attitude of individual investors, who are quite powerful here, he said. "In many cases, they are not investors but speculators. Investments is not buying securities in the morning and then selling it in the afternoon. That's trading. Furthermore, their decision is often based on rumors and speculation, which is not ideal."

He recommended that these investors go for long-term investments instead, putting money in blue chip companies.

Poirier, born in France, worked extensively in the United States and Japan before coming to Korea to head the Seoul branch of SG Securities.