Social Contribution 68 Points, Interest of CEO Is Important

“Without evaluation, there is no improvement.”

It is a common lesson learned in the business management classes. The Korean businesses have been emphasizing the importance of ethical management and management of trust. This year, a new evaluation model was developed to evaluate the ‘ethical management factor’ of a company.

On 7th January, the Institute of Industrial Policy Studies (IPS) has developed and announced an ethical management evaluation model under a joint research team consists of Dongsung Cho, Dean of Business Administration College of Seoul University, Ghi-chan Kim, professor of Business Administration College of Catholic University, Chul-ho Shin, professor of Business Administration College of Sungshin Women’s University and others.

▽The support of the CEO is vital = The model developed by the research team measure economic contribution (proportion 11.7%), social contribution (68.2%) and voluntary contribution (20.0%). This model then evaluates the ethical management factors out of 100 point scale. Items such as new employment, individual added value and others, that appears to have no relation to ‘ethics’ are also taken into consideration. The research team explains, “If a company bankrupts without creating any profit, it effects negatively to the society.”

A very noticeable item in the evaluation criteria is the ‘Support of the CEO’. This item is more important in the evaluation criteria than ‘Corporate Ethical System’ itself. This means that interest level of CEO is more important than the ethical principle announced by Korean businesses.

Professor Kim of the research team says, “Many Korean corporate have tendencies to consider the ethical management merely as a ‘job regulation’. The Chief Executive Officer (CEO) also has to act as the Chief Ethics Officer, without it ethical management is impossible.”

▽The ethical management score of POSCO? = The research team has implemented this new model on POSCO, a company that have high interest in the ethical management for a long time. According to the evaluation result, the PSOCO scored 8 points in economical contribution, 56.27 points in social contribution and 18.37 points in voluntary contribution. In total, they’ve scored 82.64 (out of 100 points) points.

According to the research team, this is a comparably high score. The POSCO has scored an exceptional 18.37 points in the voluntary contribution due to their active social welfare activities such as fund donations. They also publish an environmental report on regular basis.

▽The limit of the evaluation = This evaluation model has limitations. The research team acknowledged it. First most of the evaluation criteria are difficult to be measured in numerical values. This led to questionable objectiveness of the evaluation. For an example, the major evaluation item, the ‘interest level of the CEO in ethical management’ has no choice but to be evaluated subjectively.

Also a wrong impression can be made. The business practice of moral management instead of making profit, which is the main function of a company, could be mistaken for an ethical management.

“The evaluation model will be continuously modified according to reality. What’s important is the evaluation. Soon a ‘self-evaluation model’ will be introduced to the public,” added Professor Kim finally.

Jong sik Kong kong@donga.com