[Editorial] Forced Social Contributions

Chairman Sohn Kyung-shik of Korea Chamber of Commerce and Industry (KCCI) said yesterday that although corporate social contributions are necessary, they must not be given to the extent that they hinder corporate competitiveness. By saying so, he openly drew a line as to the appropriate scale of corporate social contributions in response to the Uri Party’s comment last week at a meeting with Korea’s five major economic organizations that when the Korea-U.S. FTA is concluded, companies which would benefit from increased exports should support farmers who suffer from the opening of the agricultural market.

Large corporations complain that the government and the ruling party are pressuring them to make social contributions after President Roh Moo-hyun emphasized “elimination of social bipolarization” as a policy agenda. Some companies, which are operating social work foundations or scholarship foundations, say that the government demanded that they focus their support on low-income families or poor students rather than smart students.

It is companies themselves that should make decisions regarding their social contribution, not the government. The government has no right to interfere with the whereabouts of the contribution. Most businesses are already aware of the need to make social contribution and are doing various social works. If the government were to spread contribution culture among companies, it should provide institutional motivations such as more tax benefits. From the companies’ perspective, a government that forces them to make social contributions is no different from one that demands to fund election campaigns or administration.

In this regard, it is no surprise that the chairman of KCCI mentioned the contribution “hindering corporations’ competitiveness.” However rich a company may be, it cannot spend money freely since the money belongs to shareholders, not the management. In addition, in order for companies to secure future competitiveness and retain their workforce, investment is essential. This is why compliance, profit, and quality products come before social welfare when talking about corporate social responsibility

Between 1997 and 2005, per capita quasi-tax increased three to five times faster than per capita income at the annual average of 14.2 percent. If the government goes ahead to raise quasi-tax further, the vicious cycle of falling competitiveness, lower growth, less employment, reduced income, and increasing number of the poor will aggravate.