When the head of Hyundai Motor was hauled off to jail last month accused of master-minding a huge slush fund, it looked like business as usual for graft-prone Korea Inc.
For years South Korean governments paid lip service to cleaning up corporate conduct and to raising business practices to international standards.
In reality they tolerated corporate wrongdoing characterized by cozy ties to politicians, reckless expansion and complete lack of transparency.
As long as companies kept producing and the economy kept growing, the government turned a blind eye. But after the Asian financial crisis of 1997-1998, the nation's over-extended conglomerates were on the verge of collapse.
Politicians finally decided to act but the arrest of Hyundai Motor's Chung Mong-koo indicates to what extend the corporate reforms they enacted have so far failed to bite.
"Old habits die hard and these are all decades-old diseases. It is hard to cure them overnight," said Lee Phil-sang, an economist at Korea University.
Frequent scandals have punctuated the decade since the financial crisis, culminating with the arrest of Chung, who presides over South Korea's second-largest business empire and the world's seventh-biggest automaker.
Prosecutors accuse Chung of using the slush fund to bribe government and financial officials as well as facilitating the transfer of corporate wealth and management control to his only son, Chung Eui-sun.
South Korea's biggest company, Samsung, accounting for 20 percent of the nation's exports, is also under investigation. Prosecutors are looking at alleged irregularities in the transfer of wealth from the Samsung Group's patriarch Lee Kun-hee to his son, Jae-yong.
The idea of Korea Inc was born in the early 1960s, when the past authoritarian government nurtured family-run business conglomerates, known as chaebol. As they grew, they were credited for transforming the poor, agricultural country into an industrial powerhouse.
But the imperious executives ran the companies for founding families and not for shareholders, pursuing expansion instead of profit, manipulating accounting books and developing complicated corporate structures to maintain their empire-building plans.
Economists say there has been considerable progress in efforts to improve transparency in accounting, mainly due to the increased influence from foreign investors after the Asian financial crisis.
"South Korea paid a huge tuition fee in the form of the financial crisis but it helped set the country in the right direction," Lee Phil-sang said. "But the latest scandals point to the need for the chaebol to go the extra mile in their efforts to improve transparency and corporate governance."
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