CONTENTS
- 1. Ethical Management | One Pillar of Social Responsibility
- - Explanation of the Concept of Ethical Management
- 2. Ethical Management | The Need for Corporate Ethical Management
- - Prevention of Legal Violation Risks
- - Response to ESG Disclosure and Rating Indices
- - Meeting the ESG Requirements of Global Business Partners
- - Securing Corporate Image and Social Trust
- - Protecting Internal Staff and Improving Corporate Culture
- 3. Ethical Management | Key Obligations a Company Bears in Ethical Management
- 4. Ethical Management | Sample Practice Guidelines
- - Scope of Legal Advisory Provided
1. Ethical Management | One Pillar of Social Responsibility
Ethical management is one pillar of corporate social responsibility (CSR, Corporate Social Responsibility).
A company must earn the trust of its stakeholders and consumers, both internally and externally, on the basis of fairness and transparency. Because consumers, investors, and governments prefer ethical and responsible companies, ethical management should become part of a company's vision.
When unethical matters arise in a company's operations, such as false advertising and consumer deception, labor exploitation, insider information and accounting fraud, environmental pollution, and corruption and bribery, the consequences do not end with a short-term decline in performance.
In cases of corruption, collusion, and unfair trade, these matters lead to legal sanctions and enormous fines, and the company loses consumer trust along with its competitiveness in the market.
This loss of trust is more likely to lead to legal and social risks later, such as the withdrawal of investors and a decline in corporate value.
Explanation of the Concept of Ethical Management
Ethical management is a framework in which a company carries out its management activities by considering social value together with legal and moral responsibility, going beyond the traditional management approach aimed solely at generating profit.
In other words, it means making fair and transparent decisions for all stakeholders (customers, executives and employees, partner companies, the local community, the government, and others) and operating the company in a manner consistent with social value.
As ethical management has today established itself as a core component of ESG (environmental, social, and governance) management, companies are required to set and practice ethical value standards across management, including not only legal compliance but also human rights protection, anti-corruption, fair trade, safety and environment, personal information protection, and AI ethics.
Ethical management is expanding into a broad concept that encompasses not only the ethical norms a company voluntarily sets but also various laws, international standards, and the requirements of global corporate client companies.
2. Ethical Management | The Need for Corporate Ethical Management
Ethical management is a management policy needed across all industries, and it is completed not through a mere declaration but through systematic implementation.
The more carefully a company establishes ethical management guidelines, such as compliance rules on gifts and entertainment, congratulatory and condolence money, and fair trade, the duty of good faith toward investors through the fair provision of investment information and the production of transparent financial information, the building of mutual trust with partner companies, and compliance with environmental laws along with the reduction of environmental impact, the more efficiently it can enforce them within the company.
We will take a closer look at why companies need ethical management.
Prevention of Legal Violation Risks
Recently, as various laws such as the Monopoly Regulation and Fair Trade Act, the Serious Accidents Punishment Act, the Personal Information Protection Act, and environmental laws have been strengthened, the importance of corporate ethical management has risen sharply.
When an ethical management system is not in place or is poorly operated, it can lead to risks such as large-scale legal sanctions, penalty surcharges, criminal punishment, and business suspension arising from misconduct by executives and employees or wrongdoing by partner companies.
Issues such as serious accidents, collusion, environmental pollution, human rights violations, and AI discrimination have become so risky that, once they occur, they can affect the very survival of the company.
Response to ESG Disclosure and Rating Indices
Ethical management results are used as a core indicator of ESG management disclosure, and global ESG rating agencies treat the management of anti-corruption, human rights, industrial safety, and supply-chain ethical management as required evaluation items.
When the ESG rating is low, it is directly linked to attracting investment, loan interest rates, participation in public-institution bidding, and eligibility to supply global business partners, so building an ethical management system has become a factor that determines a company's competitiveness.
Meeting the ESG Requirements of Global Business Partners
Major overseas companies and global brands conduct ethical management due diligence (CSR Audit, ESG due diligence) as a requirement when selecting partner companies.
When the standards for human rights, the environment, safety, and anti-corruption are not met, the result is suspension of transactions, exclusion from the supply chain, and termination of import-export contracts, so establishing an ethical management system is a required condition for entering the global supply chain and continuing transactions.
In line with the EU supply chain due diligence law and Korea's policy of mandatory ESG disclosure, the level of ethical management implementation is establishing itself as a required condition for global export companies.
Securing Corporate Image and Social Trust
A company's unethical conduct, misconduct by executives and employees, and human rights violations by partner companies can spread in an instant through social media, YouTube, and online communities, and it has become common for these to lead to social criticism, damage to brand image, boycotts, falling stock prices, and customer attrition.
Building an ethical management system blocks risks in advance while raising social trust and helping to secure excellent talent and increase investor confidence.
Protecting Internal Staff and Improving Corporate Culture
Through ethical management, preventing workplace sexual harassment, harassment, discrimination, improper directives, and conflicts of interest and putting in place a fair and transparent decision-making structure and a human rights protection framework can prevent internal conflict and maintain organizational trust.
Through ethical management guidelines and a reporting system, corruption and unethical conduct can be detected in advance, which secures the soundness of the company as a whole and maintains a sustainable management environment.
3. Ethical Management | Key Obligations a Company Bears in Ethical Management
The key obligations a company must bear for ethical management are as follows.
Enactment and announcement of a code of ethics and practice guidelines
Prohibition of workplace harassment and sexual harassment, acceptance of money and entertainment, and conflict-of-interest conduct
Establishment of grounds for discipline and punishment for violations
② Building an anti-corruption and anti-bribery system
Prohibition of providing money when dealing with public officials under the Anti-Corruption Act and the Public Service Ethics Act
Compliance with the prohibition of improper solicitation and the acceptance of money
ISO 37001 certification and operation of a corruption-risk self-checklist
Conclusion of integrity contracts with partner companies and external stakeholders
③ Establishing a conflict-of-interest prevention framework
Definition of conflict-of-interest conduct and organization of the types that occur
Management of conflicts of interest involving family companies, equity relationships, and outside directors
Inclusion of clauses prohibiting the pursuit of private gain and preferential transactions
④ Operating fair trade and partner-company ethics standards
Compliance with the Monopoly Regulation and Fair Trade Act and the Fair Transactions in Subcontracting Act
Prohibition of unfair special agreements and unfair trade practices
Conclusion of fair trade agreements with partner companies and related education
Announcement of a declaration to eradicate abuse of power and management of results
⑤ Operating human rights management and anti-discrimination policies
Declaration of compliance with the UN Guiding Principles on Business and Human Rights (UNGP) and the OECD Guidelines for Multinational Enterprises
Processes for preventing and responding to workplace sexual harassment and harassment
Compliance with the Anti-Discrimination Act and the Act on the Promotion of Employment of Persons with Disabilities
Enactment of a human rights management charter
⑥ Practicing ESG and socially responsible management
Establishment of an ESG strategy and operation of an ESG committee
Disclosure of environmental, social-contribution, and governance information
Response to sustainability management reports and ESG disclosure obligations
Diagnosis and due diligence of supply-chain ESG risks (Due Diligence)
⑦ Operating an ethical management violation reporting center and protection system
Installation of an internal reporting center that allows anonymous reporting
Operation of a whistleblower protection and reward system
Preparation of grievance counseling and legal advisory procedures
Investigation of violations and establishment of a disciplinary committee
4. Ethical Management | Sample Practice Guidelines
Our firm provides a sample of practice guidelines for a company's ethical management as follows.
If needed, we hope you will lay the foundation for ethical management through the practice guidelines below.
Article 2 (Scope of Application) These guidelines apply to all executives and employees and to all stakeholders, including the company's partner companies, service providers, and external partners.
Article 3 (Compliance with Laws and Norms) ① All executives and employees shall strictly comply with relevant domestic and foreign laws, international norms, and the company's internal regulations.
② When a situation suspected of a legal or ethical violation arises, they shall immediately report it to the head of their department and to the ethical management department.
Article 4 (Fair Performance of Duties) ① Executives and employees shall maintain fairness and transparency in performing their duties and shall not accept or provide improper solicitation, money, entertainment, or favors in transactions with stakeholders.
② They shall secure fairness and objectivity in the processes of selecting partner companies, contracting, inspection, and evaluation, and shall not distort their judgment for financial gain or private friendship.
Article 5 (Respect for Human Rights and Prohibition of Discrimination) ① All executives and employees shall respect the human rights of colleagues, customers, partner companies, and the local community, and shall not discriminate on grounds such as race, sex, educational background, religion, age, place of origin, disability, or sexual orientation.
② Human rights violations such as workplace harassment, sexual harassment, verbal and physical abuse, and ostracism are prohibited, and anyone who discovers or becomes aware of such conduct shall report it immediately.
Article 6 (Protection of Safety and the Environment) ① Executives and employees shall comply with relevant laws such as the Occupational Safety and Health Act and environmental laws and with the company's safety and environmental regulations, doing their utmost to protect workers' safety and the environment.
② When they become aware of environmental pollution, a violation of safety rules, or the possibility of a serious accident, they shall immediately report it to the head of their department and to the safety management department.
Article 7 (Anti-Corruption and Anti-Monopoly) ① Executives and employees shall not demand or accept money, entertainment, favors, or improper benefits in connection with their duties.
② They shall strictly comply with the Monopoly Regulation and Fair Trade Act, the Improper Solicitation and Graft Act, and regulations restricting internal transactions.
Article 8 (Information Protection and Confidentiality) ① Executives and employees shall not leak to the outside or improperly use customer and company information acquired in the course of their duties.
② They shall strictly comply with the Personal Information Protection Act and laws related to information protection.
Article 9 (Reporting and Protection) ① Executives and employees may report facts of ethical management violations or suspected cases to the ethical management department or through an anonymous reporting channel.
② A reporter shall not suffer any disadvantage for any reason, and the company shall take measures to protect reporters.
Article 10 (Education and Implementation Review) ① The company shall regularly conduct ethical management education to raise the ethical awareness of executives and employees, and shall periodically review compliance with the practice guidelines.
② When a violation is detected, the company shall, depending on the seriousness of the matter, refer it to the personnel committee or take disciplinary or legal measures.
Scope of Legal Advisory Provided
Ethical management is directly linked to a company's sustainability.
Beyond simply establishing internal regulations and guidelines, we recommend working with attorneys at a firm that can put in place workable operating systems and frameworks and then provide advisory services such as internal investigations and crisis response in real time.
Our firm's corporate attorneys provide solutions for ethical management based on their experience advising domestic and foreign companies on the Anti-Corruption Act, the Improper Solicitation and Graft Act, and other matters, along with their track record of establishing compliance systems.
We encourage you to receive a 🔗recommendation of a corporate attorney who has expertise in ethical management, having served as a member of a government agency's ethics and human rights committee and as a CP evaluation committee member, and to request a consultation with our firm, which provides legal advisory under prompt judgment.
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