South Korea is currently undergoing reform of its corporate governance (CG) system, reflecting attempts to harmonise at a global level. Since the financial crisis in 1997, the need for reform has been emphasised and the Government is leading a policy which targets the traditional structure of the chaebol, as well as the system of corporate ownership and control in South Korea. In this paper, we outline the traditional system of CG in South Korea and review the broad agenda for CG reform which is currently taking place. From our review, we develop a conceptual framework which makes the implicit CG reforms in South Korea explicit. The framework comprises two inter–related models which represent the forces driving reform, the need for reform and the specific initiatives instrumental to reform. On the basis of our review and conceptual framework, we conclude by making a number of policy recommendations for the future direction of CG reform in South Korea. Specifically, we suggest a policy of corporate governance awareness involving a more penetrating policy of reform and incorporating the establishment of a CG forum. Our recommended policy should result in the reforms working from within the chaebol and CG system, rather than from without. For reform to have a permanent effect, the policies need to address the business culture, traditions and internal structure of the system. We suggest that this can only be achieved by increasing general awareness of the need for CG and the reasons underlying the current policy as well as by nurturing mutual trust and understanding between the parties involved.
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