The cost of running slush funds, long regarded as a cost of doing business in Korea, just got higher. Chung Mong-koo, chairman of Hyundai Motor, on Monday received a three-year prison sentence for diverting funds from company coffers.

Coming in the wake of the 10-year sentence meted out to Kim Woo-choong, who siphoned off billions of dollars from the once-mighty Daewoo conglomerate, this suggests diminishing tolerance for wrongdoing by chaebol leaders. Alas, even if true, punishments handed down by newly zealous judges are insufficient to eradicate corporate transgressions – particularly since the sprawling conglomerates have plenty of other backers in Korea’s corridors of power.

For one thing, a jail sentence need not bar a Korean company chief from returning to his post. Witness Chey Tae-won, chairman of SK Corp, who served a fraction of his three-year sentence and was soon back running the oil refinery business. Mr Chung, a renowned micro-manager, took the pre-emptive step of installing his son in the driving seat and is likely to continue making his presence felt at the carmaker. And there may be other ways of responding to criticism about governance. Last year, Hyundai and Samsung Group announced big charitable donations following allegations of corruption.

Secondly, sporadic arrests are not accompanied by structural change – a sharp contrast to the rewriting of the rule book sparked by the demise of Enron in the US. Poor transparency and weak corporate governance persist at Korea’s conglomerates, making it easier to hide creative transactions. Indeed, and notwithstanding a feisty antitrust body, the government is pursuing regressive legislation to dilute restrictions on cross-shareholdings. That alludes to another factor supporting the status quo – economic slowdown, exacerbated by a strong currency. Supporting national champions, of course, is not the textbook method to galvanise growth. Investors preferring a classic approach will conclude that there are better investment opportunities than a market with uninspiring growth and murky corporate structures.

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