“Companies are also punished for employee mistakes”… What are the ways to avoid the ‘bilateral punishment’ anti-graft law?

Recently, the prosecution indicted about 50 people, including famous instructors so-called 'one-way instructors', officials of large entrance exam institutes, and current and former teachers. They are accused of providing money to teachers who have experience in writing CSAT or mock assessment questions and purchasing questions, or obtaining questions in advance of EBS textbooks before they are published and using them for private education content. The investigative authorities judged this to be a serious issue that undermined the fairness of the educational field, applied charges such as violation of the Anti-Corruption Act and obstruction of business, and sent those involved to trial.

What is noteworthy in this case is that not only the teacher who received the money and the private education officials who provided it, but also the private education company stood before the law. This suggests that customary external cooperation or advisory contracts can become legal risks that can push the entire company into crisis.

The Anti-Corruption Act was introduced to ensure fair performance of duties by public officials, but in corporate practice, problems often arise due to misunderstanding of its scope of application. ‘Public officials, etc.’ as defined by the law broadly includes not only public officials, but also faculty and staff of schools at all levels, including private schools, and executives and employees of school corporations and media companies. In other words, when a company enters into a contract with an external expert for the purposes of marketing, consulting, lectures, etc., if the other party is included in such 'public officials, etc.', the Anti-Graft Act will apply without exception.

The most fatal thing from a company's point of view is the dual punishment rule. The Anti-Graft Act stipulates that fines or fines be imposed not only on the employee who commits a violation but also on the corporation to which he or she belongs. In this case as well, if it is acknowledged that an academy official provided money or valuables to a teacher in connection with work, it is difficult for the academy corporation to avoid punishment as well. In particular, a key issue in sentencing is whether there was systematic direction or assistance at the corporate level during the investigation process, or whether considerable care and supervision were exercised to prevent violations.

Therefore, companies must internalize the following principles in their compliance system from a risk management perspective. First, there is a need to make identity verification procedures mandatory for transaction partners. This means that when signing an advisory contract or requesting a lecture, a process must be in place to check in advance whether the other party is a ‘public official, etc.’ under the Anti-Graft Act. In particular, it must be clearly recognized that teachers at private schools, not public schools, and media personnel are also eligible, and if necessary, they must be requested to provide proof of prior approval from the head of the relevant institution.

Next, it is necessary to establish an objective calculation basis for legitimate title. The law recognizes as an exception the receipt of money or valuables based on legitimate authority. However, as in this case, paying an amount that far exceeds the normal market price or paying money as a consulting fee without specific service results is highly likely to be considered a bribe or illegal money or valuables. When paying for external services, companies must establish reasonable standards based on market unit prices and thoroughly verify whether the contract details match the actual work performed.

The last important principle is the prohibition of using confidential and undisclosed information in the course of work. When a company pays a fee to obtain information from a public official, etc., if the information is classified as an official secret, this may not only violate the Anti-Corruption Act but also extend to crimes such as obstruction of business or breach of trust. Even if a legally legal contract has been concluded, if the actual information exchanged is undisclosed internal information obtained by the other party in the course of his or her job, this is considered an illegal act. Therefore, it is necessary to closely monitor the work progress of related departments where information is frequently collected, such as external cooperation or strategic planning, and constantly check whether the source and circumstances of information obtained by executives and employees are within legal boundaries.

Compliance capabilities have now become a key indicator of a company's sustainability. Establishing a preemptive risk management system beyond passive responses to avoid the law is the surest way to protect corporate trust and secure competitiveness. It is a time when the entire organization, from management to working-level employees, needs to make efforts to increase legal sensitivity and make ethical management part of its constitution.
 

Small Business Team

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"Companies are also punished for employee mistakes"... What are the ways to avoid the ‘bilateral punishment’ anti-graft law? (Shortcut)