Behind the Scenes: Samsung vs. Hyundai Motor (4)
Since the prosecution opened its latest criminal investigation into the Hyundai Motor Co. earlier this year, the company's top management has been attempting to identify informants used by law enforcement authorities. Management believes these "deep throats" are among their former or current employees.
Apparently tipped off by an informant, prosecutors stormed the Seoul office of Glovis Co., Hyundai Motor’s delivery service unit, and were able to quickly locate a secret vault built into one of the walls and dial the combination. Hidden inside was 5 billion won (5 million USD) in bundles of bills, money which prosecutors believe was part of the slush funds created for Hyundai Motor Co. chairman Chung Mong-koo.
In searching for informants, Hyundai Motor officials are narrowing down candidates. They firmly believe there is more than one person handing over information. "We suspect about two of our former or incumbent employees acted as informants to law enforcement authorities. It is likely that the informant who gave information to prosecutors about Hyundai Motor was a different person than the one who contacted authorities about the situation at Glovis," said an official from Hyundai Motor's audit and inspection division.
"To draw conclusions based on what we have found so far, the person who tipped off prosecutors about Hyundai Motor Co. was a former director who burned bridges with top management while leaving the company. The person who acted as the informant for the Glovis case was also a former director who was accused of embezzling company funds."
Trying to identify the informants is apparently not an easy process for Hyundai Motor's top management. According to the official at the group's audit and inspection division, one employee threatened to sue company executives for libel after he was initially accused as an informant. The executives have since backed off.
Critics argue that Hyundai Motor Co.'s top management have only themselves to blame for being hit hard by the whistle-blowers. The group earned a notorious reputation for its unpredictable management of personnel policies in the past years, randomly shifting and sacking senior employees under the chairmanship of Mr. Chung and the founding family. "In the past two or three years, personnel changes were made irregularly. Just last year, there were about ten personnel changes at the executive level posts at [Hyundai group affiliate] Kia Motors alone," said a former Hyundai Motor Co. employee, adding that one of the group's vice presidents was fired while on an overseas business trip and was informed of the news by a subordinate.
The unpredictable personnel management at Hyundai Motor Co. epitomizes the partisan power struggle within the country's largest automaker. Hyundai Motor insiders divide the group's top management executives into a number of factions. The first group comprises the "old guard" of late Hyundai Group chairman Chung Ju-yung, whose death in 2001 eventually resulted in the division of the conglomerate by his three sons. The confidants of Chung Mong-koo represent another group.
There was talk of conflict between existing and newly recruited personnel after Hyundai Motor Co. began to branch off in its own direction. "Chairman Chung [Mong-koo] was always receiving negative reports from employees accusing their colleagues from different factions. Oddly enough, he did not actually dislike such reports," said a former Hyundai Motor employee. "Once, Chung received a series of complaints about a certain executive. He surprised everyone by promoting him the next day," the former employee said.
Hyundai Motor Co.'s recent dustup has raised voices within the group, who say that it must take better care of people retiring or leaving the company. "When the late Chung Se-yung [Chung Ju-yung's younger brother] was chairman at the Hyundai Group, the management offered jobs at Hyundai's contractors and other posts for its retiring executives. However, now we offer just a small amount of financial compensation to retiring executives, and only to the ones that held high posts, at that," said an executive at Hyundai Motor, a Hyundai Motor Co. affiliate. Although the group demands retiring executives to sign a written pledge not to reveal business secrets after they leave the company, that is apparently not enough of a deterrent, considering recent developments.
Personnel practices are equally as harsh at Korea's other major conglomerate. Last year it was reported that Samsung Group's corporate restructuring office decided to fire a company employee who was having an extramarital relationship with one of his colleagues. Management officials tracked the man's mobile phone and credit-card records and searched through the company's computer network to secure solid evidence against him.
If the story is true, Samsung's management committed a serious violation against the individual rights of one of their own employees. Samsung denies it searched the man's credit-card records.
However, some Samsung insiders say the group's restructuring office has the capability to pull something off to that degree. "Last year, an inspection team from the restructuring office stormed the office of an affiliate and searched the desks and computers of every employee," said a former Samsung employee who had spent time in the restructuring office.
"In one employee's notebook, the inspectors found names and descriptions of his female friends. That employee was fired days later."
A former employee at Samsung Engineering and Construction, a group affiliate, reveals even a more disturbing experience: "There was a time when the restructuring office inspected the bank transaction records of every project manager at Samsung Construction. They even demanded to see the bank transaction records of the project managers' wives and also asked them to submit written certificates from other banks," in order to confirm that they did not have extra accounts hidden somewhere.
Another former Samsung employee reveals that the group inspects the e-mails of its employees through a consolidated computer network, running a word search program on the mails. The group stores information gleaned at a separate data center in Gwacheon and Gumi, he said. Most Samsung employees tend to avoid using company computers for personal matters, as each computer terminal is vulnerable to internal surveillance activities initiated by management, sources said.
Samsung employees take it for granted that the company tracks the history of their cellular phone calls. "At Samsung, board members and other upper level managers holding key posts are provided with a cellular phone as a bonus," a former Samsung official said. "Under this situation, these employees assume that the company will look at their call history." Employees who do not use Samsung credit cards very often receive some pressure from their managers, amid speculation that they are disloyal to the company, one Samsung official recalled. This is because some observers call Samsung a "mammoth surveillance republic."
During an inspection of its subsidiaries, the Corporate Strategy and Planning Department of Samsung Group focused their effort on eliminating such terms as "Corporate Strategy and Planning Department" (Restructuring Headquarters) and "Chairman" from their stored documents and computer files, sources said. Even though subsidiaries cannot make major decisions without authorization from the Restructuring Headquarters, corporate inspectors are keen on covering their tracks in order to minimize the chance of Samsung Headquarters becoming involved in unexpected trouble.
Board members who have since left Samsung are also under a strategic "management program," as they are given severance packages equal to their former pay at Samsung, up to 10 years after retiring. Additional perks are offered to former executives on a situational basis, as well. When Samsung Everland was being investigated on improper bond issuance charges, Samsung Group sent former executives of Samsung Everland and their wives on overseas tours.
Despite the above-mentioned tight internal surveillance system and generous bonus packages for former board members, there are still those who threaten to blow the whistle on the company's irregularities. Several years ago, one former Samsung official, who threatened to expose the existence of slush funds, was able to extort a huge sum of money in return for keeping mum, sources said. "Most recently, one U.S.-based official handling illegal funds took a flight to Mexico with secret computer files in tow and gave the files to a third party for an unknown amount of money," a former Samsung executive said. "Quite surprisingly, Samsung let him return to his job."
