2/09/2014

Playing by Local and/or International Rules in Korea by Tom Coyner

The old axiom of "when in Rome, do as the Romans" may seem like practical wisdom. But sometimes that may not be your best option. First of all, going native is a pretty tough thing to do as a foreigner. Usually, at best, an expat can act approximately Korean and hope to get some sympathetic appreciation from the local populace. Other times, one can be in what seems to be a hopelessly disadvantageous position given the cultural and language differences.

At the same time, being a Korean in Korea hardly comprises a bed of roses. Often there seems to be more thorns than petals given the various social and regulatory obligations and responsibilities. In this context, there are some inherent advantages of being foreign since by being alien one is not inferior or superior but simply separate from the mainstream. As such, one can work by slightly different rules.

Often these rules are technically in place within Korean business and legal parameters, but generally are not observed due to overriding social and political concerns. Since as a foreigner -- and even as a foreign business -- the expatriate manager may be surprised at how this can work in his or her favor.

For example, with some small Korean companies, oral agreements may be preferred to written ones. A foreigner's insistence on long, written agreements can be regarded as almost insulting. Nevertheless, it is imperative to have written agreements. Generally a foreigner can insist on this easier than a Korean. He or she has the option to demand negotiated agreements to be as explicit as possible due to the business cultural differences.

This is not to say one needn't be sensitive about practical considerations that may seem unique to doing business in Korea. A comprehensively detailed agreement drafted by a Western company's legal department may seem to cover all bases. Yet such a document can confuse and cause major problems during and following negotiations. The expatriate business professional should be prepared to redraft the head office's prepared document to say exactly the same thing but in simpler language. Not to do so is likely to confuse the Korean counterpart with Western "legalese,'' that in turn can lead to major misunderstandings.

One simple approach is to break up long contractual paragraph blocks, with the sub-clauses presented in easy to find and understand outline form. It is often a good idea to add hypothetical examples of unusual or complicated concepts or conditions to ensure not only agreement but also complete understanding by all parties.

Being culturally sensitive, one should be careful in discussing indemnification for malfeasance so as not to insult the other party. This issue normally does not exist in purely Western business, but often a Korean may take exception to how a Western attorney may describe the other party being liable for potential penalties.

Addenda should be freely and fully included to contracts to specifically point out issues such as payment terms and timing so that there is no misunderstanding or possible variance of interpretation.

Now, all of this is a lot of extra work for the Western business person -- but it's worth it given the likely headaches and incriminations that may follow if one doesn't do this kind of preparation.

Not only are the business cultures different, basic commercial concepts may significantly vary in the details -- or possibly not even exist within one's Korean counterpart's normal activities. So it can be dangerous to assume understanding. When in doubt, define in writing.

Furthermore, Korean employees are quite frequently transferred among the various departments. Rarely is there time for a decent handover of responsibilities. It is not uncommon for the exiting employee to neglect to mention to his/her replacement where one's contract has been filed. Consequently, an extremely detailed, heavily illustrated, and well-organized agreement, with full addenda, can be critical for getting the replacement employee up to speed.

This kind of document can also get the new employee off the hook with his or her boss should a disagreement arise. If the disputed matter is covered in the agreement, clearly explained as a contingency or possibility -- complete with hypothetical examples, the new employee can report that the matter has already been contractually settled.

Keeping a Practical Balance

Now should it not be already obvious, the important lesson is not to get suckered into the "cultural gotcha'' of surrendering good business sense due to cultural differences. The Korean cultural trait of not wishing to put things down on to paper or taking contracts as literally serious as Westerners should be accommodated just so far. To repeat, the Westerner is not a Korean and thereby is not part of Korea's social web of obligations and potential penalties. As the Westerner regularly works across the "cultural divide,'' he or she must protect the company's interests by refusing to compromise the company's core values and policies.

It is critical to be as clear and as explicit as possible when negotiating a strategic legal agreement in Korea. It is also important to keep in mind that ultimately Korean contracts are fully enforceable. But be aware that these documents are literally as good as they are written. There are almost no additional legal safeguards beyond what appears on the paper.

So be prepared and be explicit. Most important, do not assume, but always confirm, genuine understanding, in writing, of all points with one's Korean negotiating partner.

Business negotiation is an exacting and demanding matter, particularly complicated when playing by a different set of cultural rules and business practices. The more the expatriate executive is familiar with the rules, the more there can be a meeting of minds -- and the more success he or she can achieve at the bargaining table. It is all to the expat's advantage to be thoroughly familiar with the counterpart's set of mind and behavioral patterns. At the same time, consider what one's strengths may be -- including those that may not strictly fit in the normal Korean cultural context. The fact that other, Korean companies may not have these qualities should not prevent the expat from leveraging those advantages in Korea.

To give an example, if one's company is challenged by government regulator, one should establish a legal defense much as one would in one's native country. Resist _ or at least seriously question -- advice from your Korean employees -- and even Korean legal counsel -- to settle and compromise if one is convinced that the company is totally in the clear. Even if there is indeed a problem, a Western legal defense can be the best course of action.

Korean government officials are accustomed to sometimes unfairly getting their way, since most Korean companies will quickly try to settle, even when they are completely innocent. If the regulatory challenge is unjustified, it is often best from the first moment to emphatically state so and get one's legal ducks in a row. The regulator will probably not be amused, but will also realize that dealing with the foreign company is going to be more work and it may not be worth the hassle. Even if the regulator decides to proceed, be prepared to act "un-Korean'' and cite chapter and verse of the government's regulations, since often they can be used to one's advantage.

Keep in mind that Korean business practices, though often based on deep cultural foundations, are rapidly changing. The marketplace is becoming more open to international practices. Women and those Koreans who have lived extended periods abroad are making their impacts, along with the changes resulting from the wide application of broadband communications.

The above-discussed points are what one may consider being bedrock when it comes to doing business. Bear in mind the rules are changing. Therefore, it is wise to occasionally review and test one's understanding with a Korean colleague, while being sure not to give up some of the advantages of being a foreign business professional.
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Tom Coyner is President of Soft Landing Consulting(www.softlandingkorea.com), a sales and business development consultancy, and serves as senior commercial advisor to IPG Legal. His professional involvement with Korea began in 1975.

The original appeared in the Korea Times and may be found HERE.